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Speaker 2: Right now, joining us, Jordan Rochester with a wonderful set
Speaker 2: of overnight notes.
Speaker 3: He's with FIC macro strategy, you know, with Miszuo. Jordan.
Speaker 2: Let's go a little walk as year right now as
Speaker 2: Cam Dawston was talking about this trust series, so for
Speaker 2: ten year, I'm looking at it out three standard deviations.
Speaker 3: It's been worse over the last four days.
Speaker 2: Where's the trip point for these liquidity trust series for you?
Speaker 3: Where we get to market chaos?
Speaker 4: I think that's the biggest question to it.
Speaker 5: Was one of my big key concerns earlier this week
Speaker 5: was about dollar funding because the whole world was facing
Speaker 5: such higher.
Speaker 4: Tariff rates for the US.
Speaker 5: What you're going to see is that exporters to the
Speaker 5: US were no longer going to receive their dollar receipts,
Speaker 5: and then dollar funding would become an issue. The only
Speaker 5: good news that I can give you is that you
Speaker 5: just had a record Q one imports in America and
Speaker 5: so a lot of these exporters around the world will
Speaker 5: be sitting on a dollar cash pile. That's a little
Speaker 5: bit more healthier than usual. Now we've had this ninety
Speaker 5: day reprieve at ten percent tariff rates. I do see
Speaker 5: the flows of commerce still taking place between Europe and
Speaker 5: the rest. But the problem is with China with these
Speaker 5: extreme tariffs that we have. We've got one hundred and
Speaker 5: forty five percent tariff rate on China. It's the largest,
Speaker 5: one of the largest trading partners in the world with
Speaker 5: the US, and so you're going to see a dollar
Speaker 5: a quizy issue at some point unless we have are
Speaker 5: climbed out.
Speaker 3: Jordan Rochester with this Missouri.
Speaker 2: We welcome all of you on your commute this morning
Speaker 2: across the nation this Friday of Bloomberg's Veillance. Very much
Speaker 2: market focus. We'll do a little bit of Washington and
Speaker 2: certainly those announcements out of the White House will be
Speaker 2: Key John Tucker with us for Lisa Matteo in this hour.
Speaker 2: Damien sasaur In for Paul Sweeney with this wonderful emerging
Speaker 2: market focus at Bloomberg Intelligence.
Speaker 3: Damien a question to mister Rochester.
Speaker 6: Yes, mister Rochester formerly fic Macro at Nomor and out
Speaker 6: in the zoo. So really in a great place to
Speaker 6: talk about China here. And look, everybody's blaming the thirty
Speaker 6: year move on the basis on leverage, selling or buying
Speaker 6: or whatever it is. But you know, I just got
Speaker 6: to ask you. I'm getting a lot of questions about
Speaker 6: China and what role it pad in these treasury swings.
Speaker 6: I know you're well, not your colleagues, but your peers
Speaker 6: over at SNBC are basically saying that China was involved
Speaker 6: in that, and now City Group's getting, you know, getting
Speaker 6: on board.
Speaker 3: What are your thoughts there?
Speaker 5: I could never say whether China is involved not. We
Speaker 5: just don't have the data yet until at next the
Speaker 5: end of the month for next month. That's the irritating
Speaker 5: thing about data.
Speaker 4: It's slow.
Speaker 5: But what we can say is that if you're a
Speaker 5: central bank and you're facing extreme currency pressures, it makes
Speaker 5: sense to selling US treasuries to defend your currency. It's
Speaker 5: been very smooth in dollar ramimbi and so that's kind
Speaker 5: of possibly been behind it, I would add.
Speaker 6: So let me ask you this now that you know
Speaker 6: the dollars declining in the face of all this very unusual.
Speaker 6: Do you think Asian central banks have more scope to
Speaker 6: cut rates here?
Speaker 4: I think the whole world does.
Speaker 5: This is going to be a huge growth shock to
Speaker 5: the US, but a big growth shop to the rest
Speaker 5: of the world. And what's going to happen is the
Speaker 5: Chinese exports are no longer going to go to the
Speaker 5: US at the same rate. We'll be looking for the
Speaker 5: next consumer. Europe stands out to me, but parts of
Speaker 5: Asia too. We'll see excess supply of Chinese goods hit
Speaker 5: their markets and that's going to load the selling price.
Speaker 2: Jordan, Rochester within all the research capabilities of your shop,
Speaker 2: do you people just look at the various supply chains
Speaker 2: and almost frankly the demand chains.
Speaker 3: Where China belieguered by the White House, runs their products
Speaker 3: through Vietnam, runs their product through Indonesia, runs their next
Speaker 3: to Kazakhstan.
Speaker 4: Long term, that's probably what's going to happen. Short term.
Speaker 5: How quickly they can do it is difficult. For example,
Speaker 5: Chinese exporters were discussing in an FT article just over
Speaker 5: over the past few days they had set up in Jordan,
Speaker 5: which has an FTA Jordan, the country not me an
Speaker 5: FTA with the US, but Jordan as a result has
Speaker 5: a twenty percent tariff rate. Now under these the sort
Speaker 5: of expected levels of reciprocal and so even countries with
Speaker 5: FDAs where China exporters had sort of hedged themselves by
Speaker 5: moving into countries to do the final production part there
Speaker 5: and sell on to the US that the plans scuffered.
Speaker 5: If everybody has a ten percent taraf rate, it's really
Speaker 5: hard to do the rerouting. But for Chinese exports at
Speaker 5: one hundred and forty five percent, sure they will take
Speaker 5: ten percent by rerouting, but it it takes time and
Speaker 5: it's not going to happen in the next few weeks.
Speaker 2: I mean, Danian, we got to focus this down here
Speaker 2: because we have Danian Sasar with us.
Speaker 3: The bottom line is Fuscheng is making.
Speaker 2: A lot of the golf heads for callaway, ping and tidiness.
Speaker 2: Going to have to run that through Vietnam, Damien SASA
Speaker 2: or hey to help improve your lousy game.
Speaker 6: I pay an awful lot for my probi one excess.
Speaker 6: But here's what I have to ask Jordan. I mean, look,
Speaker 6: we know that the China dumping is on the rest
Speaker 6: of the world is going to happen where we know
Speaker 6: transhipments are going to happen. We know Europe's the clear winner.
Speaker 6: But here's my question. How will bilateral trade negotiations with
Speaker 6: the US evolve? And here's what I'm thinking here. You
Speaker 6: have active discussions going on right now with India, Japan,
Speaker 6: South Korea. Are non tara variables going to play a
Speaker 6: role here? I mean, are they going to start talking
Speaker 6: about currency manipulation and start holding some of these Asian
Speaker 6: economies you know to bear for that? I mean, how
Speaker 6: do you how do you even begin to talk about
Speaker 6: that and regulate that.
Speaker 5: I don't know about your experience with government officials, but
Speaker 5: it never goes quickly, does it. Whenever your life involves
Speaker 5: dealing with the government, it's quite difficult to get things
Speaker 5: via email chains over the line. So I am skeptical
Speaker 5: about how quickly you can get complete free trade agreements
Speaker 5: in the next ninety days.
Speaker 4: What I can think that.
Speaker 5: A lot of these countries can do is buy themselves
Speaker 5: more time extensions. Way, there's more time to deliberate. The
Speaker 5: EUS offering zero for zero tariff rates, for example, but
Speaker 5: the US is claiming that non tariff barriers are their issue.
Speaker 5: Non tariff barriers requires regulation, changes, requires votes in parts,
Speaker 5: it's a bit more difficult to do than just simple
Speaker 5: tariff manipulation stories. And on the FX side, I do
Speaker 5: agree Lessons made it clear several times informally and formally
Speaker 5: about Japan, for example, having two weeks of an exchange
Speaker 5: rate and the Bank Japan perhaps needing to hike rates
Speaker 5: more so these will be a factor in the talks.
Speaker 2: I got John Tucker's thinking, long yen here to be
Speaker 2: stronger again? Can you model out as you did the
Speaker 2: other day, Jordan Rochester one for five yen down to
Speaker 2: one thirty five? Dare I say, short term, given dollar malignancy,
Speaker 2: that we get yen to a strong one thirty per dollar.
Speaker 4: Yeah.
Speaker 5: What's quite clear is we're having a d dollarization theme
Speaker 5: play out in the market. The theme's gone from slow
Speaker 5: to rapid in the past forty eight hours.
Speaker 4: A lot of that has.
Speaker 5: Been corporate demands as well that the market's been seeing,
Speaker 5: pushing up the likes of euro dollar and dollien and
Speaker 5: the yen stronger for the Japanese yen. I think that
Speaker 5: we could have another five percent devaluation in the.
Speaker 4: Dollar from here.
Speaker 5: If we are truly pricing in the US, exceeptionism come
Speaker 5: to an end. Once you have a ten percent trade
Speaker 5: weighted fall in the dollar, typically that's when it bottoms
Speaker 5: out and rebounds. So we're using the twenty eighteen the
Speaker 5: COVID nineteen playbooks, and we've won another five percent at
Speaker 5: least to go here. That gets dolly En quite close
Speaker 5: to one thirty five and lower. That's the sort of
Speaker 5: view I have for where we get to over.
Speaker 4: The next few months.
Speaker 5: And it was something I thought would happen next year.
Speaker 5: So it's all happening very quickly.
Speaker 3: Jordan, Thank you so much. Jordan Rochester with us with Missoul.
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live
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Speaker 2: What does Kathy say at Schwab joining us now Kathy
Speaker 2: Jones to straighten out our fixed income portfolio?
Speaker 3: Do people buy the dip in bonds?
Speaker 7: Yeah, I think you have to be careful, but I
Speaker 7: think that is probably a very good idea. The question is,
Speaker 7: are we at the yield level that's really attractive in
Speaker 7: some parts of the market. I think we are. I
Speaker 7: think in municipal bonds you're looking at, you know, tax
Speaker 7: equivalent yields or a high earner in the eight nine
Speaker 7: percent area, the high st equality. I think that that's
Speaker 7: the place you start to nimble.
Speaker 2: Okay, But on the commercial break, John Tucker's over here
Speaker 2: with robinhood Day trading in Nvidia. He's buying the dip.
Speaker 2: When you buy the Kathy Jones dip? Are you buying duration?
Speaker 2: Are you, like saying, extending out your maturity? Are you
Speaker 2: what's the what's the math of buying the fixed income dip?
Speaker 7: Yeah, so right now we're still at benchmark, which is
Speaker 7: consistent with the Bloomberg egg, and that's around six years
Speaker 7: and we've been kind of hugging the benchmark for a
Speaker 7: long time because of all the uncertainty. We feel like
Speaker 7: you're still clipping a pretty good coupon of four and
Speaker 7: a half upwards to five percent in high quality bonds.
Speaker 7: That's a good base. We're not extending duration yet. We
Speaker 7: have to wait and see how things play out, but
Speaker 7: I think that will be a move that we make
Speaker 7: probably some time later this year, but you know, high
Speaker 7: credit quality. For We're we're really just focused on high
Speaker 7: credit quality and making sure we have enough liquidity, not
Speaker 7: going into instruments that they're ill liquid at this stage
Speaker 7: of the game, trying to play it safe. But I
Speaker 7: think the opportunities are starting to emerge.
Speaker 3: Jamien, is a dollar an a liquid instrument?
Speaker 6: Well, you know, Kathy, I have to agree with you.
Speaker 6: Muni's mortgages as well. You know, I think you know
Speaker 6: high quality mortgages. But you know what really stands out
Speaker 6: in this move. Guess what acid class woke up within
Speaker 6: fixed income credit and we saw spreads blow And now
Speaker 6: I'm looking at IG and high yield, you know, down
Speaker 6: two and a half three percent, you know, just since
Speaker 6: the second of April. What are your thoughts on credit
Speaker 6: markets going forward?
Speaker 7: Yeah, we're so a little bit cautious, although again we're
Speaker 7: getting tempted. We have been and kind of on the
Speaker 7: sidelines and credit for a while, just staying up in
Speaker 7: credit quality because the spreads were so tight. It didn't
Speaker 7: get paid for taking risk. But now you know, we're
Speaker 7: starting to get paid for taking risk. The problem is,
Speaker 7: I think the mix of policies we have right now
Speaker 7: is so difficult to interpret or even come up with
Speaker 7: an investment thesis that you can carry through the end
Speaker 7: of the year, because it could change in the heartbeat.
Speaker 7: That's where we're that's where we're having trouble. But I
Speaker 7: do think as we get if those spreads blow out
Speaker 7: some more, you know, we will start looking at more credit.
Speaker 6: We've also seen a massive steepening dare I say, in
Speaker 6: US yield curve, not just the US, really global yield curves,
Speaker 6: you know, And so you know when it talks, when
Speaker 6: Tom asks about positioning along the yield curve, I'm just curious,
Speaker 6: you know, I'm hearing a lot of people saying they
Speaker 6: still want to be, you know, along the short end
Speaker 6: of the curve, you know, as opposed to the long end.
Speaker 6: I'm just curious to hear thoughts there.
Speaker 2: Yeah.
Speaker 7: No, I think that thesis makes sense because we are
Speaker 7: anticipating rate cuts down the road, and if this continues,
Speaker 7: I don't see how the FED holds off because you
Speaker 7: see higher unemployment on the horizon. But I don't want
Speaker 7: to just hug the short end and miss out on
Speaker 7: grasping some of these yields for the long run, because
Speaker 7: I do think we're going to get a slower economy.
Speaker 7: I do think the FED will at some point have
Speaker 7: to lower rate, and I want to capture some of that, right.
Speaker 2: I want to report, Damien Damiens stay there right now
Speaker 2: the market moving futures are up like forty and they're
Speaker 2: now at eleven.
Speaker 3: We actually had read in the screen for a bit
Speaker 3: the Secretary.
Speaker 2: Of treasurer with Maria right now, maybe he can have
Speaker 2: the same effect as James Diamond a few days ago.
Speaker 6: Damien Kathy US Treasury demanded this, you know, kind of
Speaker 6: downtick really took a bit of a knock, and you know,
Speaker 6: I'm just curious. You know, we know we've been transitioning
Speaker 6: away from the FED, from US banks and foreigners, and
Speaker 6: you know, what does this mean in your opinion to
Speaker 6: term premium over time? I mean, are you thinking that
Speaker 6: this steepening of the curve is structural, that it's going
Speaker 6: to last for a long period.
Speaker 3: That's a really good pa.
Speaker 7: I do think it's going to last. Okay, term premium.
Speaker 7: We actually came into this year calling at the year
Speaker 7: of the term premium because we have to. We have
Speaker 7: to incorporate now these risks that are out there, and
Speaker 7: I do think we'll continue to see the term premium
Speaker 7: move up, not just here but globally, but especially here
Speaker 7: because this is the source of uncertainty.
Speaker 2: I got twenty more questions. We don't have time, Kathy Jones,
Speaker 2: your trooper to come in today. I can't imagine what
Speaker 2: the Kathy Jones calendar looks like at Charles Schwab today
Speaker 2: Chief Fixed Income Strategists, and ye'll curve watcher at Charles Schwab.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: Within the span of this week, this historic week, it
Speaker 2: is a good time to speak to Sevita Supermanian. She
Speaker 2: is with the Bank of America, but far more than that,
Speaker 2: delivers Berkeley mathematics, philosophy and massive dead head knowledge and.
Speaker 3: Joins us this morning here. She was definitive in making
Speaker 3: esg adult for.
Speaker 2: All all of you that were screaming, stop the peace,
Speaker 2: love and dope, just give me the math. Savina Supermanian
Speaker 2: led the charge to a constructive ESG debate more than
Speaker 2: a few years ago, where through she could joined us
Speaker 2: at studio.
Speaker 3: Wonderful to have you here.
Speaker 2: I love what you do in your Bank of America report, which,
Speaker 2: unlike most ego driven strategists, you actually listen to your
Speaker 2: securities research. You actually pay attention to what's going on
Speaker 2: in the trenches. Lorraine Hutchinson has a worst job at
Speaker 2: Bank of America.
Speaker 3: She's got to figure out what Walmart's going to do
Speaker 3: with China.
Speaker 2: I know, what does China do to the consumer and
Speaker 2: that how does that fold into your world?
Speaker 8: Well, I mean, you know, Lorraine has been spot on
Speaker 8: in calling out that a lot of these companies with
Speaker 8: exposure to China actually started shifting sourcing out of China
Speaker 8: into other regions of Asia as well as Mexico, you know,
Speaker 8: other parts of globe as early as you know, twenty fifteen,
Speaker 8: even before any of the tariff talk began.
Speaker 9: So, you know, I think that the idea that these.
Speaker 8: Companies are vulnerable to China alone is nice, is not
Speaker 8: necessarily the case anymore. But closet China via you know, Vietnam, Mexico,
Speaker 8: That's what worried us about the initial April second announcement.
Speaker 2: A few years ago, you were in high school. I
Speaker 2: got a phone call in Singapore. Go over to Bank
Speaker 2: of America.
Speaker 3: So I walk in.
Speaker 2: It's me and Ken Lewis having a conversation about Bank
Speaker 2: of America and Asia. You guys have a heritage there,
Speaker 2: you have a history there really like no one else.
Speaker 2: So what's China do here? Damien's going to say they dedollarize.
Speaker 2: Do you just assume China solves the problem without unilateral
Speaker 2: negotiations with the White House bilateral?
Speaker 9: I should say, you know, that's TBD.
Speaker 8: I think that where we are now is where corporates
Speaker 8: have to really think about how they're going to plan.
Speaker 8: And that's the problem is that it's hard to plan
Speaker 8: when you just don't know what the playing field looks like.
Speaker 4: You know.
Speaker 8: What I think is interesting, though, is that there's been
Speaker 8: this knee jerk reaction to buy treasury bonds instead of
Speaker 8: stocks as a safe haven. And I think that's exactly
Speaker 8: wrong because if you look back on what happened in
Speaker 8: prior periods of protectionism, prior periods of stagflation, whatever we're
Speaker 8: heading into value stocks outperformed treasury bonds by a massive margin.
Speaker 8: The last thing you want to be stuck in during
Speaker 8: a stagflationary environment is long duration bonds. They have no options,
Speaker 8: whereas stocks, to me, are the best place to be.
Speaker 8: In an environment where you need those options, companies can
Speaker 8: extend or shorten their duration. We saw this with Meta
Speaker 8: and Google in twenty twenty three. They both initiated dividends
Speaker 8: and transition from being just pure.
Speaker 9: Growth to value.
Speaker 8: I think this is a really interesting time to think
Speaker 8: about value equities. Companies that are returning capital, like utilities,
Speaker 8: even metals and mining, even you know, energy companies that
Speaker 8: where the dividends are sacro SYNCD. I think those are
Speaker 8: areas that you really want to think about.
Speaker 6: Sabina, I'd love to ask you whether you prefer Tarpent
Speaker 6: station or American beauty, but we're not going to ask that.
Speaker 6: An earning season, it's a great time to be alive.
Speaker 6: And you know, I don't think it's going to be
Speaker 6: you know, the earnings at all that moves markets. It's
Speaker 6: going to be the words, the forward guidance around it.
Speaker 6: What are you expecting here?
Speaker 9: Absolutely?
Speaker 8: And I think what's a little bit worrisome is that
Speaker 8: we have a lot of companies shutting down guidance and
Speaker 8: going dark, and that's never really good because the worst
Speaker 8: you know, I think one of the reasons that we
Speaker 8: were a bullish on US stocks is that they're the
Speaker 8: most transparent, you know, equity market in the world. All
Speaker 8: of these companies issue guidance, and now if they stop,
Speaker 8: that's that's one you know, one more nick in the
Speaker 8: America you know exceptionalism story. I think, you know, what
Speaker 8: do we do with that that information vacuum? I mean,
Speaker 8: what I think is interesting is that companies are already
Speaker 8: thinking about how to navigate this period. And it could
Speaker 8: be something like recasting your costs as IP or you know,
Speaker 8: thinking about how to shift sourcing more creatively, how to price,
Speaker 8: how to pass that price along to consumers, and a
Speaker 8: lot of companies have the option to increase prices as
Speaker 8: long as wages remain relatively healthy.
Speaker 2: With the Bank of America, Savita Supermanian with us, we
Speaker 2: welcome all over your commute across Bank of America's nation
Speaker 2: and of course on YouTube and particularly good evening in
Speaker 2: the Pacific RIM YouTube subscribe to Bloomberg Podcast as CPI. Yesterday,
Speaker 2: I got negative statistics for that business inflation PPI. I'm
Speaker 2: not going to go into it other than to say
Speaker 2: it does show a disinflationary tendency. Pretty much everything said,
Speaker 2: futures go from up twenty to up twenty six. The
Speaker 2: VIX comes in actually forty one point four or five.
Speaker 3: Let me say that.
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Speaker 6: Damian Savida put on your options hat for me. With
Speaker 6: all the uncertainty that's out there, implied boles have been
Speaker 6: all over the map, surfaces or inverting skis or stapening.
Speaker 6: What are your thoughts on buying and or underwriting equity
Speaker 6: protection here?
Speaker 8: Yeah, I mean I think that protections already probably pretty
Speaker 8: well uh sought after. Yeah, you know, I think there
Speaker 8: is actually potentially more upside than downside risk to the
Speaker 8: S and P five hundred And I know I sound
Speaker 8: a little bit, you.
Speaker 9: Know, out of sync with everybody else.
Speaker 8: Here, but you know, again, I see this as a
Speaker 8: market environment where you want to follow the money. The
Speaker 8: money is not going into US Treasury bonds. There's a
Speaker 8: buyers strike on US treasure rebonds. Where is the money
Speaker 8: going to go? I think it's going to go into
Speaker 8: inflation protected income. Think about retirees. Retirees right now own
Speaker 8: this barbell I have to.
Speaker 9: Well, let's think about what we all own. We own
Speaker 9: a barbelle of cash and tim stocks, right.
Speaker 8: I mean, if you look at Merrill lynch Our, you
Speaker 8: know advisor data, four out of five of the top
Speaker 8: ten holdings of retirees are tech companies. Their yield is
Speaker 8: lower than the yield of the S and P five hundred.
Speaker 8: This is the first time in history that we've seen
Speaker 8: retirees not owning dividends.
Speaker 2: Quickly on this then, is apple of value stock as
Speaker 2: you mentioned value before, Well, I mean.
Speaker 8: It's certainly a lot more value now than it was
Speaker 8: a few months ago.
Speaker 3: Peas Templeton would say, shares are on sale.
Speaker 8: Yeah, I think that there is an idea there is
Speaker 8: this notion that the dividends are relatively protected, payout ratios
Speaker 8: are low for a lot of these companies. That's what
Speaker 8: I would look at is, what's the payout ratio, what's
Speaker 8: their dividend growth profile?
Speaker 9: What's management's focus on dividends?
Speaker 2: Handlers didn't want you to do this interview because they
Speaker 2: know I'm going to get you in trouble.
Speaker 3: Okay, folks, here's the drill.
Speaker 2: Savida is so good at the spread market in math
Speaker 2: that she's one of the few equity people out there.
Speaker 2: And what do we do with our four oh one
Speaker 2: k that could go into the office this afternoon with
Speaker 2: Brian moynihan, And you're going to explain to Brian for
Speaker 2: the larger Bank of America World the collapse two point
Speaker 2: eight standard deviations off the log trend back to twenty
Speaker 2: twenty three autumn of so for ten year yield. And
Speaker 2: the answer is the underlining machinery of mister moynihan, a
Speaker 2: guy building a building on Park Evan and a few
Speaker 2: other people. The liquidity issue out there is really sport.
Speaker 2: How do you explain to bank management the tension going
Speaker 2: into this weekend?
Speaker 4: Oh?
Speaker 8: I think bank management is well aware and on top
Speaker 8: of this, But I mean I would say that you know,
Speaker 8: in environments like this, the trick is getting to the
Speaker 8: other side.
Speaker 9: And who knows this.
Speaker 2: Is that how many heads a short term trust market?
Speaker 8: Well, I mean I think that you look for areas
Speaker 8: that are short duration. Short duration is key in a
Speaker 8: liquidity crisis, and that means you go for cash, short
Speaker 8: duration bonds, stocks with high dividends. You know, some credit,
Speaker 8: but not all credit. Credit markets might be healthier than
Speaker 8: they have been in prior crises. I mean, you tell me, Tom,
Speaker 8: but I think this crisis is so different from two
Speaker 8: thousand and eight or nineteen ninety eight or ninety eight
Speaker 8: or even the seventies, in that US companies have completely
Speaker 8: de levered in terms of the larger ones. Right if
Speaker 8: you think about banks, energy companies, all the old economy
Speaker 8: companies that were hit in two thousand and eight have
Speaker 8: become healthier, have really been preparing for this type of crisis.
Speaker 8: So I think that's the good news is that within
Speaker 8: the equity market, you've got a lot of companies with
Speaker 8: solid balance sheets and you know, the ability to maintain dividends.
Speaker 6: Seviea. We're talking about retirees and we're talking about retirement
Speaker 6: benefits here, and we're talking about equitable institute losses. Between
Speaker 6: the four trading days between April third, and April eighth,
Speaker 6: the twenty five top state local US pensions lost almost
Speaker 6: two hundred billion dollars. Well, yeah, I mean they're calling you,
Speaker 6: what do you say?
Speaker 9: You know why that that's happening.
Speaker 8: I think part of the reason is that everybody loaded
Speaker 8: up on private equity, private credit and long bonds, interesting,
Speaker 8: which are hardest hit during any sort of cost of
Speaker 8: capital crisis. Think about all of these areas, They're going
Speaker 8: to be whacked by higher interest rates. And I think
Speaker 8: that's the problem, is that pension funds have supplanted all
Speaker 8: of their active public equity exposure, yeah, with passive or
Speaker 8: private equity. Interesting, and that's why the S and P
Speaker 8: index itself is at risk. This is the most crowded
Speaker 8: ticker in the world. Nobody owns stocks anymore, they own
Speaker 8: the index.
Speaker 6: But let me ask you that. I mean, aren't private
Speaker 6: credit funds allowed to mark their books like four times
Speaker 6: a year, call it once a year when they get
Speaker 6: the audit, right, So I mean, it's not really showing
Speaker 6: up in it, you know what I mean? So that
Speaker 6: four dat decline of two hundred billion, that might not
Speaker 6: even be including the marks you're getting from private credit yet,
Speaker 6: So it could be much more, is what you're saying exactly.
Speaker 9: That's why I like equities Again.
Speaker 8: They're marked to reality every millisecond of the day, and
Speaker 8: I think that's a very valuable characteristic as well, beautifully.
Speaker 3: Explained by you and Damien better than I could do.
Speaker 2: Then where is the opportunity if passive is taken over?
Speaker 2: I mean, as we get this from Eric Bell Chunas,
Speaker 2: But Savita Supermanian, give me an opportunity looking out past
Speaker 2: labor day?
Speaker 8: Yeah, by the average stock in the S and P,
Speaker 8: by the equal weighted SMP put by large cat value,
Speaker 8: by anything but the cap weighted index. Because that's the
Speaker 8: area that I think has become bloated and potentially risky.
Speaker 3: Can you buy Europe?
Speaker 2: I mean if if i'm I mean, I mean, let's
Speaker 2: be honest here, Damien, I mean, you know if I
Speaker 2: got you one thirteen, Savina Romamian over Lewis Viewton, They're
Speaker 2: on fifty seventh Street and fifth. They han't a loading up.
Speaker 2: I mean, is europe an opportunity?
Speaker 9: I think Europe's an opportunity. I mean, i'm i'm.
Speaker 8: I was more optimistic on Europe when before the tariff
Speaker 8: wars began because I think there's an opportunity for a
Speaker 8: lot of really interesting cross border m and a where
Speaker 8: US companies can buy cheaper growth in Europe than they
Speaker 8: can in the US. So, you know, I think those
Speaker 8: are areas that could catalyze Europe. I think Europe also
Speaker 8: right now certainly looks a lot more attractive on a.
Speaker 9: Policy risk perspective.
Speaker 8: At least we know a little bit more about what's
Speaker 8: going to happen there. But I still think Europe's dependence
Speaker 8: on the US and the interdependence between all of these
Speaker 8: regions is a risk that that may not be factored in.
Speaker 2: Call me if you talk to Brian moyne, Anne, we'd
Speaker 2: love to know what you know, what you're talking about.
Speaker 2: Savina Supermanian, thank you so much for.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 2: Jennifer Lee joins US Now Senior economist Jennifer to what
Speaker 2: we heard from Damien sas our overwhelming law.
Speaker 3: Is a presumption of a growth slowdown. Where will real
Speaker 3: GDP head?
Speaker 10: Good morning, and thank you very much for having me on. Yes, well,
Speaker 10: right now, it looks like GDP is headed lower in
Speaker 10: terms of growth. You know, we're not looking for a
Speaker 10: recession in the US, but the risk of this continues
Speaker 10: to run. It's just given obviously this escalating higher and
Speaker 10: a higher terra form losing the track of all the
Speaker 10: percentages right now, but it looks like, you know, we
Speaker 10: are maxed out at one hundred and forty five percent
Speaker 10: on one side, one hundred and twenty five percent on
Speaker 10: the other side. So we'll see how this plays out.
Speaker 10: But this is you know, obviously not going to use
Speaker 10: for US consumers. You're going to be paying higher prices,
Speaker 10: even though you know, we brought all the other countries
Speaker 10: down to a baseline of ten percent tariff, but you know,
Speaker 10: prices are heading higher and.
Speaker 11: This is what's going to hit the US consumer and
Speaker 11: this is what's going to.
Speaker 2: Are you going to a negative statistic on real GDP
Speaker 2: for this present quarter?
Speaker 11: No, we are not, no, not.
Speaker 10: We're still looking for growth, but slower, much slower growth.
Speaker 10: And it's not just the consumer, by the way, it's
Speaker 10: also business investment. And you know, even though a lot
Speaker 10: of these uh you know, this this invitation we can
Speaker 10: we say, to bring more investment into the US is helping,
Speaker 10: we're stealing, you know, lots of money coming in now
Speaker 10: in terms from different companies promising to build and to hire.
Speaker 10: At the same time. You know, it's just very hard
Speaker 10: to make any real strong with conviction investment decisions in
Speaker 10: this sort of uncertain environment. So I think that's also
Speaker 10: going to offset a lot of this incoming.
Speaker 11: Investment, Jennifer.
Speaker 6: As you know, overnight, Beijing raised their tariff on the
Speaker 6: US to one twenty five percent, But the company statements
Speaker 6: stood out for me. They said, we're not going to
Speaker 6: raise anymore. You know why, because it doesn't matter. We're
Speaker 6: not trading with them anymore. I mean, so in your models,
Speaker 6: are you modeling zero trade between China and the US
Speaker 6: on a four basis?
Speaker 10: Well, you know it, certainly it looks like we are
Speaker 10: heading in that direction, but I can't see, you know,
Speaker 10: I just can't see how that is going to happen,
Speaker 10: just given how much reliance they are, there is on
Speaker 10: both both countries on each other for all this trade.
Speaker 10: So there's just going to have to be you know,
Speaker 10: sometimes they're going to have to start talking at some point,
Speaker 10: but right now, I'm just I'm very curious to see,
Speaker 10: number one, what the reaction from White House is going
Speaker 10: to be, and number two, what other tools are going
Speaker 10: to be coming out of the toolbox to borrow with
Speaker 10: the language from monetary policy makers about what else can
Speaker 10: be used? If we are hitting that max of one
Speaker 10: hundred and forty five one hundred and fine five percent,
Speaker 10: what's next? So we're going to start talking about expert
Speaker 10: restrictions on rare minerals for example, on you know, perhaps
Speaker 10: treasury on the treasury holdings. I don't know what's next,
Speaker 10: but you know, but if we're done with terrorists, there's well,
Speaker 10: there's probably a lot of other things that they.
Speaker 6: Can use, Jennifer. Many are referring to the ninety day
Speaker 6: window by Trump as him having blinked, right, I mean,
Speaker 6: he saw the devil and he basically blinked. And I'm
Speaker 6: just curious. You know, if you're sitting there, you're in Beijing,
Speaker 6: you have to enter into negotiations, or for that matter,
Speaker 6: any sense, any.
Speaker 12: Country entering after why do they have to negotiate as well?
Speaker 6: I mean, only if they want to keep creating with
Speaker 6: the US, or you're right, maybe they just sit tight,
Speaker 6: sit on their hands, and then them blink back again.
Speaker 6: I mean, that's my question, Jennifer. You know, how do
Speaker 6: you negotiate with the US now that Trump has just
Speaker 6: put this ninety day window and it does seem like
Speaker 6: he did blink.
Speaker 11: It is it.
Speaker 10: Looks like he saw the cliff. He goes, oh, there
Speaker 10: is the after of the cliff. I'm going the other way.
Speaker 10: You know, there are a lot of different interpretations of
Speaker 10: what happened, but you know, from one, I think all
Speaker 10: of us are very relieved that he did that he
Speaker 10: that he did put in that ninety day pause, and
Speaker 10: I think that should be very much welcomed. And that
Speaker 10: was definitely a big step back from the brink, and
Speaker 10: I think that's what everyone should sort of focus on,
Speaker 10: and the fact that that.
Speaker 11: Is good news.
Speaker 10: Now, what's going to happen next Again, that's anyone's guest.
Speaker 10: But I would really really hope that both sides are
Speaker 10: going to start saying, okay, let's talk this out. Let's
Speaker 10: let's plan a summit of some port of some sort
Speaker 10: of in Beijing or in Washington, DC, or a somewhere
Speaker 10: in neutral wherever that's going to be now and start
Speaker 10: hammering out.
Speaker 11: What are we going to do to make all of this,
Speaker 11: to make it both sides.
Speaker 10: Happy, because the global economy is really at stake here,
Speaker 10: you know.
Speaker 2: Jennifer, what's so important here is is this oddity on
Speaker 2: a Friday of While the American economy is great, Morgan
Speaker 2: Stanley out now has a return on average common equity
Speaker 2: of seventeen point four percent jp Morgan even better than that,
Speaker 2: we're moving from a three percent real GDP economy into
Speaker 2: some great mystery. Can the banks call Secretary Besson and
Speaker 2: just say stop this because of the liquidity issues, the
Speaker 2: bond issues, the dollar issue. Are you confident into the
Speaker 2: weekend that the big banks have the power to sway
Speaker 2: the secretary?
Speaker 11: I would like to think that would be the case. However,
Speaker 11: I think there are the administration has.
Speaker 10: Bigger, bigger issues or bigger picture that they're that they're
Speaker 10: focusing on. I mean, I believe President Trump did say
Speaker 10: that there's good that we're going to be entering this,
Speaker 10: you know, this volatile period right now, Camemis exact words,
Speaker 10: but you know it's going to be some choppiness in
Speaker 10: terms of economy, in terms of prices, so we have
Speaker 10: to what they're trying to do is look through this
Speaker 10: and ultimately make this you know, right, this wrong?
Speaker 11: You know what they are they are seeing in terms
Speaker 11: of global trade.
Speaker 2: Jennifer, I got gold up fifty six dollars three two
Speaker 2: three four. I've got so for ten year, folks, which
Speaker 2: is sort of the heartbeat of the trust market out
Speaker 2: two point nine standard deviations off the trend ACKed to
Speaker 2: the fall of last year. Aren't we at a point
Speaker 2: where the big banks, Diamond, Mooyne and the others can
Speaker 2: call them up and just say stop it.
Speaker 11: Again?
Speaker 4: They can?
Speaker 11: But does he want to show that he is bending
Speaker 11: to you know, to corporate America.
Speaker 10: That's you know, they're sort of like beet chair Powell
Speaker 10: right when when he want, you know, people are going
Speaker 10: to be questioning is he doing it because of local
Speaker 10: pressure or is he doing it because he's trying to
Speaker 10: support the US economy. There's there's gonna be a lot
Speaker 10: of questions about this, and tough questions, of course, and
Speaker 10: you know they will be posed.
Speaker 3: Jen We've got to run here, Damien. I got to run,
Speaker 3: but this is too important.
Speaker 2: I got Looney one forty one to a strong Canadian
Speaker 2: dollar one thirty nine. Can the next Prime Minister of Canada,
Speaker 2: whomever it is, can they stand a strong Canadian dollar.
Speaker 11: I don't know. I would call it right now very strong.
Speaker 10: I mean, it's certainly better than, you know, than what
Speaker 10: we had before. But I'm going to be curious to me.
Speaker 10: Our election is at April twenty eighth. Whoever the new
Speaker 10: Prime minister is going to be, whether or not there's
Speaker 10: going to be a majority government or not, what measures are.
Speaker 11: They going to do to strengthen the Canadian economy? And
Speaker 11: that will be you know, that's the next focus.
Speaker 2: Thank you so much for being this today, Jenniferly huge
Speaker 2: value at BEMO Capital Market.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple Corplay and Android
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Speaker 1: Just say Alexa Play Bloomberg eleven thirty.
Speaker 2: Erica Groschen came out of Harvard and out of University
Speaker 2: of Wisconsin, Madison and did the thing that's wonderful in research.
Speaker 2: She wrote up research. I believe it was the new
Speaker 2: York fed years ago and Damiena jumped out of the page,
Speaker 2: jumped out.
Speaker 3: Of the screen. It was like, who is this person?
Speaker 2: And I interviewed Eric Groschen. I don't think she was
Speaker 2: so young. I don't think she could drive. She's joining
Speaker 2: us now after a stellar career of public service as
Speaker 2: commissioner of the United States Bureau of Labor Statistics. When
Speaker 2: you see dose, say we're going to move him out
Speaker 2: the door. No one has been in the crosshairs like
Speaker 2: doctor Groschen. Erica, thank you so much for joining us.
Speaker 2: It could be a four hour conversation, but we're going
Speaker 2: to be quick, quick, quick today.
Speaker 3: Erica.
Speaker 2: What is the damage to the people that you our
Speaker 2: economic data build in nineteen forty seven, best in the world.
Speaker 2: How does the labor statistics, How does CEA and the others?
Speaker 3: How do they move forward?
Speaker 13: Wow, that's a that is a big question. Let me
Speaker 13: start off by saying, I think up to this point,
Speaker 13: most of the damage has been collateral. Damage hasn't been
Speaker 13: aimed at BLS or most of the other statistical agencies,
Speaker 13: with some exceptions in particular, but it's profound. It's lack.
Speaker 13: Right now, we're worried about very worried about the loss
Speaker 13: of expertise and at BLS in particular, that's going to
Speaker 13: be exasperated in the next couple of weeks when the
Speaker 13: Department of Labor announces the reductions force that it's intending
Speaker 13: to do. Will and then.
Speaker 12: There's will we be a little Will we be able
Speaker 12: doctor Groschen to execut cute the two jobs reports in
Speaker 12: the first week of the month, or is that going
Speaker 12: to become a challenge to actually understand the American labor economy.
Speaker 13: In the short run, probably not too much disruption, but
Speaker 13: the damage will grow over time. And we have also
Speaker 13: what we're doing is getting rid of the necessary sort
Speaker 13: of option value that BLS has always built into its
Speaker 13: operations so that when there's a weather event or some
Speaker 13: other problem, the agency can still put out the jobs
Speaker 13: report on time. That's going to be harder. And then finally,
Speaker 13: we are absolutely the devastating the agency's ability to modernize
Speaker 13: in the way.
Speaker 11: That it should.
Speaker 6: Doctor Groshen Larry think of Blackrock on the tape right
Speaker 6: now saying that sweeping US TWERF announcements went way beyond
Speaker 6: anything I could have ever imagined in my forty nine
Speaker 6: years in Finance. You had Jamie I'm in on earlier
Speaker 6: saying pretty much the same thing. What does this mean
Speaker 6: for the labor markets here in the US? Can we
Speaker 6: expect layoffs ahead?
Speaker 11: Wow?
Speaker 13: So one of the things that's characteristic of most recessions
Speaker 13: is that actually companies stop hiring before they start laying off,
Speaker 13: and so the place to look for the most immediate
Speaker 13: damage is just freezing and hiring. And we're already starting.
Speaker 13: We've already begun to see that in the fact that
Speaker 13: temporary help services employment has been falling. Erica, Well, that's
Speaker 13: often companies will stop hiring temp or fire their tempts
Speaker 13: before they Yeah, Erica.
Speaker 3: Get one more question in here. We've got breaking news.
Speaker 3: You're going to have to run. But let me let
Speaker 3: me get this in folks.
Speaker 2: The headline, which will get to in a moment, the
Speaker 2: United States has told China to request a g Trump
Speaker 2: call that according to CNN, and that moved the markets.
Speaker 3: We are read on the screen and.
Speaker 2: Now we're up twenty three on the Dow fractionally up,
Speaker 2: I would say, but again, this is the headline by
Speaker 2: headline sequence, we're seeing a reason to stay with Bloomberg
Speaker 2: all through this fractures Friday. I can't imagine where we're
Speaker 2: going to be at three pm this afternoon, Erica. They
Speaker 2: said you were coming on today, and I said, great.
Speaker 2: Finally I can ask someone qualified, Erica Groschen, if we
Speaker 2: get to a five percent unemployment rate somewhere out there
Speaker 2: is a five percent unemployment rate in America now, the
Speaker 2: same as a five percent unemployment rate in nineteen eighty
Speaker 2: five or nineteen sixty five.
Speaker 3: Wow.
Speaker 13: The simple answer is yes, that's part of what we
Speaker 13: expect from our federals to tiss except it's collected in
Speaker 13: the same way, it's asking the same questions, and so
Speaker 13: it is comparable. That said, the economy has changed, right,
Speaker 13: So when we look overall at at who's who's who's unemployed,
Speaker 13: and who's not unemployed, and who's counted as working and
Speaker 13: things like that, there are changes over time. So right now,
Speaker 13: one of the things I would say is that we've
Speaker 13: just come off a period of historically low unemployment rates.
Speaker 13: So five percent wouldn't have seemed that bad, you know,
Speaker 13: you know, two or three decades ago, but now it's
Speaker 13: a significant increase in the amount of unemployment.
Speaker 2: Erica, for all of us at Bloomberg with great respect
Speaker 2: led by our Michael McKee. Thank you to you and
Speaker 2: our public servants in our economic data collection. Can't say
Speaker 2: that how we rely on you.
Speaker 3: Each and every day.
Speaker 2: She is at Carnell University, the arecclaimed Industrial and Labor
Speaker 2: Program Erica Grossen always the Bureau of Labor Statistics.
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