1
00:00:02,520 --> 00:00:13,760
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

2
00:00:13,840 --> 00:00:17,920
Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

3
00:00:18,200 --> 00:00:22,000
Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App.

4
00:00:22,360 --> 00:00:25,680
Speaker 1: Listen on demand wherever you get your podcasts, or watch

5
00:00:25,760 --> 00:00:27,040
Speaker 1: us live on YouTube.

6
00:00:27,320 --> 00:00:30,200
Speaker 2: Joining us now as we slide into this CPI report,

7
00:00:30,240 --> 00:00:35,479
Speaker 2: this important report. Constance Hunter, Senior Advisor Macro Policy Perspectives

8
00:00:35,800 --> 00:00:39,720
Speaker 2: and of course always with the Economist Intelligence Unit, joins

9
00:00:39,800 --> 00:00:44,320
Speaker 2: us today. I guess it's sort of like a mysterious report,

10
00:00:44,360 --> 00:00:48,879
Speaker 2: to say the least. But is disinflation in place? If

11
00:00:48,920 --> 00:00:51,840
Speaker 2: I see US and global yields moving.

12
00:00:51,640 --> 00:00:55,600
Speaker 3: Higher, Well, the yields are probably moving higher for a

13
00:00:55,680 --> 00:00:58,520
Speaker 3: number of reasons. But I think what we've seen is

14
00:00:58,640 --> 00:01:02,520
Speaker 3: the disinflation and deeplyation in goods that's about to end, right,

15
00:01:02,560 --> 00:01:05,039
Speaker 3: And I agree with Anna Wong. We're seeing softness and

16
00:01:05,080 --> 00:01:08,759
Speaker 3: transportation services. That's about six percent of the waiting of CPI,

17
00:01:09,360 --> 00:01:12,319
Speaker 3: and so the question is is that are the increases

18
00:01:12,360 --> 00:01:15,280
Speaker 3: in goods and the fall and transportation going to offset

19
00:01:15,280 --> 00:01:17,840
Speaker 3: each other When we look at core services though, we're

20
00:01:17,880 --> 00:01:20,520
Speaker 3: still running a little bit above four percent year over year,

21
00:01:21,240 --> 00:01:23,000
Speaker 3: So if we can.

22
00:01:22,920 --> 00:01:26,479
Speaker 4: See what vets churche not yet, not yet, No.

23
00:01:26,520 --> 00:01:29,520
Speaker 2: I will vets. They're way about four.

24
00:01:29,840 --> 00:01:31,840
Speaker 5: Way about four percent? All right?

25
00:01:31,880 --> 00:01:35,800
Speaker 6: So CPI ex food x energy year on year, and

26
00:01:35,840 --> 00:01:39,200
Speaker 6: since this is two point eight percent, isn't that okay?

27
00:01:40,720 --> 00:01:43,360
Speaker 7: Well, so I can live with that. So if we

28
00:01:43,400 --> 00:01:44,120
Speaker 7: go back to that.

29
00:01:44,240 --> 00:01:46,119
Speaker 3: So I was listening early this morning, and I forget

30
00:01:46,120 --> 00:01:47,400
Speaker 3: the name of the guest you had on who was

31
00:01:47,440 --> 00:01:51,600
Speaker 3: talking about the post nineties, the late nineties equity market, right,

32
00:01:51,680 --> 00:01:54,680
Speaker 3: And in the nineties we had potential GDP was a

33
00:01:54,680 --> 00:01:57,280
Speaker 3: bit higher, we had inflation between two and a half

34
00:01:57,320 --> 00:01:59,960
Speaker 3: and three percent, and because growth was humming along, actually

35
00:02:00,000 --> 00:02:03,840
Speaker 3: only two point eight percent was okay. The big question

36
00:02:03,920 --> 00:02:07,760
Speaker 3: mark here is we are coming into potentially softer growth

37
00:02:07,800 --> 00:02:10,560
Speaker 3: and even higher inflation going forward as a result of

38
00:02:10,560 --> 00:02:11,040
Speaker 3: the tariffs.

39
00:02:11,360 --> 00:02:13,880
Speaker 2: How could you forget? Julian and Manuel have everquor?

40
00:02:14,080 --> 00:02:15,760
Speaker 7: I'm so sorry, Julian.

41
00:02:17,000 --> 00:02:17,720
Speaker 2: Forgettable?

42
00:02:19,120 --> 00:02:19,560
Speaker 5: My bad?

43
00:02:19,600 --> 00:02:20,360
Speaker 7: You're right, Tom.

44
00:02:20,680 --> 00:02:21,560
Speaker 5: So what do we do here?

45
00:02:21,639 --> 00:02:23,440
Speaker 6: If you're the Federal Reserve, you see a print like

46
00:02:23,440 --> 00:02:26,400
Speaker 6: two point eight percent, let's say it comes in there today.

47
00:02:26,639 --> 00:02:28,320
Speaker 5: Do you feel like you've got more work to do?

48
00:02:28,320 --> 00:02:30,080
Speaker 5: Do you feel like you can sit on your hands,

49
00:02:30,120 --> 00:02:31,440
Speaker 5: do you need to cut rates?

50
00:02:31,680 --> 00:02:34,720
Speaker 3: So what everybody is going to be looking for, and

51
00:02:34,760 --> 00:02:37,720
Speaker 3: it's going to be challenging, right because these are lagging indicators.

52
00:02:37,760 --> 00:02:39,640
Speaker 3: But what everybody's going to be looking for what are

53
00:02:39,680 --> 00:02:42,520
Speaker 3: the clues not just about what it says where we

54
00:02:42,520 --> 00:02:44,920
Speaker 3: would be going if we weren't having tariffs, but we're

55
00:02:44,960 --> 00:02:47,320
Speaker 3: looking for clues about what is going to be inflation

56
00:02:47,400 --> 00:02:50,760
Speaker 3: in May, June, July as a result of the tariffs.

57
00:02:50,960 --> 00:02:54,920
Speaker 3: And so the details of this goods pricing is going

58
00:02:55,000 --> 00:02:57,359
Speaker 3: to be really critical. And we have the amazing work

59
00:02:57,360 --> 00:03:00,799
Speaker 3: by Cavallo and his colleagues on the real prices index, right,

60
00:03:00,840 --> 00:03:04,400
Speaker 3: and if you look since March, we've seen import prices

61
00:03:04,440 --> 00:03:08,480
Speaker 3: go up. But of course this allows domestic producers to say, well,

62
00:03:08,680 --> 00:03:10,920
Speaker 3: I can also afford to raise my prices because my

63
00:03:10,960 --> 00:03:15,960
Speaker 3: competition is raising their prices. Right, so you import overall inflation, I.

64
00:03:15,919 --> 00:03:18,639
Speaker 2: Get forty two seconds, just as simple as I can.

65
00:03:18,680 --> 00:03:21,720
Speaker 2: And this goes to Economics Intelligence Unit, all the wonderful

66
00:03:21,720 --> 00:03:24,720
Speaker 2: work of ANA one here, your work with macro policy

67
00:03:24,760 --> 00:03:29,359
Speaker 2: perspectives and Julia Cornado in your head, where is CPI

68
00:03:29,560 --> 00:03:33,760
Speaker 2: twelve months out? Not your end, but just is it

69
00:03:33,800 --> 00:03:36,760
Speaker 2: to Paul's point, is it three ish? Is it two

70
00:03:36,840 --> 00:03:39,680
Speaker 2: point xi ish? You're going to make some news here

71
00:03:39,760 --> 00:03:40,280
Speaker 2: four ish?

72
00:03:41,000 --> 00:03:41,240
Speaker 8: No.

73
00:03:41,440 --> 00:03:45,800
Speaker 3: I think the news here is that the growth shock

74
00:03:46,240 --> 00:03:49,080
Speaker 3: is going to overtake the inflation shock. So you've asked

75
00:03:49,080 --> 00:03:51,920
Speaker 3: the critical question, and I think twelve months out we

76
00:03:51,960 --> 00:03:54,480
Speaker 3: could be looking at a two and a half percent inflation,

77
00:03:54,680 --> 00:03:58,240
Speaker 3: provided that all of those core services that have been

78
00:03:58,240 --> 00:04:01,800
Speaker 3: sticky continue to begin a little bit downward.

79
00:04:02,040 --> 00:04:05,600
Speaker 6: Constin Hunter chief economists at the economist intelligence units still

80
00:04:05,600 --> 00:04:08,480
Speaker 6: what it's in our Bloomberg Interactive Broker studio constants. We've

81
00:04:08,480 --> 00:04:13,200
Speaker 6: had so much discussion about tariffs this year, has it

82
00:04:13,240 --> 00:04:16,080
Speaker 6: impacted your GDP outlook at all? Because I'm not sure,

83
00:04:16,120 --> 00:04:18,000
Speaker 6: actually I'm not even sure where we are with tariffs

84
00:04:18,120 --> 00:04:20,160
Speaker 6: right now, but it seems like it's not as bad

85
00:04:20,200 --> 00:04:21,880
Speaker 6: as it was maybe a couple of days ago.

86
00:04:22,120 --> 00:04:24,200
Speaker 5: Has it impacted your GDP outlook?

87
00:04:24,320 --> 00:04:27,880
Speaker 3: So what impacted our GDP outlook is the uncertainty that

88
00:04:27,920 --> 00:04:31,919
Speaker 3: the the back and forth on tariff policy has caused.

89
00:04:32,480 --> 00:04:35,600
Speaker 3: And of course this is intertwined with a bunch of

90
00:04:35,839 --> 00:04:41,440
Speaker 3: dispersion regarding economists forecasts, and so it is that uncertainty

91
00:04:41,520 --> 00:04:44,080
Speaker 3: that we think is going to drive the pullback in growth,

92
00:04:44,080 --> 00:04:46,600
Speaker 3: and that's going to come from firms reducing capex because

93
00:04:46,600 --> 00:04:49,080
Speaker 3: they're not quite sure where there where it.

94
00:04:49,040 --> 00:04:50,000
Speaker 7: Makes sense to spend.

95
00:04:50,880 --> 00:04:54,039
Speaker 3: We see from a we have a corporate network that

96
00:04:54,120 --> 00:04:56,440
Speaker 3: are around the world. We have it in different cities

97
00:04:57,120 --> 00:05:01,000
Speaker 3: and we've surveyed them and we ask them about in

98
00:05:01,480 --> 00:05:03,359
Speaker 3: this tear for war, who are you going to choose

99
00:05:03,400 --> 00:05:03,960
Speaker 3: to align with?

100
00:05:03,960 --> 00:05:04,000
Speaker 9: You?

101
00:05:04,040 --> 00:05:05,599
Speaker 3: You're going to choose to align with the US. Are

102
00:05:05,640 --> 00:05:07,800
Speaker 3: you going to choose to align with China? Or are

103
00:05:07,839 --> 00:05:10,440
Speaker 3: you going to try to stay neutral? And you know

104
00:05:11,000 --> 00:05:13,640
Speaker 3: japan executive Japanese executives, yes, they want to align with

105
00:05:13,640 --> 00:05:16,239
Speaker 3: the US. You look at executives at country companies based

106
00:05:16,240 --> 00:05:19,159
Speaker 3: in other countries and they're reconsidering whether they want to

107
00:05:19,200 --> 00:05:22,320
Speaker 3: align with the United States. That's going to impact capex.

108
00:05:22,360 --> 00:05:25,520
Speaker 2: Here to your global view and constance hunters known for

109
00:05:26,240 --> 00:05:29,720
Speaker 2: always taking things globally. My first chart of the day

110
00:05:30,000 --> 00:05:35,680
Speaker 2: was generic forty years Japan yields are slipping away here, there,

111
00:05:36,279 --> 00:05:41,000
Speaker 2: and everywhere. To me, that's lower fixed income prices. Do

112
00:05:41,080 --> 00:05:45,440
Speaker 2: we underestimate the drift of the US ten year yield,

113
00:05:45,839 --> 00:05:49,760
Speaker 2: the drift of Japan and other nations debt now.

114
00:05:49,960 --> 00:05:52,200
Speaker 3: I think I think we shouldn't underestimate it.

115
00:05:52,279 --> 00:05:52,440
Speaker 10: Right.

116
00:05:52,480 --> 00:05:54,560
Speaker 7: We are seeing term premium come back.

117
00:05:55,160 --> 00:05:58,360
Speaker 3: And if we go back to this nineties world we

118
00:05:58,360 --> 00:06:01,320
Speaker 3: were talking about earlier, that is fine if you have

119
00:06:01,400 --> 00:06:05,279
Speaker 3: stronger growth, stronger productivity. It has a dampening effect on

120
00:06:05,360 --> 00:06:07,840
Speaker 3: growth if you don't have those things. If it's because

121
00:06:07,839 --> 00:06:11,120
Speaker 3: of increased debt levels. And when we think about what's happening,

122
00:06:11,160 --> 00:06:13,720
Speaker 3: we're looking at China really doing a huge stimulus to

123
00:06:13,760 --> 00:06:16,200
Speaker 3: try to make up for this, increasing its debt levels.

124
00:06:16,320 --> 00:06:19,000
Speaker 3: We're looking at Germany, you know, ending its debt break,

125
00:06:19,160 --> 00:06:22,359
Speaker 3: increasing its debt levels. So there is a good reason

126
00:06:22,440 --> 00:06:24,800
Speaker 3: that we are seeing term premium go higher here and

127
00:06:24,920 --> 00:06:25,680
Speaker 3: around the world.

128
00:06:25,960 --> 00:06:28,640
Speaker 2: A terrific work again always by the Top Live blog.

129
00:06:28,640 --> 00:06:31,080
Speaker 2: It's one of the great premium products of the Bloomberg

130
00:06:31,520 --> 00:06:35,400
Speaker 2: at Terminal Top Live and Chris Ansy driving forward all

131
00:06:35,440 --> 00:06:37,200
Speaker 2: of that covered some of these We got to kind

132
00:06:37,240 --> 00:06:39,320
Speaker 2: of says you got to react to some of these headlines.

133
00:06:39,720 --> 00:06:43,600
Speaker 2: The annual gain and a headline CPI what our audience

134
00:06:43,680 --> 00:06:47,320
Speaker 2: cares about at two point three percent is the smallest

135
00:06:47,720 --> 00:06:51,800
Speaker 2: since February of twenty twenty one. In other words, before

136
00:06:51,839 --> 00:06:56,039
Speaker 2: the big inflation surge of spring of twenty twenty one,

137
00:06:56,440 --> 00:06:59,080
Speaker 2: but the trademard may reverse.

138
00:06:58,720 --> 00:07:00,760
Speaker 7: That because of God, we're not seeing that yet.

139
00:07:01,040 --> 00:07:03,719
Speaker 3: I was just glancing at the goods inflation from the

140
00:07:03,760 --> 00:07:07,400
Speaker 3: release and from what they've the sort of top line numbers,

141
00:07:07,440 --> 00:07:10,040
Speaker 3: and we're really not seeing any goods. We saw apparel

142
00:07:10,080 --> 00:07:12,760
Speaker 3: continue to decline, we saw used cars continue to decline.

143
00:07:12,960 --> 00:07:16,360
Speaker 3: It's not there yet, and the question is sort of

144
00:07:16,400 --> 00:07:20,480
Speaker 3: when does that come? Does it come in May? And

145
00:07:20,920 --> 00:07:24,760
Speaker 3: all indications are that it will be coming. And so

146
00:07:24,800 --> 00:07:26,720
Speaker 3: we really go back to what's happening with Core, which

147
00:07:26,760 --> 00:07:27,520
Speaker 3: was two point eight.

148
00:07:27,760 --> 00:07:30,000
Speaker 2: Well, thank you, you drove the vics under eighteen. You're

149
00:07:30,080 --> 00:07:33,520
Speaker 2: killing a constants hunter with us with the Economic Intelligence

150
00:07:33,600 --> 00:07:39,440
Speaker 2: Unit today and Juliet Cornado of a micropolicy perspective seventeen

151
00:07:39,480 --> 00:07:42,440
Speaker 2: point nine zero on the VIX. That's a whow statistic

152
00:07:42,520 --> 00:07:47,320
Speaker 2: futures up nine down, futures off of UNC United Health

153
00:07:47,680 --> 00:07:51,720
Speaker 2: showing a negative statistic nasdack up a solid four tenths

154
00:07:51,760 --> 00:07:54,600
Speaker 2: of a percent. Paul I had a tantrum. He said, Tom,

155
00:07:54,640 --> 00:07:57,640
Speaker 2: I'm sick and tired of John Lipsky and Constance Hunter

156
00:07:57,680 --> 00:08:00,680
Speaker 2: and all these people at sixty thousand feet. Let's get

157
00:08:00,680 --> 00:08:04,440
Speaker 2: the landing gear out with Matt Miskin Manual Life. Johnny

158
00:08:04,480 --> 00:08:09,600
Speaker 2: Andcock Investments are co chief investment strategy. Matt tough question,

159
00:08:09,880 --> 00:08:13,640
Speaker 2: what is your strategy this second third week of May.

160
00:08:15,120 --> 00:08:17,640
Speaker 4: Well, we've gone from risk off to risk one in

161
00:08:17,680 --> 00:08:21,400
Speaker 4: a matter of weeks, and it's been incredibly volatile for us.

162
00:08:21,520 --> 00:08:24,280
Speaker 4: It's about just being patient here. We leaned a little

163
00:08:24,320 --> 00:08:27,520
Speaker 4: bit into markets on the equity side amidst that drawdown

164
00:08:27,560 --> 00:08:30,280
Speaker 4: because we didn't think it was that fundamental. But now frankly,

165
00:08:30,280 --> 00:08:33,600
Speaker 4: we're back to the bond market and looking at disinflationary

166
00:08:33,640 --> 00:08:38,400
Speaker 4: forces that CPI report did miss again. We actually had

167
00:08:38,559 --> 00:08:43,320
Speaker 4: egg deflation, which is nice to see, and so we

168
00:08:43,360 --> 00:08:45,520
Speaker 4: actually think you got to be patient here. Now things

169
00:08:45,520 --> 00:08:48,680
Speaker 4: are back to being expensive on the risk side. Look

170
00:08:48,720 --> 00:08:50,080
Speaker 4: to get some high quality income.

171
00:08:50,320 --> 00:08:54,240
Speaker 2: He's too modest. Emily Rowland has nailed it with buy

172
00:08:54,360 --> 00:08:59,600
Speaker 2: American by large cap. Stay the course, don't go to cash, Paul.

173
00:08:59,480 --> 00:09:01,000
Speaker 6: Matt, What do we doing it in a fixed income

174
00:09:01,080 --> 00:09:03,720
Speaker 6: space here? That to your treasures yielding during your four

175
00:09:03,760 --> 00:09:05,079
Speaker 6: percent these days?

176
00:09:05,120 --> 00:09:06,520
Speaker 5: Do you just hide out there? Do you try to

177
00:09:06,559 --> 00:09:07,600
Speaker 5: take some credit risk here?

178
00:09:08,640 --> 00:09:10,840
Speaker 4: We the short end, we don't mind. I mean, it's

179
00:09:10,920 --> 00:09:13,320
Speaker 4: if that is attractive yields, you know, you can't you

180
00:09:13,320 --> 00:09:15,880
Speaker 4: can't dismiss that. But also in the intermediate part of

181
00:09:15,920 --> 00:09:19,640
Speaker 4: the curve, we just think it's completely hypnotized right now

182
00:09:19,679 --> 00:09:23,080
Speaker 4: by political developments. It's so odd to us that the

183
00:09:23,200 --> 00:09:26,920
Speaker 4: terror risk has come down and inflation's coming down, and

184
00:09:27,000 --> 00:09:30,040
Speaker 4: yet the ten year treasure yield is accelerating higher. So

185
00:09:30,280 --> 00:09:33,800
Speaker 4: it really has not been pricing in any disinflation in

186
00:09:33,840 --> 00:09:37,040
Speaker 4: our view, and you're getting this really nice income stream

187
00:09:37,240 --> 00:09:40,600
Speaker 4: again available to you in the bond market, and it's

188
00:09:40,640 --> 00:09:44,200
Speaker 4: not it's blowing through all the risk issues that could

189
00:09:44,240 --> 00:09:45,959
Speaker 4: be playing out. I mean, if you look at the

190
00:09:46,040 --> 00:09:48,400
Speaker 4: risk assets right now, well back to twenty one times

191
00:09:48,400 --> 00:09:51,120
Speaker 4: on the pe ratio of the SMP, high yield spreads

192
00:09:51,120 --> 00:09:54,360
Speaker 4: are back to three percent. Industrials are the best performing

193
00:09:54,400 --> 00:09:57,360
Speaker 4: sector now year to date, and financials are close behind

194
00:09:58,120 --> 00:10:02,160
Speaker 4: risk assets. A price for perfection, high quality income has

195
00:10:02,240 --> 00:10:05,040
Speaker 4: a lot of ability to run here. If this other

196
00:10:05,080 --> 00:10:07,360
Speaker 4: side of the market gets a bit of a rotation

197
00:10:07,720 --> 00:10:09,320
Speaker 4: or bid, again, what.

198
00:10:09,160 --> 00:10:11,000
Speaker 6: Did you make of earnings there, Matt? Did they give

199
00:10:11,000 --> 00:10:15,000
Speaker 6: you any confidence? Is it reflecting I guess the uncertainty

200
00:10:15,040 --> 00:10:16,960
Speaker 6: of the tires situation we're in. What did you take

201
00:10:16,960 --> 00:10:17,679
Speaker 6: away from earnings?

202
00:10:18,760 --> 00:10:21,200
Speaker 2: You know, the US earning season has been great.

203
00:10:21,480 --> 00:10:26,320
Speaker 4: It's just amazing how little that has been of attention

204
00:10:26,640 --> 00:10:29,960
Speaker 4: from investors. So the US earning season is going out

205
00:10:30,000 --> 00:10:33,280
Speaker 4: about fourteen percent year of the year growth clip, which

206
00:10:33,320 --> 00:10:35,600
Speaker 4: is one of the best we've seen in years. And

207
00:10:35,800 --> 00:10:40,000
Speaker 4: US equities are significantly underperforming their foreign counterparts. On the

208
00:10:40,120 --> 00:10:43,920
Speaker 4: MSCIIFA earnings are down six percent year of a year,

209
00:10:44,080 --> 00:10:47,079
Speaker 4: and that's the best performing part of the global equity market.

210
00:10:47,440 --> 00:10:51,360
Speaker 4: So stocks are not following profits, they're following politics, and

211
00:10:51,400 --> 00:10:54,199
Speaker 4: it's a lot of sentiment and to us, we're not

212
00:10:54,320 --> 00:10:56,400
Speaker 4: going to be whip sawed by sentiment. We're going to

213
00:10:56,440 --> 00:10:59,120
Speaker 4: follow the earnings. And even though the earnings have been good,

214
00:10:59,360 --> 00:11:01,920
Speaker 4: the negative side of the story is that the earnings

215
00:11:01,920 --> 00:11:04,760
Speaker 4: revisions have been coming down. So we started the year

216
00:11:04,800 --> 00:11:08,760
Speaker 4: with nearly a fourteen percent earnings growth estimate for twenty

217
00:11:08,800 --> 00:11:12,760
Speaker 4: twenty five. The streets view now it's nine. So our

218
00:11:12,880 --> 00:11:14,920
Speaker 4: view is that's going to keep getting trimmed. S and

219
00:11:15,000 --> 00:11:17,679
Speaker 4: p multiples just got expensive again. We want to look

220
00:11:17,720 --> 00:11:20,600
Speaker 4: for high quality income and be patient here.

221
00:11:20,760 --> 00:11:23,360
Speaker 2: Johnny Hancock was involved in all sorts of deals and

222
00:11:23,440 --> 00:11:27,120
Speaker 2: negotiations at the Founding Fathers and you know, getting things

223
00:11:27,160 --> 00:11:30,000
Speaker 2: done in the eighteenth century. He would have loved a big,

224
00:11:30,040 --> 00:11:33,120
Speaker 2: beautiful tax bill. How does the tax bill coming? This

225
00:11:33,200 --> 00:11:35,480
Speaker 2: is really the first time Paul I brought this up

226
00:11:35,480 --> 00:11:37,680
Speaker 2: on the show. All of a sudden, folks, it's a

227
00:11:37,679 --> 00:11:40,920
Speaker 2: summer legislative season. Matt Michigan. What's that going to do

228
00:11:40,960 --> 00:11:43,040
Speaker 2: to the bond market. What's going to do to Emily

229
00:11:43,160 --> 00:11:44,760
Speaker 2: Rowland's call in the equity market?

230
00:11:45,920 --> 00:11:49,560
Speaker 4: You know, coming from Boston, we dislike taxes, just like

231
00:11:50,040 --> 00:11:52,360
Speaker 4: almost all Americans. I mean, we're still getting over t

232
00:11:52,559 --> 00:11:57,440
Speaker 4: tax over here, Tom, you know, legacy of Boston and

233
00:11:57,520 --> 00:12:00,440
Speaker 4: ancestors here. But you know, in terms of Paul's see,

234
00:12:00,679 --> 00:12:03,679
Speaker 4: it's been a give and take, and you know, tariffs

235
00:12:03,720 --> 00:12:05,920
Speaker 4: we're going to be a negative on margins. They we're

236
00:12:05,920 --> 00:12:08,520
Speaker 4: going to print margins. That's diminishing. Now we got a

237
00:12:08,559 --> 00:12:12,000
Speaker 4: potential tax bill. At the end of the day, what

238
00:12:12,080 --> 00:12:15,600
Speaker 4: we are seeing is that growth in profit margins are

239
00:12:15,840 --> 00:12:18,640
Speaker 4: probably going to be limited. We just don't see much

240
00:12:18,679 --> 00:12:21,160
Speaker 4: of a tax cut. We just see an extension of

241
00:12:21,200 --> 00:12:24,920
Speaker 4: the current tax regime regime more likely, and it's just

242
00:12:24,960 --> 00:12:26,480
Speaker 4: going to be one that you know, I think it's

243
00:12:26,720 --> 00:12:29,000
Speaker 4: if you did a pie chart, it's ninety percent of

244
00:12:29,040 --> 00:12:32,440
Speaker 4: investor intention right. Ten percent is everything else. But in

245
00:12:32,520 --> 00:12:35,400
Speaker 4: our view, investors should be more attentive to global growth

246
00:12:35,840 --> 00:12:38,840
Speaker 4: and fundamentals. And to us it's okay, but it is

247
00:12:38,880 --> 00:12:41,520
Speaker 4: a decelerating growth environment We're likely to see over the

248
00:12:41,520 --> 00:12:42,360
Speaker 4: course of the year.

249
00:12:42,240 --> 00:12:44,760
Speaker 2: Where we in sixty forty somebody, I am sorry, I

250
00:12:44,800 --> 00:12:46,920
Speaker 2: can't cite it, folks. Somebody had a great article this

251
00:12:47,000 --> 00:12:50,520
Speaker 2: weekend on the death of sixty forty sixty percent equities,

252
00:12:50,559 --> 00:12:53,880
Speaker 2: forty percent bonds go play golf outside Babson at the

253
00:12:53,920 --> 00:12:56,640
Speaker 2: Wellesley Country Club. Matt miss can help me here is

254
00:12:56,720 --> 00:12:58,120
Speaker 2: sixty forty still, Jermaine.

255
00:12:59,600 --> 00:13:02,760
Speaker 4: It's great foundation still. In our view, it's just that

256
00:13:02,920 --> 00:13:05,720
Speaker 4: the equity side of the portfolio, we think is going

257
00:13:05,800 --> 00:13:09,000
Speaker 4: to have as a long term investor less return potential.

258
00:13:09,080 --> 00:13:12,640
Speaker 4: We're coming off of amazing ten year fifteen year type

259
00:13:12,679 --> 00:13:15,920
Speaker 4: returns out of the equity side, and the bond side

260
00:13:15,960 --> 00:13:18,840
Speaker 4: has been brutal for like the last five years, and

261
00:13:18,880 --> 00:13:20,480
Speaker 4: we just think that the bond side is going to

262
00:13:20,520 --> 00:13:24,520
Speaker 4: take on more of a return driver over the next decade,

263
00:13:25,080 --> 00:13:27,200
Speaker 4: the yields are a lot higher than they were five

264
00:13:27,280 --> 00:13:30,360
Speaker 4: ten years ago. And then on the equity side, look

265
00:13:30,400 --> 00:13:33,440
Speaker 4: if you want to look at credit or private debt

266
00:13:33,559 --> 00:13:36,800
Speaker 4: or other things. Income as a return driver is our

267
00:13:36,840 --> 00:13:39,080
Speaker 4: big theme over the next several years.

268
00:13:39,120 --> 00:13:42,240
Speaker 2: Are buybacks, our share buybacks and income driver.

269
00:13:43,960 --> 00:13:48,560
Speaker 4: It's okay, we'll take it as a capital return. It

270
00:13:48,600 --> 00:13:52,200
Speaker 4: does help obviously, you know, reduce shares, increase earnings power.

271
00:13:53,120 --> 00:13:54,920
Speaker 4: But at the end of the day, we've already done

272
00:13:54,960 --> 00:13:57,600
Speaker 4: a lot of that. That has been a significant return driver.

273
00:13:57,960 --> 00:14:01,839
Speaker 4: Capital appreciation. But good old dividends and income and.

274
00:14:03,320 --> 00:14:06,800
Speaker 2: Yeah, thank you, Yeah, payments. Man, I got to go there,

275
00:14:06,920 --> 00:14:09,319
Speaker 2: Thank you so much. Man Miskin with his manual life

276
00:14:09,440 --> 00:14:12,360
Speaker 2: at Johnny Hancock running jug here folks. Paul Sweeney says,

277
00:14:12,640 --> 00:14:14,680
Speaker 2: where's the beef, where's the dividend?

278
00:14:14,840 --> 00:14:17,160
Speaker 6: Yep, exactly right. I've been asking Tim Cook that for

279
00:14:17,200 --> 00:14:19,760
Speaker 6: a long time at Apple. Let's talk about the fixed

280
00:14:19,760 --> 00:14:20,640
Speaker 6: income market, Tom, I'm.

281
00:14:20,520 --> 00:14:23,720
Speaker 5: Looking at the ten year treasury. We're in about.

282
00:14:23,520 --> 00:14:25,680
Speaker 6: Three basis points four point four to three percent and

283
00:14:25,880 --> 00:14:28,040
Speaker 6: two people are talking about people are talking about it.

284
00:14:28,040 --> 00:14:30,480
Speaker 6: I mean, you can actually talk to somebody in fixed

285
00:14:30,520 --> 00:14:33,240
Speaker 6: income this days and have a reasonably interesting conversation.

286
00:14:33,640 --> 00:14:36,160
Speaker 5: Years ago, you just get like zero percent return on

287
00:14:36,200 --> 00:14:38,400
Speaker 5: the bond market. Whos to talk to these people?

288
00:14:38,480 --> 00:14:42,560
Speaker 6: Kathy Jones, for example, she fixed income strategist that Charles

289
00:14:42,560 --> 00:14:45,400
Speaker 6: Schwap nobody wanted to talk to her for like a decade.

290
00:14:45,920 --> 00:14:49,600
Speaker 5: Now real yield in the fixed income space.

291
00:14:49,720 --> 00:14:53,440
Speaker 6: Kathy, How are you guys at Charles Shwap thinking about

292
00:14:53,720 --> 00:14:55,960
Speaker 6: the bond market these days.

293
00:14:57,080 --> 00:14:57,320
Speaker 2: Now?

294
00:14:57,520 --> 00:14:58,120
Speaker 5: I'm Paul.

295
00:14:58,160 --> 00:15:01,400
Speaker 11: I think the key is that at the long end

296
00:15:01,440 --> 00:15:05,000
Speaker 11: you still have some risk to the upside. We didn't

297
00:15:05,040 --> 00:15:08,760
Speaker 11: see a tariff effect in this CPI report, which is great,

298
00:15:09,280 --> 00:15:12,880
Speaker 11: but we do expect to see some impacts. Tariffs, even

299
00:15:12,920 --> 00:15:15,280
Speaker 11: at a lower level, are still four or five times

300
00:15:15,280 --> 00:15:18,840
Speaker 11: as high as they were before, so we'll probably see

301
00:15:18,840 --> 00:15:22,000
Speaker 11: some tariff effect coming through towards the end of the year,

302
00:15:22,160 --> 00:15:24,960
Speaker 11: and then we have all the budget talks to go through.

303
00:15:25,400 --> 00:15:27,880
Speaker 11: So we think that the long end, the intermediate to

304
00:15:27,960 --> 00:15:30,800
Speaker 11: long end, stays elevated. It doesn't necessarily have to go

305
00:15:30,800 --> 00:15:34,600
Speaker 11: a lot higher here, but stays elevated because the term

306
00:15:34,680 --> 00:15:37,080
Speaker 11: premium is going to stay up until we see some

307
00:15:37,160 --> 00:15:39,160
Speaker 11: of those policy issues resolved.

308
00:15:39,280 --> 00:15:42,440
Speaker 2: Hey, Kathy Jones review for our listeners and our viewers

309
00:15:42,440 --> 00:15:46,160
Speaker 2: here this is important question, folks out the yield curve,

310
00:15:46,760 --> 00:15:50,720
Speaker 2: Where does your own Powell and Company have impact? Don't

311
00:15:50,760 --> 00:15:53,360
Speaker 2: give me it's just in the short term, belogny. Can

312
00:15:53,360 --> 00:15:56,080
Speaker 2: they affect the belly of the curve? Cand your own

313
00:15:56,120 --> 00:16:00,160
Speaker 2: power effect the price of the ten year note?

314
00:16:01,640 --> 00:16:06,600
Speaker 11: Yeah, certainly, because they focus a lot on inflation expectations,

315
00:16:06,800 --> 00:16:11,320
Speaker 11: and that's where you get the FED policy focus that

316
00:16:11,800 --> 00:16:14,800
Speaker 11: moves out the yield curve. So the FED effects the

317
00:16:14,840 --> 00:16:19,160
Speaker 11: yield curve certainly, very strongly out to two years, maybe

318
00:16:19,200 --> 00:16:21,840
Speaker 11: three to five years, But when it comes to ten year,

319
00:16:21,960 --> 00:16:25,400
Speaker 11: then you have to incorporate the inflation outlook and a

320
00:16:25,440 --> 00:16:31,320
Speaker 11: bunch of other stuff. But keeping inflation expectations anchored, which

321
00:16:31,360 --> 00:16:33,520
Speaker 11: I would say right now, I'm not sure they are

322
00:16:34,000 --> 00:16:37,760
Speaker 11: fully anchored, but keeping those anchored is a big focus

323
00:16:37,840 --> 00:16:40,040
Speaker 11: for the FED because that's what keeps the long end

324
00:16:41,200 --> 00:16:42,960
Speaker 11: down relative to the short end.

325
00:16:43,440 --> 00:16:46,000
Speaker 6: Tom, here's some inflation news that you can use. Eggs

326
00:16:46,040 --> 00:16:49,640
Speaker 6: were down twelve point seven percent on the month, the

327
00:16:49,680 --> 00:16:53,520
Speaker 6: biggest tumbles since nineteen eighty four. That's after the surgeon

328
00:16:53,520 --> 00:16:55,400
Speaker 6: egg presses do the Avian flu. Of course, that's a

329
00:16:55,480 --> 00:16:58,720
Speaker 6: coordinated Chris answer, seen editor for Bloomberg News. That's news

330
00:16:58,760 --> 00:17:00,800
Speaker 6: you can use. I'll defer to call, of course.

331
00:17:00,800 --> 00:17:03,840
Speaker 2: But that's why are they back to where they used

332
00:17:03,840 --> 00:17:07,520
Speaker 2: to know? I took the photo of Kirkland eggs here.

333
00:17:07,560 --> 00:17:10,199
Speaker 2: I'll get it out on social for Lisa Matteos. I

334
00:17:10,240 --> 00:17:12,639
Speaker 2: know she's hanging on every word this morning. Yep. But

335
00:17:12,720 --> 00:17:15,480
Speaker 2: the bottom line is, if you're paying seven forty nine

336
00:17:15,560 --> 00:17:19,159
Speaker 2: a dozen for fancy eggs that were handpicked, you know,

337
00:17:19,240 --> 00:17:22,120
Speaker 2: in a field in Connecticut, and you get your what is.

338
00:17:22,040 --> 00:17:25,000
Speaker 5: A twelve point seven percent decline, then there's.

339
00:17:24,840 --> 00:17:28,680
Speaker 2: Six dollars fifty nine. This is not happening. I can

340
00:17:28,960 --> 00:17:33,080
Speaker 2: assure you. This is I'm reporting, folks, that's not happening.

341
00:17:33,200 --> 00:17:35,760
Speaker 5: Kathy Jones have credit quality out there.

342
00:17:35,800 --> 00:17:38,800
Speaker 6: I mean, with all this tariff talk and I'm concerned

343
00:17:39,000 --> 00:17:42,000
Speaker 6: and some economic concerning that's bringing into the marketplace are

344
00:17:42,040 --> 00:17:45,919
Speaker 6: fixing comp Infession is starting to worry about credit quality.

345
00:17:46,040 --> 00:17:49,560
Speaker 11: We saw a little bit of windening of spreads, a

346
00:17:49,560 --> 00:17:53,640
Speaker 11: fairly substantial widening of spreads as the tariff talk ratcheted up.

347
00:17:54,000 --> 00:17:56,800
Speaker 11: They've come back a bit from there. We haven't seen

348
00:17:56,840 --> 00:18:00,280
Speaker 11: them skyrocket, yet because of the economic data keep keep

349
00:18:00,280 --> 00:18:04,520
Speaker 11: holding in pretty pretty well. So I think credit quality

350
00:18:04,600 --> 00:18:08,600
Speaker 11: is peaked for the cycle, but it's definitely an investment rate,

351
00:18:08,720 --> 00:18:11,560
Speaker 11: it's still pretty strong. I think in high yield it

352
00:18:11,640 --> 00:18:15,119
Speaker 11: is kind of a mixed bag from here, but we

353
00:18:15,240 --> 00:18:18,080
Speaker 11: haven't seen that downturn in the economy that would cause

354
00:18:18,119 --> 00:18:20,240
Speaker 11: credit spreads to really widen significantly.

355
00:18:20,280 --> 00:18:23,280
Speaker 2: From me, how do YouTube live chat? I mean, you

356
00:18:23,320 --> 00:18:26,480
Speaker 2: know they don't care about you, they don't care about me. Well,

357
00:18:26,520 --> 00:18:29,120
Speaker 2: one guy goes, I really don't care about John Tucker,

358
00:18:29,480 --> 00:18:35,520
Speaker 2: But twenty four eggs it's shop right? Nine two doesn't?

359
00:18:35,880 --> 00:18:39,399
Speaker 2: That's like five bucks? Yeah, it doesn't. I'm shopping at

360
00:18:39,400 --> 00:18:39,960
Speaker 2: the wrong.

361
00:18:39,800 --> 00:18:44,000
Speaker 12: Story, exactly right, kathyw Are there some sectors here that

362
00:18:44,000 --> 00:18:46,560
Speaker 12: that kind of screen well for you guys here when

363
00:18:46,560 --> 00:18:50,720
Speaker 12: you when you think about credit risk here, you.

364
00:18:50,600 --> 00:18:53,159
Speaker 7: Know, we tend to look at it and aggregate.

365
00:18:53,359 --> 00:18:56,560
Speaker 11: But I would say the areas that have held up

366
00:18:56,600 --> 00:19:00,200
Speaker 11: well are still financials. Financials continue to be in very

367
00:19:00,200 --> 00:19:00,680
Speaker 11: good shape.

368
00:19:00,680 --> 00:19:01,320
Speaker 4: And those are.

369
00:19:01,240 --> 00:19:05,840
Speaker 11: Issuers of not only investment grade bonds, but we're also

370
00:19:05,880 --> 00:19:10,280
Speaker 11: issuers of say, preferreds, So you get to play either

371
00:19:10,359 --> 00:19:14,360
Speaker 11: the higher risk, longer duration version of that in financials

372
00:19:14,520 --> 00:19:20,439
Speaker 11: or the kind of intermedia term basic bond aspect of

373
00:19:20,560 --> 00:19:23,760
Speaker 11: that the financials. But they're holding up pretty well.

374
00:19:23,720 --> 00:19:28,920
Speaker 2: In this in this cacophony of news of international relations

375
00:19:29,000 --> 00:19:32,560
Speaker 2: of Rianda and arrest. Kathy Jones, What is CFO is

376
00:19:32,600 --> 00:19:35,359
Speaker 2: going to do on issuance? Do they say, let's go,

377
00:19:35,520 --> 00:19:36,400
Speaker 2: let's go, let's go.

378
00:19:38,119 --> 00:19:42,320
Speaker 11: You know, issuance is still holding up, But the opportunity

379
00:19:42,440 --> 00:19:46,280
Speaker 11: set isn't that great, right because the curve sort of

380
00:19:46,280 --> 00:19:50,600
Speaker 11: flattens out. You don't get a lot of advantage right

381
00:19:50,600 --> 00:19:55,240
Speaker 11: now in issuing beyond maybe a little bit in the

382
00:19:55,280 --> 00:19:58,160
Speaker 11: belly of the curve. So issuance is going to keep pace.

383
00:19:58,320 --> 00:20:01,640
Speaker 11: But I don't think that these yields are so attractive

384
00:20:01,720 --> 00:20:05,720
Speaker 11: that any CFO who hadn't already extended duration or hadn't

385
00:20:05,760 --> 00:20:09,440
Speaker 11: already taken advantage of financing, would jump at these yields.

386
00:20:09,680 --> 00:20:12,639
Speaker 2: Katy, thank you so much, greatly, greatly appreciate it. Kathy

387
00:20:12,720 --> 00:20:14,200
Speaker 2: Jones with Charles Schwaber.

388
00:20:21,040 --> 00:20:24,600
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live

389
00:20:24,680 --> 00:20:27,840
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

390
00:20:27,920 --> 00:20:31,560
Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app or

391
00:20:31,720 --> 00:20:33,440
Speaker 1: watch us live on YouTube.

392
00:20:33,880 --> 00:20:36,960
Speaker 2: Joining us in the studio now, Brian Belski, He's here

393
00:20:37,000 --> 00:20:40,320
Speaker 2: for two reasons. One is after the shock of yesterday.

394
00:20:40,640 --> 00:20:43,840
Speaker 2: And also finally, the Minnesota Twins one eight games in

395
00:20:43,880 --> 00:20:46,840
Speaker 2: a row and it's up there on a roll.

396
00:20:46,920 --> 00:20:48,440
Speaker 8: It's amazing. I was there for one of them. Was

397
00:20:48,440 --> 00:20:49,840
Speaker 8: a beautiful night in Minneapolis.

398
00:20:49,960 --> 00:20:55,080
Speaker 2: It was well, are there blackflies at the Twins stadium

399
00:20:55,400 --> 00:21:01,000
Speaker 2: in May? And is it like Cleveland where there's.

400
00:21:00,440 --> 00:21:04,000
Speaker 8: We call them ganats? Yeah, yeah, yeah, it's uh.

401
00:21:04,240 --> 00:21:06,520
Speaker 13: I went to several spring training games down at Fort

402
00:21:06,600 --> 00:21:09,080
Speaker 13: Myers and then was up in Many for business last week,

403
00:21:09,119 --> 00:21:10,560
Speaker 13: so I was able to catch a ball.

404
00:21:10,400 --> 00:21:12,919
Speaker 2: Withhold says a book out, I'm not to invest and

405
00:21:12,960 --> 00:21:16,280
Speaker 2: I'm not to invest is the panic and this is

406
00:21:16,320 --> 00:21:18,840
Speaker 2: the modern disease that Brian and I are so against him,

407
00:21:18,840 --> 00:21:21,920
Speaker 2: which is goady cash. How do you get back in

408
00:21:22,000 --> 00:21:24,840
Speaker 2: the market if you're part of the goady cash crew?

409
00:21:25,760 --> 00:21:28,600
Speaker 13: You buye and I think you try not to outsmart yourself.

410
00:21:28,720 --> 00:21:30,680
Speaker 13: You know, We've been talking about this for years, Tom

411
00:21:30,680 --> 00:21:32,760
Speaker 13: and everyone tries to time the market and try to

412
00:21:32,760 --> 00:21:33,800
Speaker 13: be smarter than the market.

413
00:21:33,800 --> 00:21:35,080
Speaker 8: The market is what the market is.

414
00:21:35,119 --> 00:21:38,640
Speaker 13: And and thanks for sticking with us in terms of

415
00:21:39,240 --> 00:21:41,480
Speaker 13: our view because many people did not, and we took

416
00:21:41,520 --> 00:21:43,040
Speaker 13: a lot of heat in the media and a lot

417
00:21:43,080 --> 00:21:45,360
Speaker 13: of heat internally, and a lot of heat from our clients.

418
00:21:45,400 --> 00:21:49,240
Speaker 8: For all build Ian is such a lovely guy.

419
00:21:49,280 --> 00:21:53,800
Speaker 13: I just did the ReConference keynote and he followed me,

420
00:21:54,480 --> 00:21:55,600
Speaker 13: so I love that guy.

421
00:21:55,600 --> 00:21:59,720
Speaker 8: Plus Minnesota guy. So you know, of course, but you know,

422
00:22:00,240 --> 00:22:02,840
Speaker 8: and we we do what we do for a reason.

423
00:22:02,920 --> 00:22:06,439
Speaker 13: We're investors. We're not going to react fear sells. People

424
00:22:06,440 --> 00:22:10,240
Speaker 13: were making binary decisions based on emotion without having analysis,

425
00:22:10,640 --> 00:22:13,480
Speaker 13: and the analysis said that, you know, the markets were

426
00:22:13,480 --> 00:22:16,199
Speaker 13: not going to be as broken as everybody thought, and

427
00:22:16,240 --> 00:22:18,800
Speaker 13: I think everyone was kind of once again jumping to conclusions.

428
00:22:18,840 --> 00:22:22,160
Speaker 13: I really think, guys, that what's happening is we've kind

429
00:22:22,160 --> 00:22:24,120
Speaker 13: of shocked ourselves into.

430
00:22:24,040 --> 00:22:26,040
Speaker 8: A period of normalization, believe it or not.

431
00:22:26,520 --> 00:22:28,840
Speaker 13: And so the periods that we've seen really for all

432
00:22:28,840 --> 00:22:32,840
Speaker 13: intents and purposes, Tom and Paul since two thousand and

433
00:22:32,920 --> 00:22:35,800
Speaker 13: seven have not been normal, not been normal. So we've

434
00:22:35,800 --> 00:22:37,240
Speaker 13: been said saying for the last couple of years that

435
00:22:37,280 --> 00:22:38,320
Speaker 13: we're entering normalization.

436
00:22:38,960 --> 00:22:43,800
Speaker 6: So normalization is at a high single digit return expectation

437
00:22:43,880 --> 00:22:44,720
Speaker 6: for equity markets.

438
00:22:44,840 --> 00:22:45,040
Speaker 8: Yeah.

439
00:22:45,040 --> 00:22:48,840
Speaker 13: I mean, if you go back historically, it's nine point

440
00:22:48,960 --> 00:22:51,080
Speaker 13: six percent or nine point eight percent, they're all divided

441
00:22:51,119 --> 00:22:52,840
Speaker 13: on there. So I think high single digit, low double

442
00:22:52,880 --> 00:22:54,719
Speaker 13: digits for both the S and P five hundred and

443
00:22:54,840 --> 00:22:57,200
Speaker 13: earnings growth. We said this in our year ahead piece

444
00:22:57,280 --> 00:22:59,280
Speaker 13: for twenty twenty three that we published in November of

445
00:22:59,280 --> 00:23:02,359
Speaker 13: twenty twenty two. At that report, guys, we said the

446
00:23:02,400 --> 00:23:05,160
Speaker 13: new cyclical bull market has begun, part of our twenty

447
00:23:05,200 --> 00:23:08,800
Speaker 13: five year secular ballmarket theme, which remains intact. We are

448
00:23:08,840 --> 00:23:11,960
Speaker 13: now in year three of that cyclical bowl. And so

449
00:23:12,119 --> 00:23:13,960
Speaker 13: at the end of the day, we think that you

450
00:23:14,800 --> 00:23:18,000
Speaker 13: answer Tom's questions, don't try to outsmart yourself, be an investor.

451
00:23:18,280 --> 00:23:20,520
Speaker 13: Stocks are higher twelve months from now, stocks are higher

452
00:23:20,560 --> 00:23:23,040
Speaker 13: six months from now in this two shell pass.

453
00:23:23,080 --> 00:23:24,399
Speaker 8: And oh, by the way, it looks like it's passed.

454
00:23:24,400 --> 00:23:28,760
Speaker 2: Our financials a comfort stock for people's scared stiff.

455
00:23:29,119 --> 00:23:31,320
Speaker 13: I think they are, Tom, because you know, a lot

456
00:23:31,320 --> 00:23:34,080
Speaker 13: of people talk about deregulation going forward, but we talk

457
00:23:34,160 --> 00:23:38,359
Speaker 13: about we think about how from a portfolio perspective, small

458
00:23:38,400 --> 00:23:41,560
Speaker 13: men and large, we think there's massive under owning, under

459
00:23:41,560 --> 00:23:44,399
Speaker 13: ownership of financials, and we think our major theme in

460
00:23:44,520 --> 00:23:47,639
Speaker 13: large cap money would be scale in small cap moneys

461
00:23:47,680 --> 00:23:51,040
Speaker 13: by small those small cat banks that have existing fantastic

462
00:23:51,119 --> 00:23:54,040
Speaker 13: relationships and clean balance sheets. But we think it's the

463
00:23:54,080 --> 00:23:56,280
Speaker 13: regional banks that are going to be interesting because they

464
00:23:56,359 --> 00:24:01,000
Speaker 13: absolutely positively have to either get smaller or get bigger.

465
00:24:01,560 --> 00:24:03,720
Speaker 13: And we think there's going to be a lot of

466
00:24:03,720 --> 00:24:05,480
Speaker 13: consolidation twenty six to twenty seven.

467
00:24:05,720 --> 00:24:07,879
Speaker 6: Hey, Brian, what did you make of earnings this cycle?

468
00:24:07,880 --> 00:24:09,960
Speaker 6: Because we had a lot of companies kind of pulling guidance.

469
00:24:09,960 --> 00:24:11,439
Speaker 6: It's kind of I guess at the height of this

470
00:24:11,560 --> 00:24:14,359
Speaker 6: tariff uncertainty here, what did you make of earnings? Would

471
00:24:14,359 --> 00:24:16,959
Speaker 6: you make of the guidance? How much can we hang

472
00:24:17,040 --> 00:24:17,560
Speaker 6: or out on that?

473
00:24:19,080 --> 00:24:22,960
Speaker 13: Well, the only difference now versus COVID where everybody pulled

474
00:24:22,960 --> 00:24:25,359
Speaker 13: their guidance, they pulled on actually their forecast too. They

475
00:24:25,359 --> 00:24:28,040
Speaker 13: haven't pulled their forecast. They just they came out with

476
00:24:28,080 --> 00:24:31,520
Speaker 13: great earnings the majority above the long term trend in

477
00:24:31,560 --> 00:24:31,960
Speaker 13: terms of.

478
00:24:31,920 --> 00:24:32,639
Speaker 8: The first quarter.

479
00:24:33,119 --> 00:24:35,720
Speaker 13: What we looked at as twenty twenty six numbers relative

480
00:24:35,720 --> 00:24:38,960
Speaker 13: to twenty twenty five numbers, and we saw what we'd

481
00:24:39,000 --> 00:24:42,320
Speaker 13: like to call this earnings revision low, meaning everyone.

482
00:24:42,119 --> 00:24:43,200
Speaker 8: Dropped their numbers at once.

483
00:24:43,280 --> 00:24:46,160
Speaker 13: So I think that at the end of the day,

484
00:24:46,760 --> 00:24:50,160
Speaker 13: earnings are kind of tracking high single digit, low double

485
00:24:50,200 --> 00:24:52,840
Speaker 13: digit increases for the S and P five hundred. We

486
00:24:52,880 --> 00:24:55,960
Speaker 13: think small cap in MidCap can actually potentially do a

487
00:24:56,000 --> 00:24:58,679
Speaker 13: little bit better, Paul. But I think this uncertainty with

488
00:24:58,720 --> 00:25:01,439
Speaker 13: respect to what has occurred the first six months of

489
00:25:01,440 --> 00:25:02,879
Speaker 13: the year five months of the year, I'm sorry with

490
00:25:02,920 --> 00:25:06,160
Speaker 13: respect to the tariffs, is starting to unwind and you'll

491
00:25:06,200 --> 00:25:10,119
Speaker 13: start to see more kind of consistent earnings. But again,

492
00:25:10,320 --> 00:25:12,320
Speaker 13: I think earnings are set up to be under promise

493
00:25:12,359 --> 00:25:14,879
Speaker 13: and over deliver, which is that's the kind of period

494
00:25:14,880 --> 00:25:15,680
Speaker 13: that you want to be in.

495
00:25:16,440 --> 00:25:19,520
Speaker 5: So, I mean, I'm trying to figure out. I'm reading

496
00:25:19,560 --> 00:25:20,440
Speaker 5: all the bluebird stuff.

497
00:25:20,480 --> 00:25:21,920
Speaker 8: I can't. Yeah, we are on terrors.

498
00:25:22,640 --> 00:25:24,480
Speaker 5: I know we're higher. I don't know how much, but

499
00:25:24,560 --> 00:25:25,359
Speaker 5: I know we're higher.

500
00:25:26,000 --> 00:25:29,160
Speaker 6: So that's got to impact earnings margins, that kind of stuff.

501
00:25:29,240 --> 00:25:30,439
Speaker 5: Is that reflected in the stocks?

502
00:25:30,480 --> 00:25:31,800
Speaker 2: Do you think? Well?

503
00:25:31,880 --> 00:25:34,639
Speaker 13: I think the one thing that people don't know is

504
00:25:34,720 --> 00:25:37,879
Speaker 13: who's going to take on the cost. Is it going

505
00:25:37,920 --> 00:25:39,440
Speaker 13: to come out of margins? It's going to be the

506
00:25:39,480 --> 00:25:43,080
Speaker 13: consumer or the producer. I think so many people rush

507
00:25:43,119 --> 00:25:45,440
Speaker 13: to judgments Paul that it was going to be the consumer.

508
00:25:46,400 --> 00:25:49,479
Speaker 13: But what we're seeing is we're seeing that the consumer

509
00:25:49,480 --> 00:25:52,879
Speaker 13: discretionary sector, I think from a bottoming perspective, looks very

510
00:25:52,920 --> 00:25:54,800
Speaker 13: well in terms of earnings. That's exactly when you want

511
00:25:54,800 --> 00:25:55,600
Speaker 13: to buy them quickly.

512
00:25:55,600 --> 00:25:59,320
Speaker 2: Here the revenue persistency of MAG seven. I mean even

513
00:25:59,359 --> 00:26:02,960
Speaker 2: if it's high single digit, which is pretty gloomy, but

514
00:26:03,320 --> 00:26:06,280
Speaker 2: they if they sum up to a high single digit

515
00:26:06,400 --> 00:26:09,320
Speaker 2: revenue persistency, that's constructive. Right. Yeah.

516
00:26:09,359 --> 00:26:10,640
Speaker 8: Two things, actually three.

517
00:26:10,720 --> 00:26:12,360
Speaker 13: You know, following me is one of the greatest stock

518
00:26:12,359 --> 00:26:14,480
Speaker 13: pickers I've ever met, Nancy Tangler. I'm a great friend

519
00:26:14,520 --> 00:26:16,520
Speaker 13: of mine, and I think we're entering into this period

520
00:26:16,560 --> 00:26:18,639
Speaker 13: of stock picking and it means matter and you need.

521
00:26:18,480 --> 00:26:21,199
Speaker 8: To have a lot of experience doing that. Number one.

522
00:26:21,280 --> 00:26:23,560
Speaker 13: Number two, I've said this for a long time now,

523
00:26:23,600 --> 00:26:25,880
Speaker 13: for at least ten plus years, that the MAG seven

524
00:26:26,000 --> 00:26:27,280
Speaker 13: or the big cap tech stocks are.

525
00:26:27,160 --> 00:26:28,320
Speaker 8: The new consumer staples.

526
00:26:28,560 --> 00:26:30,720
Speaker 13: You go back to the nineties, we went to liquidity

527
00:26:30,800 --> 00:26:33,800
Speaker 13: and where there was consistency, and maybe maybe their business

528
00:26:33,800 --> 00:26:35,440
Speaker 13: models are changing a little bit. We're going to see

529
00:26:35,480 --> 00:26:38,040
Speaker 13: that in Google clearly but I think the consistency of

530
00:26:38,560 --> 00:26:41,280
Speaker 13: the of the revenue growth going forward and the liquidity

531
00:26:41,320 --> 00:26:44,440
Speaker 13: that it offers investors, that's why you have to own

532
00:26:44,480 --> 00:26:45,240
Speaker 13: some of these names.

533
00:26:45,480 --> 00:26:48,040
Speaker 2: Brian, Thank you so much. Brian Belt, thanks with Speama

534
00:26:48,160 --> 00:26:50,960
Speaker 2: Capital Markets. I got a tape safe somewhere if you

535
00:26:51,560 --> 00:26:54,879
Speaker 2: when it was terrible out just saying just stay the course,

536
00:26:55,080 --> 00:26:57,280
Speaker 2: just just be in there. We'll play that, you know,

537
00:26:57,520 --> 00:27:00,720
Speaker 2: h end of the year, the vik the Vikings will

538
00:27:00,720 --> 00:27:03,960
Speaker 2: be six and zero before they break the Northwest hearts

539
00:27:04,160 --> 00:27:05,960
Speaker 2: one more time they've.

540
00:27:05,760 --> 00:27:08,760
Speaker 8: Been doing that, and then finish seven in ten, seven

541
00:27:08,800 --> 00:27:09,120
Speaker 8: in ten.

542
00:27:10,200 --> 00:27:12,919
Speaker 2: Brian Belski, thank you so much. As he mentioned, Nancy

543
00:27:12,920 --> 00:27:15,119
Speaker 2: Tegler coming up. This is what we like to do, folks,

544
00:27:15,160 --> 00:27:16,920
Speaker 2: just back to back excellence.

545
00:27:17,320 --> 00:27:21,199
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

546
00:27:21,240 --> 00:27:24,480
Speaker 1: starting at seven am Eastern on Applecarplay.

547
00:27:23,760 --> 00:27:26,200
Speaker 10: And Android Auto with the Bloomberg Business app.

548
00:27:26,280 --> 00:27:29,320
Speaker 1: You can also listen live on Amazon Alexa from our

549
00:27:29,320 --> 00:27:33,840
Speaker 1: flagship New York station, Just say Alexa play Bloomberg eleven thirty.

550
00:27:34,040 --> 00:27:38,960
Speaker 2: Nancy Tangler, like Brian Belski, what's the market going to do? Boring? Okay?

551
00:27:39,200 --> 00:27:43,160
Speaker 2: If you roll like Nancy Tangler, and eleven years ago

552
00:27:43,400 --> 00:27:47,320
Speaker 2: you write the introduction to your classic book, I'm looking

553
00:27:47,359 --> 00:27:52,320
Speaker 2: at three beds four bass, seven thousand square feet Paradise

554
00:27:52,480 --> 00:27:57,760
Speaker 2: Valley eight five two five three Arizona, three beds four

555
00:27:57,840 --> 00:28:02,760
Speaker 2: bass for twenty five million dollars. Okay, Paradise Valley, And

556
00:28:02,800 --> 00:28:03,239
Speaker 2: there you were.

557
00:28:03,400 --> 00:28:04,480
Speaker 5: Nancy says, we.

558
00:28:04,480 --> 00:28:08,080
Speaker 2: Got to interrupt. The Women's Guide to Successful Investing was

559
00:28:08,160 --> 00:28:11,120
Speaker 2: important with Paul Gray McMillan, and then it became even

560
00:28:11,200 --> 00:28:14,720
Speaker 2: more important. What was it like fighting to get that

561
00:28:14,840 --> 00:28:17,480
Speaker 2: book published? Do you have to yell and screen? Did

562
00:28:17,560 --> 00:28:19,880
Speaker 2: Laffler have to call up and beat on someone?

563
00:28:21,200 --> 00:28:23,600
Speaker 14: Thank you for that, Tom, No, No, not at all.

564
00:28:23,640 --> 00:28:26,280
Speaker 14: It was I think we were early on the whole

565
00:28:26,320 --> 00:28:28,560
Speaker 14: issue of women, transfer of wealth to women.

566
00:28:28,760 --> 00:28:29,879
Speaker 2: This a huge deal.

567
00:28:30,720 --> 00:28:33,400
Speaker 14: And then the second edition, you know, happily they came

568
00:28:33,480 --> 00:28:36,200
Speaker 14: to me and just I mean, you've written a ton.

569
00:28:36,359 --> 00:28:36,639
Speaker 10: You know.

570
00:28:36,720 --> 00:28:38,800
Speaker 14: It's harder to write a second edition than the first

571
00:28:38,880 --> 00:28:40,800
Speaker 14: edition because you have to edit and then you have

572
00:28:40,880 --> 00:28:42,240
Speaker 14: to add in topical stuff.

573
00:28:42,280 --> 00:28:45,760
Speaker 7: But it's been it's been fun and important.

574
00:28:45,840 --> 00:28:48,400
Speaker 2: Nobody cares. We want a third edition right now. I

575
00:28:48,440 --> 00:28:51,640
Speaker 2: want you to talk to women after three months in

576
00:28:51,680 --> 00:28:55,800
Speaker 2: a lifetime events and all the stereotypes out there that

577
00:28:56,160 --> 00:29:02,719
Speaker 2: still exist. Yeah, how do women get hurted to understand equities?

578
00:29:03,200 --> 00:29:03,440
Speaker 10: Yeah?

579
00:29:03,480 --> 00:29:06,600
Speaker 14: Well, I think the research shows women make better investors

580
00:29:06,640 --> 00:29:09,840
Speaker 14: than men. Let's just say we're as good of investors,

581
00:29:09,840 --> 00:29:11,760
Speaker 14: because I just followed one of the greats.

582
00:29:11,400 --> 00:29:12,120
Speaker 7: Brian Belski.

583
00:29:12,880 --> 00:29:16,360
Speaker 14: But they need to give themselves permission, because women have

584
00:29:16,440 --> 00:29:19,640
Speaker 14: excused themselves from the conversation. Average age of a widow

585
00:29:19,720 --> 00:29:22,160
Speaker 14: is fifty nine in the US. I was fifty nine.

586
00:29:22,560 --> 00:29:25,960
Speaker 14: Happily I'd been managing all the family wealth. But most

587
00:29:26,040 --> 00:29:28,760
Speaker 14: that's a bad time to start learning. So they need

588
00:29:28,800 --> 00:29:30,840
Speaker 14: to read my book, and then they need to listen

589
00:29:30,880 --> 00:29:32,640
Speaker 14: to your show, and they need to read barons.

590
00:29:32,760 --> 00:29:34,920
Speaker 2: The stereotypes are there's just like an auto ad or

591
00:29:34,920 --> 00:29:37,480
Speaker 2: something I can't remember, and the guys worried about like

592
00:29:37,560 --> 00:29:40,800
Speaker 2: three tuitions mortgages in that and the woman wants to

593
00:29:40,840 --> 00:29:43,440
Speaker 2: figure out where to get a diet of coke. It's

594
00:29:43,480 --> 00:29:46,040
Speaker 2: not funny, Paul. This is like, this is like the

595
00:29:46,080 --> 00:29:48,600
Speaker 2: most important conversation we can have.

596
00:29:49,480 --> 00:29:51,800
Speaker 6: Nancy, what did you What were you telling your clients

597
00:29:51,960 --> 00:29:54,440
Speaker 6: when we actually had a market a couple of weeks ago,

598
00:29:54,520 --> 00:29:57,719
Speaker 6: down twenty percent from it's in recent highs.

599
00:29:57,880 --> 00:29:59,320
Speaker 5: That's a bear market for a lot of people. A

600
00:29:59,360 --> 00:30:00,240
Speaker 5: lot of folks aren't.

601
00:30:00,120 --> 00:30:02,400
Speaker 6: That experience with that, right, What kind of conversations were

602
00:30:02,480 --> 00:30:04,080
Speaker 6: we having with them then and now?

603
00:30:04,280 --> 00:30:07,760
Speaker 14: Well again, like Brian, we're long term investors, so we

604
00:30:07,760 --> 00:30:10,360
Speaker 14: were buying okay, and you know, we were able to

605
00:30:10,360 --> 00:30:13,880
Speaker 14: pick off a number of names like Microsoft, Talenteer twenty

606
00:30:13,920 --> 00:30:15,320
Speaker 14: percent ago, just.

607
00:30:15,280 --> 00:30:16,080
Speaker 7: A few weeks ago.

608
00:30:16,280 --> 00:30:19,720
Speaker 14: So I think I've been hearing that the tech trade

609
00:30:19,760 --> 00:30:21,920
Speaker 14: is over for the last three years.

610
00:30:22,120 --> 00:30:23,760
Speaker 2: I was gonna say three decades.

611
00:30:23,480 --> 00:30:26,480
Speaker 14: Or maybe three decades, but certainly the last three were

612
00:30:26,520 --> 00:30:29,080
Speaker 14: every summer we get a bear market in technology because

613
00:30:29,120 --> 00:30:29,440
Speaker 14: that's it.

614
00:30:29,720 --> 00:30:30,160
Speaker 7: We're done.

615
00:30:30,280 --> 00:30:32,360
Speaker 14: We're doing and we've just been in buying it and

616
00:30:32,760 --> 00:30:34,360
Speaker 14: it's been great for our clients. And we also have

617
00:30:34,360 --> 00:30:37,200
Speaker 14: a lot of history of outperformance, so that gives them

618
00:30:37,240 --> 00:30:38,920
Speaker 14: confidence in a period like that.

619
00:30:39,320 --> 00:30:40,520
Speaker 5: So what do we do now?

620
00:30:40,560 --> 00:30:42,800
Speaker 6: I mean, I think tariffs are going to be lower

621
00:30:42,800 --> 00:30:46,200
Speaker 6: than maybe we initially feared, but they're still higher than

622
00:30:46,240 --> 00:30:50,040
Speaker 6: they were before. I guess that's a drag on economic growth.

623
00:30:50,040 --> 00:30:51,720
Speaker 6: I'm not sure how much I think everybody's trying to

624
00:30:51,720 --> 00:30:54,280
Speaker 6: do the math right now? What do you do in

625
00:30:54,320 --> 00:30:55,200
Speaker 6: this kind of environment.

626
00:30:55,480 --> 00:30:58,240
Speaker 14: Yeah, So, I mean I'm long for the days when

627
00:30:58,240 --> 00:31:00,680
Speaker 14: we had a FED that used price level targeting like

628
00:31:00,760 --> 00:31:02,520
Speaker 14: Wayne Angel, remember him, the.

629
00:31:04,760 --> 00:31:08,960
Speaker 2: Late Waite Angel who just died. We just lost Wayne Angel.

630
00:31:09,360 --> 00:31:15,000
Speaker 2: Explain his contribution off of Milton Friedman to our economic thoughts.

631
00:31:15,040 --> 00:31:16,760
Speaker 7: Yeah, well he was forward looking, as you know.

632
00:31:16,880 --> 00:31:20,040
Speaker 14: I mean he was looking at the currency exchange rates,

633
00:31:20,080 --> 00:31:23,720
Speaker 14: commodity prices to really guide FED policy instead of looking

634
00:31:23,720 --> 00:31:26,040
Speaker 14: at last month's data, which is what we have right now.

635
00:31:26,400 --> 00:31:28,320
Speaker 14: And so I think when you when you have a

636
00:31:28,360 --> 00:31:32,160
Speaker 14: FED that says tariffs, I can't do anything until I.

637
00:31:32,120 --> 00:31:32,680
Speaker 7: Know what they are.

638
00:31:33,080 --> 00:31:35,760
Speaker 14: That's not how this works. And so I think you

639
00:31:35,840 --> 00:31:37,880
Speaker 14: have to be looking at things that are relevant.

640
00:31:38,080 --> 00:31:40,280
Speaker 2: Is we have Paul mentioned it eloquently, if we have

641
00:31:40,360 --> 00:31:42,840
Speaker 2: this walk back on the trade war? We had John

642
00:31:42,880 --> 00:31:46,560
Speaker 2: Lipsky on earlier, it was much more apolitical and you

643
00:31:46,600 --> 00:31:52,120
Speaker 2: know than the Laffler Tangler Republican heritage. Where is your group?

644
00:31:52,160 --> 00:31:56,080
Speaker 2: Where is your tribe in Pleasant what's it called Pleasant Valley?

645
00:32:00,040 --> 00:32:03,360
Speaker 2: Where is your tribe? Post Trump? Is it like we

646
00:32:03,400 --> 00:32:06,239
Speaker 2: revert back to what we knew? Or do we go

647
00:32:06,320 --> 00:32:10,840
Speaker 2: on to something different? Within a conservative economic ethos.

648
00:32:11,000 --> 00:32:11,680
Speaker 8: Yeah.

649
00:32:11,760 --> 00:32:15,920
Speaker 14: Well, I mean I personally think tariffs are bad. They're

650
00:32:15,920 --> 00:32:19,479
Speaker 14: an indirect tax on the consumer tax. So I do

651
00:32:19,560 --> 00:32:22,160
Speaker 14: think it would be much more constructive to focus on

652
00:32:22,200 --> 00:32:25,960
Speaker 14: growth and focus on reasonable tax levels. So you know,

653
00:32:26,000 --> 00:32:30,280
Speaker 14: if we get the extension of the TCJA and additional

654
00:32:30,360 --> 00:32:34,400
Speaker 14: tax cuts which are in there, the salt deduction goes up,

655
00:32:34,800 --> 00:32:37,840
Speaker 14: you get no tax on tips and social security. Potentially

656
00:32:37,880 --> 00:32:42,360
Speaker 14: in overtime that will be I think helpful to growth.

657
00:32:42,560 --> 00:32:46,080
Speaker 14: But we as a nation need to focus on spending discipline.

658
00:32:46,200 --> 00:32:48,880
Speaker 14: We have none. This bill looks like it's going to

659
00:32:48,920 --> 00:32:53,000
Speaker 14: be additive to the deficit, and we have to focus

660
00:32:53,000 --> 00:32:55,760
Speaker 14: on growth and sent people. I love this idea of

661
00:32:56,240 --> 00:33:01,240
Speaker 14: opening an account for every newborn in America where they

662
00:33:01,320 --> 00:33:03,800
Speaker 14: learn to invest at a very young age and they

663
00:33:03,840 --> 00:33:05,760
Speaker 14: see the power of compounding.

664
00:33:06,160 --> 00:33:08,720
Speaker 6: Well, my daughter's gotten her three brothers to focus on

665
00:33:08,760 --> 00:33:09,280
Speaker 6: this stuff.

666
00:33:09,320 --> 00:33:10,800
Speaker 5: She's the only one that's got her.

667
00:33:10,840 --> 00:33:14,960
Speaker 6: At Austria, see women exactly, she's she does the taxes

668
00:33:15,000 --> 00:33:15,640
Speaker 6: for them as well.

669
00:33:16,160 --> 00:33:18,440
Speaker 5: She saw some turbo tax. What do you think about

670
00:33:18,440 --> 00:33:20,080
Speaker 5: the consumer? We're going to hear about the consumer on

671
00:33:20,120 --> 00:33:20,720
Speaker 5: Thursday year.

672
00:33:21,200 --> 00:33:24,440
Speaker 14: Yea, Paul, they are I mean, I think you know,

673
00:33:24,480 --> 00:33:27,240
Speaker 14: we saw some pull forward. Custom duties in April were

674
00:33:27,360 --> 00:33:31,000
Speaker 14: over sixteen billion versus eight billion the month before, So

675
00:33:31,080 --> 00:33:33,000
Speaker 14: we didn't see it in first quarter earnings, but we

676
00:33:33,040 --> 00:33:34,880
Speaker 14: are going to see it, I think in second quarter.

677
00:33:35,760 --> 00:33:38,400
Speaker 14: But that said, I think the consumer continues to spend.

678
00:33:38,480 --> 00:33:41,000
Speaker 14: The great eddi Ard Denny's comment that they.

679
00:33:40,920 --> 00:33:45,600
Speaker 2: Spend there yesterday never he lifted, Yeah, I think off

680
00:33:45,640 --> 00:33:47,320
Speaker 2: the top of my man's sixty five hundred.

681
00:33:47,400 --> 00:33:50,040
Speaker 14: Yeah he did, and Boldman just raised theirs to sixty one.

682
00:33:50,240 --> 00:33:51,920
Speaker 14: I don't live in that world, like I have to

683
00:33:51,960 --> 00:33:56,720
Speaker 14: produce performance and so I can't change and wiggle. But yeah,

684
00:33:56,720 --> 00:33:58,800
Speaker 14: and he said they spend when they're depressed because it

685
00:33:58,800 --> 00:34:02,200
Speaker 14: produces dopamine. So I think we'll continue to see the

686
00:34:02,280 --> 00:34:02,920
Speaker 14: consumer spent.

687
00:34:03,960 --> 00:34:06,640
Speaker 2: I need your opinion on this. I think it's really important.

688
00:34:06,680 --> 00:34:11,360
Speaker 2: I put out in a lovely, lovely small village in Massachusetts,

689
00:34:11,360 --> 00:34:15,240
Speaker 2: somebody has a barbie garden. They have like hundreds of barbies.

690
00:34:15,280 --> 00:34:18,560
Speaker 2: We've actually donated to it. I think we donated Barbie

691
00:34:18,560 --> 00:34:21,640
Speaker 2: Ferrari with Ken and the whole thing. But like it's

692
00:34:21,680 --> 00:34:24,480
Speaker 2: like hundreds of Barbies in their yard. People come by

693
00:34:24,520 --> 00:34:29,240
Speaker 2: and stare at it. How many your thoughts on thirty

694
00:34:29,320 --> 00:34:32,680
Speaker 2: barbies or three barbies? Is this what we've come to

695
00:34:33,200 --> 00:34:36,920
Speaker 2: an American consumption? I'll bet you out of you know

696
00:34:37,120 --> 00:34:39,640
Speaker 2: where you were at Point Loman before that you had

697
00:34:39,680 --> 00:34:41,800
Speaker 2: what forty or fifty barbies.

698
00:34:42,920 --> 00:34:45,360
Speaker 7: I wasn't really a barbie gal.

699
00:34:45,440 --> 00:34:45,520
Speaker 2: No.

700
00:34:45,600 --> 00:34:47,920
Speaker 7: I wanted to be a pilot in the Navy.

701
00:34:47,800 --> 00:34:50,279
Speaker 2: So well they had Barbie top time.

702
00:34:52,719 --> 00:34:56,080
Speaker 14: I think sometimes our administration, I'm gonna say it this way,

703
00:34:56,160 --> 00:34:58,239
Speaker 14: has an unfortunate way with words.

704
00:34:58,600 --> 00:35:01,399
Speaker 7: And that was just that was a statement I think

705
00:35:01,480 --> 00:35:01,839
Speaker 7: to make.

706
00:35:02,000 --> 00:35:04,839
Speaker 14: And I think we don't want that kind of We

707
00:35:04,880 --> 00:35:08,040
Speaker 14: want growth, we don't want that kind of Well, we'll

708
00:35:08,080 --> 00:35:10,719
Speaker 14: have to pull back on our own personal consumption, but

709
00:35:10,760 --> 00:35:13,120
Speaker 14: the government doesn't have to. So I think we have

710
00:35:13,160 --> 00:35:15,040
Speaker 14: to get some of this stuff right sized. I think,

711
00:35:15,160 --> 00:35:18,440
Speaker 14: you know, once you get to Washington, you just lose touch.

712
00:35:18,719 --> 00:35:20,880
Speaker 14: I interviewed for a position at the BED and the

713
00:35:20,920 --> 00:35:22,760
Speaker 14: guy said to me, look what we've done for America.

714
00:35:22,800 --> 00:35:25,480
Speaker 7: He was ex Goldman Sachs. We lowered rates.

715
00:35:25,480 --> 00:35:28,239
Speaker 14: And I said, well, that's great if you if you

716
00:35:28,320 --> 00:35:30,920
Speaker 14: are invested in risk assets, but not if you're retired

717
00:35:30,960 --> 00:35:34,080
Speaker 14: with a certain assumption of interest rate, you know, income

718
00:35:34,120 --> 00:35:36,640
Speaker 14: on your investments and now you're a greeter at Walmart.

719
00:35:36,760 --> 00:35:39,600
Speaker 14: So they need perspective like I think they need to

720
00:35:39,600 --> 00:35:41,920
Speaker 14: do time in Mid America.

721
00:35:42,040 --> 00:35:45,360
Speaker 2: Can you come back again? We need a third edition

722
00:35:45,440 --> 00:35:55,760
Speaker 2: of successful investigation, Nancy Tegler with this.

723
00:35:55,760 --> 00:35:59,600
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

724
00:35:59,640 --> 00:36:02,920
Speaker 1: starting at seven am Eastern on Applecarplay.

725
00:36:02,200 --> 00:36:04,640
Speaker 10: And Android Auto with the Bloomberg Business app.

726
00:36:04,719 --> 00:36:07,719
Speaker 1: You can also watch us live every weekday on YouTube

727
00:36:07,760 --> 00:36:09,840
Speaker 1: and always on the Bloomberg terminal.

728
00:36:10,480 --> 00:36:13,120
Speaker 2: This is a joy. What we do on surveillance around

729
00:36:13,160 --> 00:36:15,600
Speaker 2: the busy schedule of our guests is wait till we

730
00:36:15,640 --> 00:36:18,400
Speaker 2: can talk to them for an extended moment. And we

731
00:36:18,480 --> 00:36:22,680
Speaker 2: have that with John Lipsky out of Iowa years ago

732
00:36:22,800 --> 00:36:27,520
Speaker 2: in Wesleyan in Connecticut, and of course forever identified with Stanford.

733
00:36:27,560 --> 00:36:31,200
Speaker 2: He attended the recent John Taylor conference with Michael McKee.

734
00:36:31,920 --> 00:36:36,760
Speaker 2: John Lipsky's contribution to our public policy scheduled and less

735
00:36:36,760 --> 00:36:40,920
Speaker 2: than scheduled, has been profound. At the International Monetary Fund

736
00:36:41,120 --> 00:36:45,759
Speaker 2: and of course forever identified with JP Morgan Economics. John

737
00:36:45,840 --> 00:36:48,600
Speaker 2: Lipsky thrilled to have you with us today.

738
00:36:50,400 --> 00:36:53,040
Speaker 9: You're too kind, but it's a pleasure to be here.

739
00:36:53,080 --> 00:36:56,600
Speaker 2: I got to start with the great loss of Joseph Nye.

740
00:36:56,640 --> 00:37:01,160
Speaker 2: I want you to explain in the trenches of the IMF,

741
00:37:01,200 --> 00:37:04,760
Speaker 2: you're speaking Illinois, You're working with a guard to write

742
00:37:04,760 --> 00:37:10,000
Speaker 2: the ship. What Joseph ny contributed to international relations.

743
00:37:11,000 --> 00:37:15,000
Speaker 9: Well, I've ran across him in a couple of ways. One,

744
00:37:15,080 --> 00:37:21,760
Speaker 9: of course, the renowned for his inceptualization of the idea

745
00:37:21,840 --> 00:37:26,480
Speaker 9: of soft power in international relations as opposed to simply

746
00:37:26,880 --> 00:37:31,480
Speaker 9: hard power. And of course, in the context of the IMF,

747
00:37:32,920 --> 00:37:38,239
Speaker 9: which was a foundational institution creating the post World War

748
00:37:38,320 --> 00:37:44,160
Speaker 9: two order that restored the global economy and produced in

749
00:37:44,200 --> 00:37:48,040
Speaker 9: the sixty years after World War Two the fastest sustained

750
00:37:48,040 --> 00:37:55,320
Speaker 9: global economic growth probably ever, that the United States leadership

751
00:37:55,360 --> 00:38:02,440
Speaker 9: in creating the institutional grid that was the foundation of

752
00:38:02,480 --> 00:38:07,160
Speaker 9: the so called rules based international order was a reflection

753
00:38:07,320 --> 00:38:10,720
Speaker 9: and a powerful and reflection of the US soft power.

754
00:38:11,400 --> 00:38:15,960
Speaker 9: Joe was for many years also as widely as a

755
00:38:15,960 --> 00:38:21,600
Speaker 9: professor at Kennedy School at Harvard and an essayist. Also

756
00:38:22,320 --> 00:38:26,840
Speaker 9: was the US head of the Trilateral Commission, and so

757
00:38:27,000 --> 00:38:30,000
Speaker 9: took an active but behind the scenes.

758
00:38:29,640 --> 00:38:30,719
Speaker 2: In a way role of.

759
00:38:32,320 --> 00:38:36,360
Speaker 9: Keeping certainly an international foreign policy elite together.

760
00:38:36,560 --> 00:38:38,520
Speaker 2: John, let's ski let me ask you the money question

761
00:38:38,640 --> 00:38:41,560
Speaker 2: that all listening to us across this nation want to know.

762
00:38:42,600 --> 00:38:48,080
Speaker 2: After Trump, do we revert back to Ellipsky international relations

763
00:38:48,520 --> 00:38:51,799
Speaker 2: and structure or do we go on to something new?

764
00:38:53,840 --> 00:38:56,160
Speaker 9: Well, I don't know what Ellipsky structure would be, but

765
00:38:56,640 --> 00:39:02,080
Speaker 9: the really, Tom, you know, at the in the in

766
00:39:02,120 --> 00:39:06,520
Speaker 9: the first Trump administration, when there was already a degree

767
00:39:06,840 --> 00:39:12,399
Speaker 9: of let's let's say, shock and uncertainty created about where

768
00:39:12,520 --> 00:39:16,360
Speaker 9: the US policy was going. Uh, it was commonplace for

769
00:39:16,400 --> 00:39:21,759
Speaker 9: Americans to tell foreigners, well, it's it's it's gonna it's

770
00:39:21,800 --> 00:39:24,719
Speaker 9: gonna be even if Trump is gone, it's not going

771
00:39:24,760 --> 00:39:26,640
Speaker 9: to be back to being the same again. And people

772
00:39:26,680 --> 00:39:28,520
Speaker 9: would say, well, what do you mean exactly, and the

773
00:39:28,560 --> 00:39:32,760
Speaker 9: answer would be I'm not sure either. Now we would

774
00:39:32,800 --> 00:39:36,759
Speaker 9: be doubling down on that. Uh, let's let's look at

775
00:39:36,760 --> 00:39:39,759
Speaker 9: the many ways that we would take a look at

776
00:39:39,880 --> 00:39:44,239
Speaker 9: try to figure out what comes next. Right now, the

777
00:39:44,239 --> 00:39:49,560
Speaker 9: President is enunciating and acting act acting energetically to pursue

778
00:39:49,560 --> 00:39:53,440
Speaker 9: what he would call American First, America First. But Secretary

779
00:39:53,440 --> 00:39:57,480
Speaker 9: of the Treasury Scott Bessen describes as America first doesn't

780
00:39:57,480 --> 00:40:02,279
Speaker 9: mean America alone. Well, that that's good, but what exactly

781
00:40:02,320 --> 00:40:05,920
Speaker 9: does it mean? And it's obvious that we don't know

782
00:40:06,000 --> 00:40:09,319
Speaker 9: the answer, so we don't yet know what Trump two

783
00:40:09,400 --> 00:40:14,839
Speaker 9: point zero is actually going to be. For example, let's

784
00:40:14,840 --> 00:40:17,120
Speaker 9: take this in relation to the kind of question you

785
00:40:17,120 --> 00:40:22,160
Speaker 9: were asking Tom the US and the World Trade Organization?

786
00:40:23,600 --> 00:40:27,920
Speaker 9: Where are we on that reciprocal tariffs appear to be

787
00:40:28,440 --> 00:40:32,719
Speaker 9: not a policy that's not compliant with one of the

788
00:40:32,719 --> 00:40:38,000
Speaker 9: fundamental aspects of the World Trade Organization agreements, which is

789
00:40:38,680 --> 00:40:43,160
Speaker 9: the principle of most favored nation. In other words, you

790
00:40:43,239 --> 00:40:48,160
Speaker 9: don't go around discriminating country by country with differential tariff

791
00:40:48,239 --> 00:40:54,560
Speaker 9: rates on the same product. That creates that inhibits international trade,

792
00:40:54,600 --> 00:40:58,200
Speaker 9: creates a mess. Well, we seem to be pursuing that.

793
00:40:58,600 --> 00:41:01,000
Speaker 9: So what does that mean with regard to such fundamental

794
00:41:01,000 --> 00:41:02,759
Speaker 9: things as our support for the wt O.

795
00:41:04,120 --> 00:41:07,640
Speaker 2: Well, forgive me John Lipsky with us here, folks, who

796
00:41:07,640 --> 00:41:10,000
Speaker 2: welcome all of you across the nation on YouTube around

797
00:41:10,000 --> 00:41:12,360
Speaker 2: the world. Good morning as well. In one of the

798
00:41:12,360 --> 00:41:17,200
Speaker 2: great charms, here is ages ago in the Salmon Brothers Building,

799
00:41:17,680 --> 00:41:21,719
Speaker 2: Building seven. Ye, Paul Sweeney got to walk the halls

800
00:41:21,880 --> 00:41:22,960
Speaker 2: of John Lipsky.

801
00:41:23,120 --> 00:41:25,960
Speaker 6: I was a lowly investment banking grunt that John Lipsky

802
00:41:25,960 --> 00:41:26,880
Speaker 6: as a night there.

803
00:41:27,200 --> 00:41:30,600
Speaker 5: So hey, John, what does it mean? I'm looking at

804
00:41:30,600 --> 00:41:31,520
Speaker 5: the US dollar here.

805
00:41:32,280 --> 00:41:36,319
Speaker 6: Stocks have bounced back, bonds have bounced, yields to come back, but.

806
00:41:36,360 --> 00:41:38,600
Speaker 5: The dollar is still kind of under pressure here. What

807
00:41:38,640 --> 00:41:41,680
Speaker 5: do you make of the US dollar here in the

808
00:41:41,719 --> 00:41:42,520
Speaker 5: global economy?

809
00:41:43,280 --> 00:41:48,360
Speaker 9: Well, it seems to me obviously markets are trying to

810
00:41:48,400 --> 00:41:51,399
Speaker 9: find their way here. But I would I would say

811
00:41:51,440 --> 00:41:54,640
Speaker 9: that there's there's little doubt that there has been a

812
00:41:54,800 --> 00:41:58,719
Speaker 9: substantial reassessment of the outlook for the US economy that

813
00:41:58,880 --> 00:42:03,560
Speaker 9: involves not just domestics, not just foreign investors, but domestic investors.

814
00:42:03,560 --> 00:42:06,480
Speaker 9: But it has had an impact on the dollar. And

815
00:42:06,800 --> 00:42:09,960
Speaker 9: I would say to roll the tape back to last

816
00:42:10,040 --> 00:42:17,120
Speaker 9: fall when or even at Dobbos in January, the dominant

817
00:42:17,120 --> 00:42:20,440
Speaker 9: theme was US exceptionalism. How is it that the US

818
00:42:20,600 --> 00:42:26,120
Speaker 9: has faster productivity growth, more new business formation, stronger growth

819
00:42:26,200 --> 00:42:31,480
Speaker 9: in business investment, etcetera. And entirely positive, not entirely, but

820
00:42:31,719 --> 00:42:35,480
Speaker 9: substantially in positive view of the US economy, especially in

821
00:42:35,520 --> 00:42:38,520
Speaker 9: differentiated form, it's that the US is doing It's not

822
00:42:38,600 --> 00:42:41,920
Speaker 9: perfect a long way, but doing better than everybody else

823
00:42:42,480 --> 00:42:49,560
Speaker 9: that has been fundamentally reassessed by policy developments that have

824
00:42:50,080 --> 00:42:57,640
Speaker 9: caused investors everywhere to number one, look at to reassess

825
00:42:57,840 --> 00:43:05,399
Speaker 9: US growth downwards, reassess inflation outlook upwards, and create more

826
00:43:05,520 --> 00:43:11,000
Speaker 9: institutional uncertainty. Tom had mentioned earlier that I was last

827
00:43:11,000 --> 00:43:15,840
Speaker 9: week in attending last week attending two conferences at Stanford University,

828
00:43:15,880 --> 00:43:19,760
Speaker 9: and we heard presentation from Stanford professors who are measuring

829
00:43:20,200 --> 00:43:25,560
Speaker 9: what they call the convenience premium for US Treasury securities

830
00:43:26,040 --> 00:43:32,040
Speaker 9: that was formed one of the evidence of the investors

831
00:43:32,360 --> 00:43:35,720
Speaker 9: of viewing not just the US economy but US markets

832
00:43:35,840 --> 00:43:41,560
Speaker 9: is exceptional, and that seemingly has disappeared. So in other words,

833
00:43:41,880 --> 00:43:47,839
Speaker 9: you could say a loss of safe haven or diminishment

834
00:43:48,000 --> 00:43:51,040
Speaker 9: diminishment of the safe haven aspects of the US market.

835
00:43:51,480 --> 00:43:54,680
Speaker 9: But I would say what you've seen in the dollar

836
00:43:54,920 --> 00:44:00,839
Speaker 9: is again a fundamental reassessment of the differential view of

837
00:44:00,920 --> 00:44:04,319
Speaker 9: the US economy, and not in a favorable way, to

838
00:44:04,360 --> 00:44:08,040
Speaker 9: say the least. Hey John added on to that last word. Here,

839
00:44:08,920 --> 00:44:12,399
Speaker 9: the degree of uncertainty about where policy is going. Since

840
00:44:12,400 --> 00:44:16,960
Speaker 9: this has essentially been a policy driven upset, it remains

841
00:44:17,880 --> 00:44:19,759
Speaker 9: pretty substantial.

842
00:44:20,239 --> 00:44:22,640
Speaker 6: Hey John, I think you and I and most of

843
00:44:22,719 --> 00:44:24,640
Speaker 6: our listeners, most of our viewers, we grew up in a.

844
00:44:24,560 --> 00:44:28,520
Speaker 5: World where globalization was the story.

845
00:44:28,560 --> 00:44:31,160
Speaker 6: You had to do your time in Tokyo, you had

846
00:44:31,160 --> 00:44:33,920
Speaker 6: to do your time in London. This is a global economy,

847
00:44:33,960 --> 00:44:34,680
Speaker 6: global market.

848
00:44:34,719 --> 00:44:35,200
Speaker 5: Is that over?

849
00:44:36,239 --> 00:44:42,520
Speaker 9: Oh no, not at all. As you see, the rest

850
00:44:42,560 --> 00:44:48,560
Speaker 9: of the world is still obviously has to take important

851
00:44:49,000 --> 00:44:53,239
Speaker 9: account of what the world's largest economy is doing, especially

852
00:44:53,600 --> 00:44:58,080
Speaker 9: since it seems intent on altering at the very least,

853
00:44:58,080 --> 00:45:04,440
Speaker 9: if not disrupting, the institutional frameworks that were created largely

854
00:45:05,040 --> 00:45:08,200
Speaker 9: with the support of the United States. The rest of

855
00:45:08,239 --> 00:45:13,240
Speaker 9: the world is continuing to trade. In other words, for example,

856
00:45:13,280 --> 00:45:18,279
Speaker 9: within Asia, the growth of interregional trade continues to outstrip

857
00:45:18,719 --> 00:45:25,800
Speaker 9: that of trade with the between regions. Especially in the US. Also,

858
00:45:26,040 --> 00:45:30,040
Speaker 9: trade and services has continued to grow rapidly, and our

859
00:45:30,120 --> 00:45:34,080
Speaker 9: trade policies that have caused so much upset have exclusively

860
00:45:34,200 --> 00:45:37,879
Speaker 9: looked at trade in goods. But it's trades and services

861
00:45:38,280 --> 00:45:42,480
Speaker 9: that forms part of the most interesting opportunity for the

862
00:45:42,520 --> 00:45:43,360
Speaker 9: global economy.

863
00:45:43,440 --> 00:45:45,239
Speaker 2: John, I want to get this in. I think it's

864
00:45:45,320 --> 00:45:48,200
Speaker 2: just too important. Your heart and soul is of Iowa.

865
00:45:48,640 --> 00:45:53,480
Speaker 2: Your mother's public office in Iowa, ages Ago, I have

866
00:45:53,640 --> 00:45:57,480
Speaker 2: family on the Mississippi River in western Illinois, et cetera.

867
00:45:57,920 --> 00:46:00,399
Speaker 2: And the basic idea and I go back to Smaller's

868
00:46:00,440 --> 00:46:05,600
Speaker 2: classic essay in the fifties of isolationism in America, and

869
00:46:05,680 --> 00:46:08,839
Speaker 2: it comes from Iowa. It comes from the Midwest. When

870
00:46:08,880 --> 00:46:10,560
Speaker 2: you and I were kids. It was led by the

871
00:46:10,680 --> 00:46:14,000
Speaker 2: Chicago Tribune. I want you to speak to the new

872
00:46:14,080 --> 00:46:20,600
Speaker 2: breed of American isolationism. Now, how does that on the end? Now?

873
00:46:21,920 --> 00:46:26,040
Speaker 9: Yeah, Tom, It's an excellent question, and it's a puzzlement

874
00:46:26,120 --> 00:46:29,680
Speaker 9: to me thinking, let's let's keep it with Iowa.

875
00:46:31,160 --> 00:46:31,480
Speaker 2: Iowa.

876
00:46:32,000 --> 00:46:38,719
Speaker 9: Iowa remains an agricultural state in the sense of its products,

877
00:46:39,280 --> 00:46:43,759
Speaker 9: even though actually direct direct farming is a very now

878
00:46:43,880 --> 00:46:46,960
Speaker 9: is a very very small part of the labor force.

879
00:46:47,600 --> 00:46:54,640
Speaker 9: But still US agricultural exports are an absolutely vital part

880
00:46:54,960 --> 00:47:00,320
Speaker 9: of the Midwest farming and for Iowa, and for exact ample,

881
00:47:00,360 --> 00:47:04,480
Speaker 9: the last time there was in Trump number one, when

882
00:47:04,680 --> 00:47:08,520
Speaker 9: there was a big upset with agricultural trade with China,

883
00:47:09,200 --> 00:47:12,839
Speaker 9: the administration ended up having to spend tens of billions

884
00:47:12,880 --> 00:47:17,799
Speaker 9: of dollars in compensation, among others, to Iowa farmers for

885
00:47:17,920 --> 00:47:23,879
Speaker 9: their lost income, and at the same time there has been.

886
00:47:24,640 --> 00:47:28,799
Speaker 9: When I was growing up, Tom, let's just say what

887
00:47:28,840 --> 00:47:31,400
Speaker 9: you would call there very there weren't very many folks

888
00:47:31,400 --> 00:47:35,960
Speaker 9: of color around. But today at my old high school,

889
00:47:36,280 --> 00:47:40,719
Speaker 9: I think it's it's considered exceptional if the valedictorian is

890
00:47:40,760 --> 00:47:47,080
Speaker 9: one of those those very talented Asian kids who have

891
00:47:48,600 --> 00:47:50,719
Speaker 9: settled in the wake, especially in the wake of the

892
00:47:50,760 --> 00:47:55,400
Speaker 9: Vietnam War. And you can find in the construction industrial

893
00:47:55,440 --> 00:47:58,160
Speaker 9: and let's see what's happening now and in the packing

894
00:47:58,200 --> 00:48:03,399
Speaker 9: industry in Iowa a huge influx of Latin workers who

895
00:48:03,400 --> 00:48:06,440
Speaker 9: are viewed as really very much multi the work, hard

896
00:48:06,480 --> 00:48:10,640
Speaker 9: working folks. So it's and yet I was voted overwhelmingly

897
00:48:10,680 --> 00:48:16,040
Speaker 9: for Trump, So it's as you would say, if call

898
00:48:16,080 --> 00:48:22,560
Speaker 9: it isolationist seems jarring. But still it's certainly more nationalists

899
00:48:22,840 --> 00:48:26,040
Speaker 9: and buying into the idea that the US has been

900
00:48:26,600 --> 00:48:30,160
Speaker 9: taken advantage of by foreigners and by the elites.

901
00:48:30,760 --> 00:48:33,560
Speaker 2: Thank you so much. And just as one example there

902
00:48:33,920 --> 00:48:36,120
Speaker 2: of the change of the Middle West is of course

903
00:48:36,120 --> 00:48:39,440
Speaker 2: the wonderful Jim Young Kim, who was at Dartmouth College

904
00:48:39,480 --> 00:48:41,960
Speaker 2: and then the World Bank, serving right when John Lipsky

905
00:48:42,360 --> 00:48:44,719
Speaker 2: was serving as well. John Lipsky, thank you for extended

906
00:48:44,760 --> 00:48:49,080
Speaker 2: comments today, remembering Paul Sweeney a few years ago.

907
00:48:49,120 --> 00:48:52,240
Speaker 8: Back to Brothers exactly as well.

908
00:48:52,760 --> 00:48:56,640
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

909
00:48:56,680 --> 00:48:59,560
Speaker 1: starting at seven am Eastern on Apple Corplay.

910
00:48:59,200 --> 00:49:01,680
Speaker 10: And Android Auto with the Bloomberg Business app.

911
00:49:01,719 --> 00:49:04,759
Speaker 1: You can also listen live on Amazon Alexa from our

912
00:49:04,800 --> 00:49:09,320
Speaker 1: flagship New York station. Just say Alexa Play Bloomberg eleven thirty.

913
00:49:09,480 --> 00:49:13,680
Speaker 6: Brian used a principal at Madison Wall. Brian, you're based

914
00:49:13,680 --> 00:49:14,520
Speaker 6: in Portland, Oregon.

915
00:49:14,680 --> 00:49:16,560
Speaker 5: I have no idea why you were there. I love

916
00:49:16,640 --> 00:49:18,480
Speaker 5: the town, but you're.

917
00:49:18,320 --> 00:49:18,839
Speaker 2: In New York.

918
00:49:19,080 --> 00:49:21,959
Speaker 5: I am Laura Martin, our good friend from Needham. She's

919
00:49:22,040 --> 00:49:25,040
Speaker 5: in New York. Why are all you media mobiles in

920
00:49:25,040 --> 00:49:25,839
Speaker 5: New York this week?

921
00:49:26,280 --> 00:49:27,440
Speaker 2: You don't like to hang out together?

922
00:49:27,680 --> 00:49:31,560
Speaker 5: And it's upfront? Oh that that yeah? Tell us what

923
00:49:31,719 --> 00:49:34,160
Speaker 5: upfront is? And why do we even have an upfront

924
00:49:34,160 --> 00:49:35,640
Speaker 5: season anymore? Tell us what upfront is?

925
00:49:35,880 --> 00:49:36,239
Speaker 2: Right? Well?

926
00:49:36,280 --> 00:49:39,440
Speaker 15: The upfront is this period of time where the world's

927
00:49:39,520 --> 00:49:42,520
Speaker 15: largest advertisers and the largest sellers of advertising in the

928
00:49:42,560 --> 00:49:45,479
Speaker 15: United States and TV in particular, come together. The TV

929
00:49:45,760 --> 00:49:50,200
Speaker 15: network owners and YouTube and Amazon all do big song

930
00:49:50,280 --> 00:49:52,920
Speaker 15: and dances I think Lady Gaga is going to be

931
00:49:52,920 --> 00:49:54,320
Speaker 15: at YouTube's broadcast tomorrow.

932
00:49:54,320 --> 00:49:54,640
Speaker 5: Wow.

933
00:49:55,560 --> 00:49:56,640
Speaker 2: And yeah.

934
00:49:56,680 --> 00:49:59,040
Speaker 15: Basically they show what they're they've got planned for the

935
00:49:59,040 --> 00:50:01,359
Speaker 15: next year and then and it's the time. Once they've

936
00:50:01,360 --> 00:50:03,920
Speaker 15: done that, then everyone can forecast what they think audiences

937
00:50:03,920 --> 00:50:06,719
Speaker 15: are going to be and then budgets basically start getting negotiated.

938
00:50:06,800 --> 00:50:08,760
Speaker 15: That's what the whole upfront period is about.

939
00:50:08,840 --> 00:50:11,279
Speaker 2: Bring us up to date with your historic call that

940
00:50:11,400 --> 00:50:14,560
Speaker 2: TV will not go away. Well, we're brilliant on that.

941
00:50:15,040 --> 00:50:16,960
Speaker 2: What's a new view from Brian Weezer.

942
00:50:17,120 --> 00:50:19,640
Speaker 15: Well, it's a gradual erosion. I mean, I still think

943
00:50:19,640 --> 00:50:22,000
Speaker 15: that the overall industry can grow the top line by

944
00:50:22,040 --> 00:50:24,840
Speaker 15: let's say one percent. If you included streaming growth of

945
00:50:24,880 --> 00:50:28,360
Speaker 15: call it ten percent, and you assume that subscription fees

946
00:50:28,400 --> 00:50:31,200
Speaker 15: from PATV declines by call it six or seven percent,

947
00:50:31,239 --> 00:50:34,360
Speaker 15: and ad revenue declines by call it three percent, the

948
00:50:34,440 --> 00:50:36,839
Speaker 15: overall medium grows.

949
00:50:36,600 --> 00:50:39,000
Speaker 2: By about a percent. So it doesn't die.

950
00:50:39,080 --> 00:50:42,920
Speaker 15: It just evolves, and the profit margins might shrink, but

951
00:50:43,040 --> 00:50:44,000
Speaker 15: it doesn't go away.

952
00:50:45,160 --> 00:50:48,440
Speaker 5: If I'm CBS and Tom, some of these after parties

953
00:50:48,440 --> 00:50:51,920
Speaker 5: for these upfronts, legendary stories I cannot tell.

954
00:50:52,200 --> 00:50:55,440
Speaker 15: But that's what the NewYork Post is for exactly?

955
00:50:55,840 --> 00:50:58,320
Speaker 5: Talk to just about I mean, what are the networks

956
00:50:58,880 --> 00:51:02,320
Speaker 5: where they allocant? Are they spending money on their CBS

957
00:51:02,360 --> 00:51:06,600
Speaker 5: television network programming? Are they putting everything on streaming these days? Well?

958
00:51:06,640 --> 00:51:07,960
Speaker 15: I think that when you look at some of the

959
00:51:08,000 --> 00:51:10,920
Speaker 15: networks like NBCU, it's kind of surprising, if not shocking,

960
00:51:11,120 --> 00:51:13,120
Speaker 15: just the share of the content budget going to peacock

961
00:51:13,280 --> 00:51:17,279
Speaker 15: versus going to the broadcast creative budget. Yeah, exactly, we're

962
00:51:17,480 --> 00:51:21,160
Speaker 15: we're paying for content other than sports. Now, sports rights

963
00:51:21,280 --> 00:51:24,760
Speaker 15: continues to be heavily skewed towards broadcast networks and cable networks,

964
00:51:24,920 --> 00:51:26,759
Speaker 15: and that's primarily because you can get people to pay

965
00:51:26,800 --> 00:51:30,080
Speaker 15: for the services right to access it, and the leagues

966
00:51:30,440 --> 00:51:32,400
Speaker 15: want the reret and the reach of broadcast.

967
00:51:32,440 --> 00:51:34,520
Speaker 2: Still. So if I go over to Michael's today for

968
00:51:34,600 --> 00:51:37,200
Speaker 2: lunchare the calcald and all that they put me in

969
00:51:37,239 --> 00:51:40,240
Speaker 2: the way back? And I'm back with the D class

970
00:51:40,280 --> 00:51:44,440
Speaker 2: celebrities upfront? Are the fancy people you talk to leading

971
00:51:44,480 --> 00:51:48,360
Speaker 2: the upfront charge? What are they talking about? Is it

972
00:51:48,400 --> 00:51:52,360
Speaker 2: like one? They're talking about YouTube? What's the theme in

973
00:51:52,400 --> 00:51:54,160
Speaker 2: the hallways? Here's the fun thing?

974
00:51:54,480 --> 00:51:56,840
Speaker 15: Even though YouTube may very well have the biggest single

975
00:51:56,880 --> 00:51:59,760
Speaker 15: event this week, it's really not part of the upfront

976
00:51:59,800 --> 00:52:02,640
Speaker 15: CAN conversation, which is kind of weird, right. They want

977
00:52:02,680 --> 00:52:05,280
Speaker 15: to be part of those conversations. They might be bigger

978
00:52:05,320 --> 00:52:09,279
Speaker 15: than NBCU and Disney and Paramount combined, but they're not

979
00:52:09,320 --> 00:52:12,839
Speaker 15: really part of the overall TV budget process because most

980
00:52:12,840 --> 00:52:14,600
Speaker 15: marketers don't think of them as TV yet.

981
00:52:14,840 --> 00:52:16,880
Speaker 6: See, that is so odd because that's where the I

982
00:52:16,960 --> 00:52:19,680
Speaker 6: used to just say to people, wherever the eyeballs go,

983
00:52:20,200 --> 00:52:21,120
Speaker 6: that's where ad.

984
00:52:20,960 --> 00:52:21,520
Speaker 2: Dollars will go.

985
00:52:21,680 --> 00:52:24,280
Speaker 5: And it's so slow, right, it's because it's different.

986
00:52:24,280 --> 00:52:27,280
Speaker 15: Though in the eyes of the typical marketer, mister Beast

987
00:52:27,360 --> 00:52:35,280
Speaker 15: might be comparable, but mister Beast by himself, Beast by himself,

988
00:52:35,320 --> 00:52:38,160
Speaker 15: mister beat is relatively small. And so because you're buying audiences,

989
00:52:38,200 --> 00:52:40,480
Speaker 15: not programs, when it comes to YouTube, it's hard to

990
00:52:40,800 --> 00:52:43,040
Speaker 15: wrap your head around what you're getting. That's part of

991
00:52:43,040 --> 00:52:43,480
Speaker 15: the issue.

992
00:52:43,520 --> 00:52:45,840
Speaker 2: We're living this every day, folks, and we really treasure

993
00:52:45,880 --> 00:52:48,080
Speaker 2: that you're on YouTube where there's good around the world,

994
00:52:48,120 --> 00:52:51,480
Speaker 2: particularly in the Pacific. Rim evening, Good morning to your

995
00:52:51,520 --> 00:52:55,799
Speaker 2: New York time on YouTube. Subscribe to Bloomberg Podcast if

996
00:52:55,800 --> 00:52:59,440
Speaker 2: Brian Weezer saw our numbers, he'd be calling us exact

997
00:52:59,440 --> 00:53:01,000
Speaker 2: beast exactly.

998
00:53:01,560 --> 00:53:06,800
Speaker 6: So, Brian, how are advertisers thinking about broadcast television and

999
00:53:06,840 --> 00:53:07,880
Speaker 6: cable television today?

1000
00:53:07,960 --> 00:53:08,680
Speaker 2: Yeah? Right now?

1001
00:53:08,719 --> 00:53:12,040
Speaker 15: Well today as in what may something? Right, I think

1002
00:53:12,040 --> 00:53:17,080
Speaker 15: they're still freaking out. Notwithstanding the yesterday's press conference. I

1003
00:53:17,120 --> 00:53:19,400
Speaker 15: think that there's still a lot of concerns and uncertainty

1004
00:53:19,480 --> 00:53:21,440
Speaker 15: about what their budgets are going to be, and so

1005
00:53:21,480 --> 00:53:22,920
Speaker 15: I think there's gonna be a lot of reluctance to

1006
00:53:22,960 --> 00:53:25,160
Speaker 15: put down money. That's the first thing, right.

1007
00:53:25,360 --> 00:53:28,720
Speaker 6: I think it's just general political economic issues.

1008
00:53:28,800 --> 00:53:31,880
Speaker 15: Uncertainty is a real issue because it's already a challenge

1009
00:53:31,880 --> 00:53:34,000
Speaker 15: when you're making these commitments for a period from say

1010
00:53:34,040 --> 00:53:37,719
Speaker 15: October to September of the following year, when you don't

1011
00:53:37,719 --> 00:53:39,640
Speaker 15: even know what economic policy is going to be in

1012
00:53:39,680 --> 00:53:43,160
Speaker 15: about thirty days, let alone sixty nine and twenty. So

1013
00:53:43,360 --> 00:53:45,360
Speaker 15: I think that that uncertainty is the first top of

1014
00:53:45,400 --> 00:53:48,000
Speaker 15: mind thing, and that's going to be a huge feature

1015
00:53:48,040 --> 00:53:51,480
Speaker 15: of this upfront in terms of reluctance to commit without

1016
00:53:51,520 --> 00:53:54,120
Speaker 15: a lot of flexibility. So that's the first in top

1017
00:53:54,160 --> 00:53:57,239
Speaker 15: of their mind. But digital platforms are even more important, right,

1018
00:53:57,280 --> 00:54:00,760
Speaker 15: So the TV budgets have a negative trajectory. Digital budgets

1019
00:54:00,760 --> 00:54:03,279
Speaker 15: continue to have a growing trajectory for large brands.

1020
00:54:03,480 --> 00:54:04,760
Speaker 2: Like single digit growing.

1021
00:54:05,280 --> 00:54:07,520
Speaker 15: I think this your single digit yeah, and I think

1022
00:54:07,520 --> 00:54:09,600
Speaker 15: that the double digits is the thing of the past.

1023
00:54:09,880 --> 00:54:12,640
Speaker 2: I mentioned you're in Portland. From Portland up to Vancouver,

1024
00:54:13,160 --> 00:54:16,200
Speaker 2: is the new Hollywood maybe through the Toronto and the

1025
00:54:16,320 --> 00:54:20,120
Speaker 2: rest that mister President Trump, mister President went after a

1026
00:54:20,160 --> 00:54:23,680
Speaker 2: good morning, Marilyn Monroe, thanks for listening. But the bottom

1027
00:54:23,719 --> 00:54:27,399
Speaker 2: line is the future of Hollywood if they're exporting ever

1028
00:54:27,560 --> 00:54:30,240
Speaker 2: labor transaction outside California.

1029
00:54:30,360 --> 00:54:32,600
Speaker 15: Yeah, Well, the smart thing if you're in the production

1030
00:54:32,719 --> 00:54:34,640
Speaker 15: business outside of the United States is to make sure

1031
00:54:34,680 --> 00:54:37,279
Speaker 15: you're doubling down your productions for outside of the United States.

1032
00:54:37,360 --> 00:54:38,480
Speaker 5: The United States is as.

1033
00:54:38,360 --> 00:54:41,440
Speaker 15: You guys follow as well as anywhere more pushing towards autarchy.

1034
00:54:41,880 --> 00:54:43,719
Speaker 15: I mean, the reality is that if you want to

1035
00:54:43,800 --> 00:54:46,440
Speaker 15: produce a content or any business or product for the

1036
00:54:46,520 --> 00:54:48,279
Speaker 15: United States, you, Kanye are going to need to have

1037
00:54:48,320 --> 00:54:51,280
Speaker 15: a US based operation. I think that Vancouver in particular

1038
00:54:51,320 --> 00:54:54,840
Speaker 15: where I'm from, and Toronto are heavily dependent on American productions,

1039
00:54:54,920 --> 00:54:56,520
Speaker 15: but if they focus on the rest of the world,

1040
00:54:56,800 --> 00:54:58,640
Speaker 15: huge opportunity.

1041
00:54:58,800 --> 00:55:01,080
Speaker 5: So what do we doing today on the upfront? What's

1042
00:55:01,120 --> 00:55:02,800
Speaker 5: the party today today?

1043
00:55:02,880 --> 00:55:05,960
Speaker 15: Disney is later today, so I'll be there.

1044
00:55:06,200 --> 00:55:09,759
Speaker 6: And so where we want getting this ESPN app that's

1045
00:55:09,760 --> 00:55:11,439
Speaker 6: going to have everything we all want?

1046
00:55:11,800 --> 00:55:13,200
Speaker 2: Yeah, well I don't coming.

1047
00:55:13,320 --> 00:55:15,840
Speaker 15: I don't know the specific schedule. But I think that

1048
00:55:15,920 --> 00:55:19,759
Speaker 15: the sports specific apps really have a limited audience because

1049
00:55:19,760 --> 00:55:21,319
Speaker 15: the number of people who are willing to pay only

1050
00:55:21,360 --> 00:55:23,480
Speaker 15: for that product are going to be limited. That's why

1051
00:55:23,480 --> 00:55:26,600
Speaker 15: the whole concept of having like a bundle of services is.

1052
00:55:26,520 --> 00:55:29,239
Speaker 5: A better business. Yest or charter, Oh no, would never

1053
00:55:29,280 --> 00:55:29,879
Speaker 5: pay for that.

1054
00:55:31,280 --> 00:55:33,920
Speaker 2: When you were Sterling Draper, did you ever beat did

1055
00:55:33,920 --> 00:55:37,399
Speaker 2: you ever beat Yodah Holloway? Oh? No's that?

1056
00:55:37,880 --> 00:55:38,040
Speaker 8: No?

1057
00:55:38,360 --> 00:55:40,120
Speaker 5: Yeah, I certainly no.

1058
00:55:40,280 --> 00:55:43,000
Speaker 15: I've said some I've got some people from that era.

1059
00:55:43,400 --> 00:55:44,800
Speaker 2: Was that was that when they.

1060
00:55:44,680 --> 00:55:47,680
Speaker 5: Sit they send the biggest Yeah?

1061
00:55:48,160 --> 00:55:50,680
Speaker 15: Remember I replaced the guy started in nineteen forty eight. Yes,

1062
00:55:50,719 --> 00:55:51,839
Speaker 15: and it was Bob Cohen.

1063
00:55:52,040 --> 00:55:56,320
Speaker 5: Bob Cohen, that's right. Bob Cohen was the definitive voice

1064
00:55:56,320 --> 00:55:57,720
Speaker 5: on Madison Avenue.

1065
00:55:59,040 --> 00:56:02,719
Speaker 2: What happens to not West Point Peperol WPP.

1066
00:56:03,239 --> 00:56:06,120
Speaker 15: I think that agencies generally are more likely twenty years

1067
00:56:06,160 --> 00:56:09,239
Speaker 15: from now you'll be able to recognize today's agencies in

1068
00:56:09,239 --> 00:56:12,880
Speaker 15: some form with a higher probability than meta will be around.

1069
00:56:13,640 --> 00:56:14,680
Speaker 2: Okay, mark our words.

1070
00:56:15,000 --> 00:56:16,600
Speaker 15: Mata is just heart probability.

1071
00:56:16,760 --> 00:56:17,320
Speaker 5: Probability.

1072
00:56:17,560 --> 00:56:20,120
Speaker 2: Yeah, don't be a stranger's thing. Can we get who

1073
00:56:20,160 --> 00:56:23,399
Speaker 2: should get live reporting from the upfronts? Joining the stem

1074
00:56:23,719 --> 00:56:27,800
Speaker 2: YEP upfront corresponding Brian, exactly right, very quit fun, Brian,

1075
00:56:27,920 --> 00:56:28,239
Speaker 2: thank you.

1076
00:56:28,640 --> 00:56:33,440
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

1077
00:56:33,560 --> 00:56:37,880
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,

1078
00:56:38,000 --> 00:56:41,240
Speaker 1: seven to ten am Easter and on Bloomberg dot com,

1079
00:56:41,360 --> 00:56:45,200
Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app.

1080
00:56:45,480 --> 00:56:48,600
Speaker 1: You can also watch us live every weekday on YouTube

1081
00:56:48,880 --> 00:56:50,880
Speaker 1: and always on the Bloomberg terminal