WEBVTT - US Jobless Claims Fall as Trade Deficit Widens 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.240 on Apple car Play or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.840 Business App. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:27.000 or watch us live on YouTube. 0:00:27.200 --> 0:00:31.960 Lizzie Saunders joins us, patiently awaiting here as we look 0:00:32.000 --> 0:00:35.479 at this news out of the United Kingdom. Lizzie Saunders, 0:00:36.040 --> 0:00:38.600 My radars up when someone says buy the dip. 0:00:39.040 --> 0:00:41.960 How dip are the software stocks this morning? 0:00:42.960 --> 0:00:46.040 Well, as you know, Tom and Paul, I'm not an analyst. 0:00:46.080 --> 0:00:48.919 I don't cover the software stocks, you know. I think 0:00:48.920 --> 0:00:51.360 it's a little bit more existential what they're dealing with 0:00:51.560 --> 0:00:54.400 versus some of the other stocks or groups of stocks 0:00:54.440 --> 0:00:56.840 that have been hit. As you have this sort of 0:00:56.880 --> 0:01:01.200 AI related money swirling around, everybody is looking for both 0:01:01.200 --> 0:01:04.360 the shiny new object the dull new object, who is 0:01:04.520 --> 0:01:08.880 a beneficiary who is getting disrupted, And I think that 0:01:08.959 --> 0:01:12.080 type of backdrop will continue. We haven't really seen the 0:01:12.160 --> 0:01:16.160 retail trader come back in a significant way. I think 0:01:16.160 --> 0:01:20.920 they've been supportive of lower less downside in some of 0:01:20.959 --> 0:01:24.240 these areas, but they're not proving to be the big 0:01:24.319 --> 0:01:27.000 by the dip crowd life was the case in the 0:01:27.040 --> 0:01:28.720 past couple of years, Paul. 0:01:28.560 --> 0:01:31.800 The pricing years like October of last year. Yeah, I mean, 0:01:31.840 --> 0:01:33.800 I don't even think it's a correction. 0:01:33.600 --> 0:01:37.120 Now, not yet correct me if I'm wrong, zag Liz. 0:01:37.240 --> 0:01:39.959 We have seen in this marketplace really since kind of 0:01:40.000 --> 0:01:43.440 late October early November, a rotation maybe out of some 0:01:43.480 --> 0:01:45.199 of the growth names, some of the tech names, into 0:01:45.200 --> 0:01:47.920 some of the more value maybe small and mid cap here. 0:01:48.280 --> 0:01:49.240 Give us your thoughts on that. 0:01:50.320 --> 0:01:52.880 So I think the broadening out trade definitely has legs. 0:01:53.280 --> 0:01:56.720 The initial juice provided to the small cap space was 0:01:56.720 --> 0:01:59.400 in advance of what ended up being a short lived 0:01:59.440 --> 0:02:02.120 easingcam pain on the part of the FED. But then 0:02:02.160 --> 0:02:05.520 I think more of the fundamental side kicked in. It 0:02:05.560 --> 0:02:09.800 wasn't just about rate cuts, because the trajectory for earnings 0:02:10.200 --> 0:02:13.240 broadly in the Russell two thousand looks quite a bit 0:02:13.280 --> 0:02:18.240 sharper than it does for the SMP five hundred. That said, 0:02:18.280 --> 0:02:21.920 what's been interesting is last year in the small cap rally, 0:02:22.320 --> 0:02:26.560 it was heavily driven down the quality spectrum, non profitable 0:02:26.600 --> 0:02:29.760 stocks within the Russell two thousand having twice the performance 0:02:29.880 --> 0:02:34.040 profitable stocks for full year calendar twenty twenty five. That's 0:02:34.080 --> 0:02:36.799 been turned on its head and now it's the profitable 0:02:36.880 --> 0:02:40.639 components within the Russell two thousand that are handily outperforming 0:02:40.960 --> 0:02:43.760 the nonprofitable. And that was something we were saying, you 0:02:43.800 --> 0:02:47.920 want to fade the unprofitable and lean into the profitable, 0:02:47.960 --> 0:02:49.919 and that certainly kicked into gear this year. 0:02:50.520 --> 0:02:53.040 Luzanne, we're probably I don't know about eighty percent away 0:02:53.040 --> 0:02:56.239 through earnings for the SMPE five hundred. What have you seen, 0:02:56.480 --> 0:02:59.799 what have you heard about guidance that gives you your 0:03:00.160 --> 0:03:01.760 as to where this market could go this year? 0:03:02.160 --> 0:03:06.960 Yeah, So in the aggregate, the earnings growth rate is 0:03:07.080 --> 0:03:08.880 quite a bit higher than what was expected at the 0:03:08.919 --> 0:03:11.640 start of the year. We're up at around thirteen percent 0:03:12.040 --> 0:03:14.639 and change, and that's the blended growth rate, which includes 0:03:14.639 --> 0:03:17.920 everybody that has reported and the few companies that have 0:03:18.000 --> 0:03:21.280 yet to report, and that was mid single digits at 0:03:21.320 --> 0:03:24.399 the start of earning season. I guess the difference, though, 0:03:24.440 --> 0:03:26.640 relative to the past four quarters or so, is that 0:03:26.720 --> 0:03:29.400 the beat rate both on top line and bottom line 0:03:29.720 --> 0:03:34.280 has been weaker relative to the four quarter average relative 0:03:34.320 --> 0:03:38.640 to the longer term Since mid nineteen nineties, average so 0:03:39.320 --> 0:03:44.240 that's what's been distinct about this backdrop is overall higher 0:03:44.240 --> 0:03:47.360 earnings growth, but a lower beat rate and a bit 0:03:47.440 --> 0:03:50.920 more subdued forward looking forecasts. 0:03:51.720 --> 0:03:56.280 So, Lizianne, we're thinking about this market here, valuation it 0:03:56.360 --> 0:03:58.640 seems to have faded a little bit in terms of 0:03:59.120 --> 0:04:02.080 concerns for market participants. I'm not sure I'm hearing as 0:04:02.160 --> 0:04:06.080 much concerned about valuation for this market these days. How 0:04:06.080 --> 0:04:06.840 do you think about that? 0:04:07.640 --> 0:04:12.360 Well, maybe that's because in the aftermath of the so 0:04:12.440 --> 0:04:15.840 called Liberation Day tariff announcements and then obviously the subsequent 0:04:15.920 --> 0:04:20.480 ninety day delay, obviously that move on April ninth began 0:04:20.600 --> 0:04:25.640 what was an unbelievable surge. But what was interesting is 0:04:26.560 --> 0:04:31.760 you then stopped the valuation expansion in around August of 0:04:31.880 --> 0:04:35.440 last year, and valuations have been relatively flat, yet at 0:04:35.440 --> 0:04:38.960 the same time you've had that rising earnings growth trajectory. 0:04:39.040 --> 0:04:41.520 So it was almost like the market pause and said, Okay, 0:04:41.560 --> 0:04:43.719 we need earnings now to start to do more of 0:04:43.720 --> 0:04:47.760 the heavy lifting. We're sort of past that automatic valuation expansion, 0:04:47.960 --> 0:04:50.240 and earnings indeed have begun to do more of the 0:04:50.600 --> 0:04:53.800 heavy lifting. So you've eased some of that valuation concern 0:04:54.360 --> 0:04:57.880 by virtue of the shoppiness we've seen in the equity market. 0:04:57.960 --> 0:05:01.440 Yet at the same time, earnings can a power hire Lizzie. 0:05:01.480 --> 0:05:03.680 I've done normal, Rubini, I think as long as I've 0:05:03.720 --> 0:05:07.960 known you. And he dropped a bombshell yesterday. Doctor Rubini 0:05:08.760 --> 0:05:12.080 made clear he looks at the productivity and technology of 0:05:12.120 --> 0:05:17.400 America and models a closer to four percent economy than 0:05:17.440 --> 0:05:22.080 a two percent economy. Could we miss here an exceptional 0:05:22.200 --> 0:05:25.120 moment for American growth is that modeled in? 0:05:28.040 --> 0:05:30.800 Not only do I think that it's not modeled in, 0:05:31.040 --> 0:05:35.080 but I think it's really a key ingredient in light 0:05:35.200 --> 0:05:38.000 of the very weak labor force growth that we're seeing 0:05:38.040 --> 0:05:41.000 courtesy of the crackdown on immigration. You know, we know 0:05:41.080 --> 0:05:46.159 the formula that goes into what GDP. When GDP is released, 0:05:46.200 --> 0:05:49.640 it's everything from government and private sector and consumption and 0:05:49.680 --> 0:05:54.520 the relationship between imports and exports, and business investment residential investment. 0:05:54.720 --> 0:05:58.640 But at its base level, the calculation for economic growth 0:05:58.720 --> 0:06:01.320 is productivity times labor force growth. We don't have the 0:06:01.400 --> 0:06:03.880 labor force growth piece, but we certainly have had the 0:06:03.920 --> 0:06:07.360 productivity piece, and that has been a beneficial offset and 0:06:07.600 --> 0:06:10.960 environment where we have very constrained labor force growth. It 0:06:11.000 --> 0:06:14.120 also tells you that if that productivity miracle, if we 0:06:14.160 --> 0:06:17.280 want to call it, that, fades it all absent any 0:06:17.400 --> 0:06:20.560 pickup in labor force growth, then we probably have a 0:06:20.600 --> 0:06:23.400 bigger problem from a GDP perspective. But that's certainly not 0:06:23.480 --> 0:06:24.000 been the case. 0:06:24.360 --> 0:06:27.560 Lizzene signers with a far too short interview. Thank you 0:06:27.640 --> 0:06:31.080 so much for the conversation this morning. Lazanne wrapped around 0:06:31.720 --> 0:06:35.320 the moment that we're having in London. Lizen Saunders always 0:06:35.320 --> 0:06:37.719 in Forever with Charles Schwab. 0:06:39.040 --> 0:06:39.760 Stay with us. 0:06:40.000 --> 0:06:43.200 More from Bloomberg Surveillance coming up after this. 0:06:50.480 --> 0:06:53.920 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:07:00.040 --> 0:07:02.880 in an American Revolution on YouTube. 0:07:02.839 --> 0:07:06.800 At Brown University and just definitive on our American history. 0:07:06.839 --> 0:07:10.440 Here Wendy a remarkable set of sentences with Helene Cooper 0:07:10.440 --> 0:07:12.600 in The New York Times this morning. It really struck 0:07:12.640 --> 0:07:16.600 me for a president ran for office promising to keep 0:07:16.880 --> 0:07:20.200 the United States out of wars. Comma, mister Trump is 0:07:20.240 --> 0:07:23.840 now considering what would be at least the seventh American 0:07:23.880 --> 0:07:28.320 military attack in another country in the past year. In 0:07:28.360 --> 0:07:32.440 his second on Iran, et cetera, et cetera, Professor Schiller, 0:07:32.600 --> 0:07:33.640 how did we get here? 0:07:35.880 --> 0:07:39.560 Well, I mean, I think Iran in the United States 0:07:39.960 --> 0:07:43.080 has been a complicated problem, as you know, for what 0:07:43.160 --> 0:07:46.080 fifty years now, just about fifty years a little under. 0:07:46.600 --> 0:07:50.200 And I think it's impossible to be the world's superpower 0:07:50.520 --> 0:07:55.560 and stay out of international conflict. It's just impossible. You 0:07:55.600 --> 0:07:59.040 inherit this edifice if you are President Trumpy at it 0:07:59.040 --> 0:08:01.640 in his first term as well well, and Biden and 0:08:01.680 --> 0:08:05.360 Obama and George W. Bush, and you know, it's very 0:08:05.400 --> 0:08:09.720 hard to unpack that or dismantle that edifice. And that 0:08:09.920 --> 0:08:14.040 edifice is frankly the beacon of freedom. It can challenge 0:08:14.080 --> 0:08:16.920 that if they want, but you know, we are a 0:08:17.000 --> 0:08:21.280 country that, since World War Two, enforces the international order, 0:08:21.320 --> 0:08:24.280 and even though Trump is pulling out of international organizations, 0:08:24.600 --> 0:08:25.120 we are. 0:08:25.000 --> 0:08:26.160 Still that country. 0:08:26.440 --> 0:08:29.600 And it's just simply impossible to avoid because the United 0:08:29.640 --> 0:08:32.160 States is so embedded in the global order that if 0:08:32.160 --> 0:08:35.480 Iran poses any kind of threat to our allies or 0:08:35.480 --> 0:08:39.280 to us, then we have to act, and that is 0:08:39.440 --> 0:08:42.240 that's the job. So I think the promises he made 0:08:42.280 --> 0:08:44.880 were I'm not going to do this, willy nilly, I'm 0:08:44.880 --> 0:08:47.000 not going to go in search of monsters to destroy 0:08:47.040 --> 0:08:48.840 as John Quincy Adams as you know, you know I've 0:08:48.880 --> 0:08:51.960 talked about that has said one hundred and fifty years ago, 0:08:52.280 --> 0:08:56.719 but more than one hundred five years ago. But he 0:08:57.040 --> 0:09:00.480 has an edifice that is still the world's supreme power 0:09:00.960 --> 0:09:04.520 and defender, and it's just impossible to walk away from 0:09:04.559 --> 0:09:05.960 that if you're the president of the United States. 0:09:06.720 --> 0:09:10.600 Given President Trump's you know, he's focusing on international affairs, 0:09:10.679 --> 0:09:15.120 and I guess that's typical of a second term president here. 0:09:15.800 --> 0:09:19.360 How concerned is the administration? Is the Republican Party with 0:09:19.520 --> 0:09:25.400 his low approval ratings here, well, you know that's sort. 0:09:25.240 --> 0:09:28.360 Of the big criticism that people like Marjorie Taylor Green, 0:09:28.480 --> 0:09:31.160 former representative in the House who just left, made about 0:09:31.240 --> 0:09:34.520 MAGA and about what Trump created. And so I was 0:09:34.520 --> 0:09:35.800 going to you know, I was going to go into 0:09:35.800 --> 0:09:37.520 office with I'm Donald Trump. I'm going to get rid 0:09:37.520 --> 0:09:39.160 of the rhinos. I'm going to get rid of this 0:09:39.280 --> 0:09:42.280 sort of Republican impetus to go to war, even though 0:09:42.320 --> 0:09:45.040 Democrats start as many wars as Republicans in the last 0:09:45.160 --> 0:09:48.839 one hundred years. But nonetheless, you know, I'm going to 0:09:48.880 --> 0:09:50.240 get rid of all that, I'm going to focus on 0:09:50.280 --> 0:09:52.400 the United States, and she what she's saying is that 0:09:52.440 --> 0:09:55.559 he's betrayed that promise and that he's deflecting. 0:09:55.800 --> 0:09:56.520 But I don't think. 0:09:56.520 --> 0:09:59.160 I think that's just more complicated than that. Because of 0:09:59.160 --> 0:10:02.880 our global interest, because we are globalized, because our economy 0:10:02.920 --> 0:10:04.680 rests on the stability of the rest of the world, 0:10:04.960 --> 0:10:08.160 we can't just sit things out. And I think that's 0:10:08.240 --> 0:10:11.320 the thing that possibly the base that voted for Donald Trump, 0:10:11.880 --> 0:10:13.800 you know, didn't want to hear or doesn't want to accept. 0:10:14.200 --> 0:10:16.520 But certainly as president, that's what he has to do, 0:10:16.600 --> 0:10:18.400 because he makes an argument that it's in his interest. 0:10:18.800 --> 0:10:22.839 Is this deflection, it'd be a very expensive, risky deflection 0:10:23.160 --> 0:10:26.960 from the economy, from affordability, from ice tactics. You know, 0:10:27.000 --> 0:10:29.120 you can do other things if you're Donald Trump, to deflect. 0:10:29.360 --> 0:10:32.559 You don't have to start a war with the wrong president. 0:10:32.600 --> 0:10:34.760 Trump has done I think a pretty good job of 0:10:34.920 --> 0:10:39.040 kind of framing the allied relationships that the United States 0:10:39.080 --> 0:10:42.240 has enjoyed or fosters into World War two. Is that 0:10:42.280 --> 0:10:44.080 going to come back and bite him here to the 0:10:44.080 --> 0:10:48.320 extent he does take some drastic moves here in our end, 0:10:48.400 --> 0:10:49.800 does he have the support of allies. 0:10:51.080 --> 0:10:52.959 Well, you know, Paul and Tom, this is a really 0:10:52.960 --> 0:10:55.440 important question. We saw the first golf for war, and 0:10:55.480 --> 0:10:58.640 we saw the second go for war, and we realized 0:10:58.640 --> 0:11:01.320 that United States went in a international community the first time, 0:11:01.559 --> 0:11:03.760 but really with Britain, i mean, on its own the 0:11:03.840 --> 0:11:07.079 second time, and it left us a twenty year commitment 0:11:07.120 --> 0:11:10.000 to war. So it becomes more expensive and more risky 0:11:10.040 --> 0:11:13.480 to do it by yourself. But you know, Trump had 0:11:13.880 --> 0:11:16.959 legitimate points about NATO. We can all agree they weren't 0:11:16.960 --> 0:11:19.320 paying their fair share of NATO and the United States 0:11:19.440 --> 0:11:22.040 was carrying the burden and that was true. And I 0:11:22.040 --> 0:11:24.200 think you have to get the president credit for saying, look, 0:11:24.280 --> 0:11:25.880 you have to stand up for yourself. We're not going 0:11:25.920 --> 0:11:29.680 to be able always able to shoulder the burdens as. 0:11:29.520 --> 0:11:32.760 We speak, Paul, should we talk economics? We can just 0:11:32.800 --> 0:11:33.160 do that. 0:11:33.360 --> 0:11:35.920 Let's digress from geopolitics for a moment. We do it 0:11:35.960 --> 0:11:39.560 with Wendy Schiller and greet all of you across the nation. Wendy, 0:11:39.600 --> 0:11:41.079 I'm reading the Morgan. 0:11:40.760 --> 0:11:42.559 One volume on William McKinley. 0:11:42.600 --> 0:11:44.960 I'm ignorant on the period of the Gilded Age, and 0:11:45.000 --> 0:11:48.560 I'm getting out I'm trying to get forward to Grover Cleveland, 0:11:48.640 --> 0:11:53.040 Alexander and Professor Schiller. What I see with McKinley is 0:11:53.080 --> 0:11:58.800 he walked back his massive protectionist tendencies. Are we seeing 0:11:58.840 --> 0:12:01.640 that with this president that he's doing a so called 0:12:02.080 --> 0:12:05.920 buffalo pivot in his own Trumpian way? 0:12:06.440 --> 0:12:08.559 Well, here's where I think this is a great example. 0:12:08.640 --> 0:12:10.960 This is where elections matter, and that the Founders put 0:12:11.000 --> 0:12:13.760 midterm elections in And you know that was supposedly a 0:12:13.880 --> 0:12:16.600 check on the House, really mostly because everybody in the 0:12:16.600 --> 0:12:18.719 House is up for reelectionary two years, but it's really 0:12:18.760 --> 0:12:22.240 a check also on partisanship and on the part of 0:12:22.240 --> 0:12:24.679 the share party between the President and Congress. This is 0:12:24.720 --> 0:12:26.840 a check on the president. He realizes that the last 0:12:26.880 --> 0:12:30.160 two years of his presidency will be quite unpleasant if 0:12:30.200 --> 0:12:32.440 the Democrats take both the House and the Senate. And 0:12:32.480 --> 0:12:35.200 what he's hearing from his party is the Senate's in play, 0:12:35.440 --> 0:12:38.680 and that's because of his economic policies and to some extent, tariffs, 0:12:38.880 --> 0:12:42.080 and he hasn't brought manufacturing back and these are overwhelming 0:12:42.120 --> 0:12:44.560 everything else he's doing. So I think that's where the 0:12:44.640 --> 0:12:47.440 urgency is coming in terms of tariffs, and of course 0:12:47.440 --> 0:12:51.400 Grover Cleveland and Donald Trump share a very important commonality. Right, 0:12:51.440 --> 0:12:54.839 they won, they lost, and they won again. McKinley. The 0:12:54.920 --> 0:12:57.160 McKinley Bill, you know of eighteen eighty nine, as you 0:12:57.200 --> 0:13:00.520 well know, was the largest ARFF protection is built ProTouch 0:13:00.520 --> 0:13:03.120 in our history. And of course by the time becomes 0:13:03.200 --> 0:13:06.120 president certainly realizes that's not the way to run the rodeo. 0:13:06.240 --> 0:13:09.080 So I think this is what's happening. At the same time, 0:13:09.480 --> 0:13:11.880 you know, things aren't kicking up the economy, and he's 0:13:11.920 --> 0:13:14.000 hearing that he could lose the Senate, which will make 0:13:14.040 --> 0:13:15.560 life very difficult for Donald Trump. 0:13:15.480 --> 0:13:18.319 Quickly or it's off your remit, but I know you're 0:13:18.360 --> 0:13:21.120 sneaking to the class with the late great William Poole 0:13:22.160 --> 0:13:26.960 or other great economists at Brown University. Kevin Hasset with 0:13:27.080 --> 0:13:33.240 an uproar yesterday folks criticizing sharply the New York Fed 0:13:33.520 --> 0:13:39.040 academics over who pays the bill? Professor Schiller enlightened us. 0:13:39.480 --> 0:13:42.480 Do we pay the tariff bill or does some company 0:13:42.520 --> 0:13:43.959 over in Vietnam pay it? 0:13:46.000 --> 0:13:48.880 Well, I mean, this is the thing about diffuse costs 0:13:48.920 --> 0:13:50.080 versus concentrated costs. 0:13:50.120 --> 0:13:51.480 This is the whole crux. 0:13:51.200 --> 0:13:54.360 Of the interception between the economy and US politics. When 0:13:54.400 --> 0:13:56.880 the calls are diffuse, it is harder to sort of 0:13:56.920 --> 0:14:00.360 get voters to pay attention when they're concentrated. I need 0:14:00.360 --> 0:14:03.120 a particular part to make another thing in the United States, 0:14:03.120 --> 0:14:05.839 and that part now costs twenty five percent more. That 0:14:05.920 --> 0:14:09.520 hurts concentrated industries. And we are economy that is so 0:14:09.559 --> 0:14:13.120 broad and diverse and service oriented now that voters and 0:14:13.679 --> 0:14:18.040 most people don't feel it as acutely as concentrated industries. 0:14:18.200 --> 0:14:20.080 But the problem for the Republicans is that some of 0:14:20.120 --> 0:14:23.080 those concentrated industries are in states that have key elections 0:14:23.080 --> 0:14:26.520 this year, so that's where this intersection happens. But it's 0:14:26.560 --> 0:14:29.920 always the battle between diffuse costs and concentrated costs, particularly 0:14:29.920 --> 0:14:31.520 when it comes to trade politics. 0:14:32.240 --> 0:14:35.080 So how aggressive can the Democrats be here in his 0:14:35.160 --> 0:14:36.000 midterm elections? 0:14:37.400 --> 0:14:39.720 Well, Paul, the Democrats can find a way to lose 0:14:39.720 --> 0:14:41.880 an election they're supposed to win. We've seen that before 0:14:41.920 --> 0:14:44.640 in the past. You know, they have to get their 0:14:44.640 --> 0:14:47.800 act together and agree on their messaging. 0:14:48.280 --> 0:14:49.120 And now they've. 0:14:48.960 --> 0:14:51.400 Got a couple of things. One is overreach, but they 0:14:51.400 --> 0:14:54.600 have to move away from you know, democracies failing democracy 0:14:54.640 --> 0:14:57.280 is failing. They're winning special elections all over the place, 0:14:57.440 --> 0:14:59.880 so in some ways democracy is not failing them. Right now, 0:15:00.080 --> 0:15:04.520 they have to go zero in on core issues healthcare, affordability, 0:15:04.600 --> 0:15:08.480 and individual security from the intrusion of the federal government, 0:15:08.680 --> 0:15:11.400 three issues. Bill Clinton always said you need three, so 0:15:11.520 --> 0:15:14.400 George Bush had three George w So they have to 0:15:14.400 --> 0:15:16.800 get their act together and decide this can't be a diverse, 0:15:17.040 --> 0:15:19.680 dispersed campaign for the Democrats. They have to zero in 0:15:19.720 --> 0:15:20.680 on a couple of issues. 0:15:20.720 --> 0:15:23.600 Professor Schuler, thank you so much for the brief this morning, 0:15:23.680 --> 0:15:28.040 much needed on our geopolitics. The economist Wendy Schuller of 0:15:28.080 --> 0:15:30.160 Brown At University. 0:15:31.600 --> 0:15:32.320 Stay with us. 0:15:32.560 --> 0:15:35.800 More from Bloomberg Surveillance coming up after this. 0:15:43.040 --> 0:15:46.600 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:15:46.680 --> 0:15:49.840 weekday afternoons from seven to ten am Eastern Listen on 0:15:49.920 --> 0:15:53.320 Apple Karplay and Android Otto with the Bloomberg Business app, 0:15:53.520 --> 0:15:55.240 or watch us live on YouTube. 0:15:55.680 --> 0:15:58.600 This is a joy with substantial physics out of the 0:15:58.640 --> 0:16:01.840 Massachusetts Institute of Technology part of it, and then he 0:16:01.920 --> 0:16:06.040 got into the totally cool and still cool physics program 0:16:06.080 --> 0:16:11.160 at Boston University. A really unknown magisterial program. Then he 0:16:11.200 --> 0:16:14.360 wandered out to JPL to put men on Mars or whatever. 0:16:14.400 --> 0:16:16.280 We could do the whole thing on space here, George, 0:16:16.280 --> 0:16:18.880 but with PGUM. Let's do it with George Patterson here 0:16:18.920 --> 0:16:22.800 on where we are right now. The leverage of nineteen 0:16:22.920 --> 0:16:26.120 ninety eight, some people knew it was there. I've had 0:16:26.120 --> 0:16:28.720 the honor of talking to Myron shuls two three times. 0:16:29.120 --> 0:16:32.640 Do we have visible leverage now within the system or 0:16:32.680 --> 0:16:36.120 do we have a discrete hidden leverage within the system 0:16:36.440 --> 0:16:37.680 that we don't understand. 0:16:39.120 --> 0:16:40.760 We spent a lot of time, First of all, thank 0:16:40.760 --> 0:16:42.520 you for being here, a great opportunity. 0:16:42.560 --> 0:16:43.640 We spent a lot of time. 0:16:43.520 --> 0:16:45.760 Worrying where like the hidden risks are. 0:16:45.640 --> 0:16:46.400 In the economy. 0:16:46.840 --> 0:16:50.960 There's really there's really no obvious excesses, right, There's no 0:16:51.240 --> 0:16:55.640 obvious areas where you know, we worry that capital is misallocated, 0:16:55.880 --> 0:16:58.360 particularly relative to like the people that can afford to 0:16:58.400 --> 0:17:00.600 take the risks, so we don't see those types of 0:17:00.720 --> 0:17:02.120 hidden leverage scenarios. 0:17:02.320 --> 0:17:04.320 You guys are Belton suspenders. 0:17:04.440 --> 0:17:07.240 I'm gonna I'm I'm front Paul sween here, this is 0:17:07.280 --> 0:17:09.040 his question, but I'm stealing. 0:17:08.760 --> 0:17:12.120 It private credit. You gotta be kidding me. They want 0:17:12.119 --> 0:17:13.200 to put it my ira. 0:17:14.000 --> 0:17:19.440 Listen, listen there. Private credit, like all private assets, has 0:17:19.520 --> 0:17:23.560 a place in portfolios. It's what's important for everyone really 0:17:23.640 --> 0:17:26.320 is to design a portfolio that meets your needs. There 0:17:26.359 --> 0:17:29.600 are substantial return opportunities, but you need to understand what 0:17:29.640 --> 0:17:32.879 you're getting involved. You need to understand the limitations, the 0:17:32.960 --> 0:17:34.640 upside and also the downside. 0:17:34.680 --> 0:17:36.960 Did that sound like the general counsel of people they 0:17:37.040 --> 0:17:40.040 memorize it? That was brilliant, exactly, George. 0:17:40.359 --> 0:17:43.640 You think about twenty twenty five performance, US equities did 0:17:43.680 --> 0:17:46.760 really well, but rest of the world did a lot better. 0:17:46.960 --> 0:17:49.160 How do you think about US versus rest of the world? 0:17:49.160 --> 0:17:49.360 Here? 0:17:50.600 --> 0:17:53.720 Exactly, in all honesty, like, many of the best opportunities 0:17:53.720 --> 0:17:56.200 I would say are probably outside the US. The US 0:17:56.200 --> 0:17:59.320 has again strong performance, but when you look at both 0:17:59.320 --> 0:18:04.480 emerging marks and even just European equities, Japanese equities, twenty 0:18:04.520 --> 0:18:06.879 five was a great year to be outside. And one 0:18:06.920 --> 0:18:10.120 of the great things about diversification is that it's one 0:18:10.160 --> 0:18:12.800 of the few free lunches that you can really have 0:18:12.920 --> 0:18:16.240 in the world of investments. You can diverse by your portfolio, 0:18:16.400 --> 0:18:18.680 you can take lower risk, and it really doesn't cost 0:18:18.680 --> 0:18:19.520 you anything to do that. 0:18:20.160 --> 0:18:21.920 So, I mean a lot of the performance in twenty 0:18:21.960 --> 0:18:25.359 twenty five outside of the US was the weakening US dollar. 0:18:26.040 --> 0:18:28.520 I'm not sure we can count on that again. So 0:18:28.600 --> 0:18:32.520 to the extent that you're I don't know, overweight rest 0:18:32.560 --> 0:18:34.600 of world or non US, what do you have to 0:18:34.600 --> 0:18:35.160 believe there? 0:18:35.680 --> 0:18:37.760 Well, part of it's just where do you think that 0:18:37.880 --> 0:18:39.240 where do you think the growth is going to be 0:18:39.320 --> 0:18:42.560 like for an emerging With regard to emerging markets, you know, 0:18:42.640 --> 0:18:45.119 I think terriffs have largely come in a little bit 0:18:45.200 --> 0:18:48.600 lighter than expected. You know, if you look at manufacturing 0:18:48.600 --> 0:18:51.920 in the US, it's not coming back. I'm not quite 0:18:51.920 --> 0:18:55.399 sure there's really an appetite for manufacturing jobs. So a 0:18:55.440 --> 0:18:57.720 lot of that is still going to happen in emerging markets. 0:18:58.400 --> 0:19:00.480 A lot of a lot of wealth created is still 0:19:00.480 --> 0:19:02.159 going to happen there. I think the fact that there 0:19:02.160 --> 0:19:06.040 are less headwinds with regards to you know, tariffs and 0:19:06.080 --> 0:19:08.600 different policies really just sets it up. I mean, we've 0:19:08.640 --> 0:19:11.120 had great performance in emerging market I think we could 0:19:11.119 --> 0:19:12.760 be at the beginning of a cycle where we see 0:19:12.760 --> 0:19:14.000 continued performance there. 0:19:14.320 --> 0:19:16.159 George Patterson with US, we're going to get to the 0:19:16.160 --> 0:19:18.399 claims report here in a moment, let me squeeze one more, 0:19:18.440 --> 0:19:19.919 and I want to come back and talk about some 0:19:20.000 --> 0:19:25.360 physics envy as we can. You're definitive on this. Are 0:19:25.359 --> 0:19:30.000 the classic curves, the Gaussian curve, the log normal curve, 0:19:30.520 --> 0:19:32.360 talleebs plus on distribution. 0:19:32.880 --> 0:19:40.160 Are they acting normal? Now? Well, the dynamics. 0:19:38.800 --> 0:19:43.159 Listen, you know those are nice analytical forms that you 0:19:43.280 --> 0:19:45.480 learn in school, but the real world is not like that. 0:19:45.720 --> 0:19:47.600 How distant is our real. 0:19:47.400 --> 0:19:49.280 World from those analytical forms. 0:19:49.400 --> 0:19:51.840 Listen, things tend to be quiet for a while and 0:19:51.880 --> 0:19:54.440 then you get much larger tails. So I think, literally, 0:19:54.480 --> 0:19:59.000 whenever we fit distributions, whenever I give internal seminars, I'm 0:19:59.000 --> 0:20:03.680 always telling my telling the young researchers. Don't assume normality, 0:20:04.119 --> 0:20:07.080 you know, you estimate something that has wider tails. 0:20:07.160 --> 0:20:09.560 So when you bring your Hinckley picnic boat down the 0:20:09.600 --> 0:20:13.560 Hudson to Pigium is an amy your boat suddenly. 0:20:13.760 --> 0:20:15.800 Not quite I'm not quite. I'm not quite at the 0:20:15.840 --> 0:20:16.480 Hinckley level. 0:20:16.640 --> 0:20:17.680 Yeah, well we'll see. 0:20:17.680 --> 0:20:21.800 Well you're all use Percelli's I mean, he's got it 0:20:21.800 --> 0:20:22.200 as well. 0:20:22.320 --> 0:20:25.919 We've got a ton. It's a Seattle slew of data pulse, sweeting. 0:20:26.000 --> 0:20:27.760 Yeah, we've got the initial job, exclaims Tom. 0:20:27.840 --> 0:20:29.879 Look at that. It's a latch monatathon number. 0:20:30.000 --> 0:20:30.280 It is. 0:20:30.359 --> 0:20:32.720 It's a two hundred and six thousand. The consensus was 0:20:32.720 --> 0:20:35.040 two hundred and twenty five thousand, Tom, And last period 0:20:35.280 --> 0:20:37.360 was revised a little bit higher to two twenty nine 0:20:37.359 --> 0:20:41.480 thousand higher, so much less much lower rate here this period. 0:20:41.280 --> 0:20:44.440 Here interesting to see here on the tenure yield, get 0:20:44.440 --> 0:20:46.640 a higher yield. I guess they're looking in that as 0:20:46.640 --> 0:20:50.960 a more buoyant economy. Four point one zero percent future 0:20:51.040 --> 0:20:53.080 is a negative twenty six right now, and the Vicks 0:20:53.440 --> 0:20:55.680 extends out from a twenty level out to twenty one 0:20:55.720 --> 0:20:58.760 point five zero. Okay, I want to talk a bit 0:20:58.880 --> 0:21:01.239 quiet here. We're gonna go looktle bit physics, folks. There 0:21:01.240 --> 0:21:04.840 are things called cross moments, which are a four box 0:21:05.720 --> 0:21:09.679 description of the dynamics of the market. Fancy people like you, 0:21:09.800 --> 0:21:13.359