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Speaker 3: We drown updated. Usually we're with Jeffrey Rosenberg of Black Rock.
Speaker 3: When we're breathless, the Feds cut rates, blah blah blah.
Speaker 3: Today we pause and we have a quiet or mer
Speaker 3: serene Jeff Rosenberg he comes in Cardigan, He's like casual,
Speaker 3: you know, it's like not fed day or jobstay or
Speaker 3: CPI day. An intelligent conversation. How hard is it to
Speaker 3: be at Blackrock and be trying to figure out coupon
Speaker 3: or total return?
Speaker 4: Is it a fun business now or is it brutal
Speaker 4: every day day to make the right decision.
Speaker 5: Well, there's just a lot of cross currents.
Speaker 6: And although it seems kind of quiet, it's it's about
Speaker 6: an hour and ten minutes till you know, we start
Speaker 6: the morning in fixed income and then it's ECB day. Actually,
Speaker 6: so there's it never it never stops.
Speaker 3: Is the stuff you learned at Temper at Carnegie Melon
Speaker 3: valid now is the textbooks help you in this fixed
Speaker 3: income market?
Speaker 7: You know, it's a great it's a great question.
Speaker 6: And I talk a lot to new graduates, and you know,
Speaker 6: I look back on you know, I was the third
Speaker 6: program at the Carnegie Mellon Computational Finance program, and you
Speaker 6: know what was important is is that you learned how
Speaker 6: to learn. You learned how to keep your skills relevant
Speaker 6: because like, for example, when I was there, like the
Speaker 6: credit derivatives market hadn't yet even been invented, but the
Speaker 6: underlying kind of intellectual foundations of that was interest rate derivatives.
Speaker 6: And so I had the interest rate derivative background, and
Speaker 6: then when credit derivatives became kind of invented, it was
Speaker 6: all based on the same kind of academic I.
Speaker 4: Want to get this in quickly. Paul wants to jump in.
Speaker 3: We've got Jeff Rosenberger Blackrock with us for this entire
Speaker 3: Two blocks into forty five after the hour, I was
Speaker 3: in the Saint Regions Hotel in Beijing and Jillian Tet
Speaker 3: did an article on something I'd never heard of, cdo
Speaker 3: squaredes a.
Speaker 4: Million years ago?
Speaker 3: Are we back to that now with derivative cuteness? Are
Speaker 3: we doing in six seven reducts.
Speaker 6: So you know, it's it's a it's a it's equip
Speaker 6: somewhat attributed to to Mark Twain. History doesn't repeat, but
Speaker 6: it rhymes, and I think that's the way to think about,
Speaker 6: you know, cycles and financial cycles and innovation, you know,
Speaker 6: particularly around around credit. You know, we've had credit cycles
Speaker 6: from time immemorial.
Speaker 7: This one is.
Speaker 6: Particularly interesting, right because it's in the post GFC environment
Speaker 6: where we've seen something we've never seen before, this massive
Speaker 6: expansion of liquidity from a step function change in the
Speaker 6: role of central banks and the amount of liquidity in
Speaker 6: the market. And liquidity is the essential ingredient in extending
Speaker 6: a credit cycle, right, my favorite, probably greatest quip of
Speaker 6: all time. You know, hats off to the source of
Speaker 6: this one, which is coming to a movie, you know,
Speaker 6: on Christmas Day with Timothy Shallow. A rolling loan gathers
Speaker 6: no loss, and you know what allows you to roll
Speaker 6: over those loans extends a credit cycle, and that's liquidity.
Speaker 6: So this has been a fifteen year long credit cycle.
Speaker 6: And so you do a lot of things when there
Speaker 6: are a lot of liquidity in the markets and you
Speaker 6: extend and you know, things build up and you know,
Speaker 6: we'll see it's not history repeating. We're not doing CDO squares,
Speaker 6: we're not leveraging up subprime mortgages. Right, That's why we
Speaker 6: don't repeat those things because we look at those mistakes
Speaker 6: and we fix the past mistakes. But looking forward, you
Speaker 6: always find new ways to find new sources.
Speaker 8: And Jeffrey thil but the best performance year to date
Speaker 8: in fixed income has been US corporate high yield US
Speaker 8: leverage loans of eight nine percent. I mean, do I
Speaker 8: take that risk going into twenty twenty five? Do I
Speaker 8: take that credit risk going into twenty twenty five?
Speaker 6: So we're at you know, almost through depends on which
Speaker 6: you know, metric you you look back in terms of history,
Speaker 6: but we're at or close to the tight levels of
Speaker 6: spreads observed in those markets. So you can take that risk,
Speaker 6: but you've got to understand what your distribution of outcomes
Speaker 6: looks like. It's a carry trade, it's an income trade. Now,
Speaker 6: why are the spreads so tight because corporate balance sheets,
Speaker 6: corporate profits. You know, despite all the back and forth
Speaker 6: about what is GDP doing and what's inflation doing, corporate
Speaker 6: profits have powered through. So with the inflation story, what
Speaker 6: has happened is pricing power, and so corporate profits really
Speaker 6: are what are driving you know, corporate risk premiums. And
Speaker 6: there's one other thing that's really interesting happening in this
Speaker 6: market about Tom Scurlier. A question in terms of innovation
Speaker 6: is kind of what you're measuring in the public markets
Speaker 6: is changing because we're redistributing the balance of credit risk
Speaker 6: between bank underwrited credit that stays on bank balance sheets,
Speaker 6: public credit markets that we measure in those indices, and
Speaker 6: then the types of credits that are being you know,
Speaker 6: increasingly found underwrited in the.
Speaker 7: Private credit market.
Speaker 6: And that distributional change makes some of those historical comparisons
Speaker 6: a bit different. But the bottom line is spreads are
Speaker 6: very tight. Could they go tighter maybe, But you should
Speaker 6: expect that your carry is going to be the best
Speaker 6: case scenario and that if there's any kind of surprise
Speaker 6: to the downside, you're going to be looking at some
Speaker 6: price erosion from spread widening.
Speaker 7: In the twenty twenty five outlook, what.
Speaker 9: Does your federal Reserve do on December eighteenth?
Speaker 6: Oh wow, I think if we pull up the Bloomberg
Speaker 6: function WRP in Cincinnati, you will it's radio that was
Speaker 6: that was a radio joke hopefully.
Speaker 4: Addition, just like you know, see.
Speaker 6: You, Tom, So, I think it's one hundred percent or
Speaker 6: ninety nine percent expected. So the FED has kind of
Speaker 6: backed itself into the corner and doesn't want to disappoint
Speaker 6: market expectations. But you look at that inflation print yesterday,
Speaker 6: you look at the ease of financial conditions, Tom, You've
Speaker 6: seen me say this on every FMC, every payroll meeting.
Speaker 6: That the disconnect here, and it's been a disconnect for
Speaker 6: a long time, is the disconnect between the Fed's view
Speaker 6: of how tight policy is and how easy policy.
Speaker 7: Is when you measure it by financial conditions and.
Speaker 3: The ambiguity of our economics. Jeffrey Rosenberg with US with
Speaker 3: black Rock this morning. Rates go down, it's ambiguous. Does
Speaker 3: a goose GDP or is it a question of a
Speaker 3: slower demand?
Speaker 4: You go down, you get.
Speaker 3: China deflation or massive disinflation. When you see rate cuts
Speaker 3: like we see, which of it is it an attempt
Speaker 3: to goose GDP or a desperation towards deflation.
Speaker 6: So I think for the impact on the US, the
Speaker 6: FED wants to normalize and they think that they're tight.
Speaker 6: I wrote about this at the beginning of this year,
Speaker 6: and it showed up when the FED finally cut rates
Speaker 6: by fifty bases points in September, and I called it
Speaker 6: the new conundrum. Right, So you guys will remember the
Speaker 6: old green span conundrum. Right, he was raising rates, but
Speaker 6: long term rates weren't going up. They were going down
Speaker 6: because back then China was rebalancing, not rebouncing, reinvesting all
Speaker 6: of his trade surpluses back into treasuries. And we couldn't
Speaker 6: understand why the Fed couldn't.
Speaker 7: Control long term interest rates.
Speaker 6: So I've talked about the possibility that we could see
Speaker 6: the new conundrum. What's the new conundrum is here we're
Speaker 6: cutting interest rates in the short end, but the law
Speaker 6: end isn't responding. That's exactly what happened in August, right,
Speaker 6: we cut interest rates fifty basis points, the long end
Speaker 6: went up. And I think when you look into twenty
Speaker 6: twenty five, right, we've taken down the amount of cuts
Speaker 6: that the.
Speaker 5: Fed is expected, but they're still expected to cut.
Speaker 6: Rates and if they do, and this is what yesterday's
Speaker 6: inflation print is kind of worrisome, is we're kind of
Speaker 6: getting into the consensus around this sticky inflation. Okay, so
Speaker 6: why are they cutting next month not next month, next week?
Speaker 6: Because they want to support the job market and the
Speaker 6: concerned about the tightening, So they're showing their hand that
Speaker 6: there's a little bit of preference for the labor market
Speaker 6: over the inflation view. Okay, well that's a problem for
Speaker 6: the rate cutting cycle because you can cut the front end,
Speaker 6: but the back end may be more worried about that
Speaker 6: sticky inflation and worried about some of those longer term
Speaker 6: issues around debt and deficits in the fiscal policy side.
Speaker 6: So the rate piece could get very interesting next year,
Speaker 6: where the directionality on the Fed doesn't necessarily create the
Speaker 6: directionality for the bond market. And remember, most of the
Speaker 6: bond market returns are going to come from the longer
Speaker 6: end if you're holding say an AG or a typical
Speaker 6: kind of index portfolio. So kind of thinking that your
Speaker 6: returns are going to follow what the Fed is going
Speaker 6: to do in twenty twenty five kind of like what
Speaker 6: we saw in October, you know, maybe a tricky and problematic.
Speaker 7: Way of investing in fixed income.
Speaker 8: Next year coming in January, we got a new administration
Speaker 8: coming in, we have a new Congress that canna be seen.
Speaker 8: Did that change the way you guys think about opportunities,
Speaker 8: risk reward.
Speaker 6: Yeah, I mean, I think we're all kind of going
Speaker 6: through it's that time of year, twenty twenty five outlooks and.
Speaker 4: Oh no, don't tell me you did an outlook.
Speaker 7: No, I spare myself the December out of but.
Speaker 10: Come January we write a here's what we think for
Speaker 10: this week, so you know, you know, and it's basically,
Speaker 10: you know, this tremendous amount of policy uncertainty, and which
Speaker 10: policy uncertainty gets unwound or realized.
Speaker 5: First, right, and so the problem is the stuff that
Speaker 5: can be done quickly.
Speaker 6: Trade immigration is the stuff that has a little bit
Speaker 6: more worrisome uncertainty for the economic impact, and the tax
Speaker 6: pieces and the deregulation takes a little bit longer to
Speaker 6: play out. So you have a timing aspect for how
Speaker 6: this kind of policy uncertainty unwinds in the first part
Speaker 6: of the year, and right now no one really knows
Speaker 6: where that's going to shake out, and it's creating this
Speaker 6: kind of policy overhang of uncertainty. But you know, what
Speaker 6: we've seen obviously in financial markets is kind of the
Speaker 6: post election reduction in the pre election uncertainty that's leading
Speaker 6: to kind of reduction in volatility, kind of what you might.
Speaker 8: Call the everything rally. So what am I doing on credit?
Speaker 8: I mean, you know, I could sit here in a
Speaker 8: two year at four point two percent?
Speaker 9: Do I take credit risk here?
Speaker 6: So you can take some credit risk, And as I
Speaker 6: was saying in the kind of the earlier segment that
Speaker 6: the credit risk, you want to preserve some flexibility.
Speaker 7: You want to preserve some.
Speaker 6: Ability to change your portfolio because you really don't have
Speaker 6: a lot of upside in terms of price appreciation. You
Speaker 6: don't have a lot of downside when it comes to
Speaker 6: kind of the base scenario for.
Speaker 7: Twenty twenty five.
Speaker 6: The economy's doing well, corporate profits are doing well, but
Speaker 6: you have a lot of that reflected in the price right,
Speaker 6: So you just don't have a lot of good asymmetry
Speaker 6: on your side. So you want to kind of start
Speaker 6: the year with a little bit of flexibility. You can
Speaker 6: own credit here, but I wouldn't be max overweight into
Speaker 6: my credit position at the beginning.
Speaker 3: There's a belief out there, i'd say, in the zeitgeist
Speaker 3: that the big companies that are riding and high right
Speaker 3: now won't issue credit until rates come down. I don't
Speaker 3: buy it. That's a consensus view. Is a big surprise.
Speaker 3: Next year they're all going to start issuing.
Speaker 6: So you've got to separate kind of discretionary issuance, which
Speaker 6: is what I think you're talking about, Like where do
Speaker 6: corporations have the ability to show some flexibility to remember,
Speaker 6: like the average maturity of investment grade debt is like
Speaker 6: seven years, right, so you've got twenty fifteen percent of
Speaker 6: that debt coming do every year. So there's just this
Speaker 6: kind of recycling effect where you're getting issuance because it's
Speaker 6: just part of the natural.
Speaker 4: But then we'll get an overlay on top of that.
Speaker 6: Yeah, and then the overlay on top of that. You know,
Speaker 6: you will get some of that because the credit spreads
Speaker 6: are very tight, so there's very good kind of pricing power,
Speaker 6: you know, never mind the rate aspect. The rate aspect
Speaker 6: is a little bit tough for one to time. So
Speaker 6: it's really when you see kind of issuers pull back
Speaker 6: and ad is are they getting really attractive issuance on
Speaker 6: the spread side, and right now they're going to get
Speaker 6: very attractive issues.
Speaker 3: Meg seven sends around all the houses their Christmas gift thing,
Speaker 3: you know, the holiday.
Speaker 4: You should see the fruitcake CROs backrock. It's just the unbelievable.
Speaker 8: The fruitcake first calling me, all right, so what's your
Speaker 8: Where's the best value in the fixing the space today
Speaker 8: as you think about twenty twenty five.
Speaker 6: Yeah, So I think there's value, and there's and there's
Speaker 6: kind of opportunity, and so I think the value is
Speaker 6: in the front end of the curve because that's the
Speaker 6: part where I think if you're gonna see some kind
Speaker 6: of reaction from the fed's policies in twenty twenty five,
Speaker 6: that's where you're going to see it, and you're not
Speaker 6: as exposed to what I was highlighting earlier before, this
Speaker 6: kind of conundrum risk where fedce cutting rates, but back
Speaker 6: end rates are really reflecting more long term inflation or
Speaker 6: debt and deficit issues. Value is tough across fixed income
Speaker 6: because of the tightness of spreads, So it's really about
Speaker 6: relative value and relative kind of risk exposure. Front end
Speaker 6: investment grade there's not a lot of spread, but there's
Speaker 6: not a lot of risk, so it's kind of.
Speaker 7: An okay place to be. There's no real kind of.
Speaker 5: Jump up and down and back up the truck. As
Speaker 5: I said, before. It's more about.
Speaker 6: A little bit starting the year, a little bit more flexibility,
Speaker 6: a little bit more liquidity, a little bit more defensive
Speaker 6: on how tight spreads are, and then use that to
Speaker 6: take opportunities.
Speaker 5: If you know there's some surprises.
Speaker 6: Which is what we're going to get right, you just
Speaker 6: can't predict them by definition.
Speaker 7: That gives you an opportunity to take advantage.
Speaker 9: Then what are systemic strategies?
Speaker 5: It's systematic.
Speaker 8: Systematic is what's the difference? Tell me what do you
Speaker 8: guys do?
Speaker 6: Yeah, so basically the key of what we do is
Speaker 6: to exploit opportunities in the cross section, right and and
Speaker 6: and look at alpha opportunities.
Speaker 7: Uh and and.
Speaker 6: What we do is take out you know, so much
Speaker 6: of what we talk about in the markets is the
Speaker 6: direction right, our rates going up, our rates going down. Look,
Speaker 6: the reality is getting the direction right is pretty hard.
Speaker 6: So if your alpha source, if your outperformance source, is
Speaker 6: betting on direction, it's it's you know, you get maybe
Speaker 6: four times.
Speaker 7: A year to make that correctly.
Speaker 5: If you look inside of financial markets.
Speaker 6: Inside the what we call the cross section, there's a
Speaker 6: lot more opportunities to take advantage of the key driver
Speaker 6: of alpha, which is which is dispersion, and that's kind
Speaker 6: of like the centerpiece of our systematic strategy and over markets.
Speaker 3: Folks, what you just heard from mister Rosenberg is gospel.
Speaker 3: I can't say enough how wrong the financial media is
Speaker 3: on this, focusing on vectors out six months they changed
Speaker 3: like an aircraft carrier turning around in the Mediterranean. And
Speaker 3: the grind is day by day looking for that differential
Speaker 3: in price, which if.
Speaker 4: You're a black rock, you gotta use Greek letters.
Speaker 9: I mean, you know you went to Cardie email three
Speaker 9: hundred billion doing this.
Speaker 3: He named his third kid Epsilon. I mean, what's that about,
Speaker 3: Jeffrey Rosenberg?
Speaker 4: Hey works thy, wonderful to have your studio, particularly this
Speaker 4: was great. It's not like what did the FED do?
Speaker 4: What about paragraph three? I mean, you know, it's it's
Speaker 4: just a it's a different Jeffrey Rosenberg.
Speaker 2: You're listening to the Bloomberg Surveillance Podcast. Catch us live
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Speaker 3: There are people that said rates are going up and
Speaker 3: inflation's not going back to a John Williams two percent
Speaker 3: too quickly. Jim Bianco out front, Doctor o'larian's done a
Speaker 3: great job. The City Group, Combine Hollenhorst and that crew,
Speaker 3: great job and other people that you know, the small brain.
Speaker 3: I have it without the sake of going. But Lindsay
Speaker 3: pieg is the one the day after day after day
Speaker 3: just said shut up, Inflation's not coming down. She's my
Speaker 3: economist of the year with Stifel. Doctor Piegs that joins
Speaker 3: us this morning. Lindsay, the global rate cut, the race
Speaker 3: to the bottom. Is it about trying to goose output
Speaker 3: or is it a modest panic about is David Rosenberg
Speaker 3: says too much economic capacity, that there's not enough demand
Speaker 3: out there.
Speaker 4: Rates got to come down now.
Speaker 9: Finally, well, I.
Speaker 1: Think we're seeing very diverging economic conditions, which warrants different
Speaker 1: policy for the ECB, the Bank of England versus what
Speaker 1: we're seeing from the FED. We're seeing faltering growth overseas
Speaker 1: at a much more precipitous decline and inflation here in
Speaker 1: the US. Growth is averaging your three percent over the
Speaker 1: past six months, and inflation is not showing further improvement
Speaker 1: but rather momentum to the sideways and in some cases
Speaker 1: an acceleration in some of these key components. So this
Speaker 1: divergence is very much to be expected given that differential
Speaker 1: in economic and underlying conditions that we're seeing abroad versus
Speaker 1: in the domestic economy.
Speaker 4: Up But Harvard Jason Furman does a great job.
Speaker 3: He calls it his ecumenical inflation as he combines.
Speaker 4: All sorts of series.
Speaker 3: What is your ecumenical treatment of yesterday's inflation report? Can
Speaker 3: you see a disinflation vector?
Speaker 1: Well, I think at this point there was not enough
Speaker 1: momentum to the upside to dissuade the FED from that
Speaker 1: December rate cut. I do think the committee is going
Speaker 1: to push through a third round cut next week, given
Speaker 1: that the increase was in line with expectations. Remember, FED
Speaker 1: officials have reset the bar for December, saying, as long
Speaker 1: as the numbers are within our expectations, within our forecast,
Speaker 1: that's not enough to derail our progress towards further relief
Speaker 1: for the economy, as long as the economy is still
Speaker 1: strong and solid but not overheating. So the threshold has
Speaker 1: been adjusted higher for December. But going forward, if we
Speaker 1: continue to see inflation at these elevated levels, this lack
Speaker 1: of progress as we've seen in the core now for
Speaker 1: the past several months. I think the Fed is on
Speaker 1: the verse. They're going to be backed into a corner
Speaker 1: to take that policy pause sooner than later in the
Speaker 1: new calendar year of twenty twenty five.
Speaker 8: Lindsay, we're going to have a new administration coming in
Speaker 8: next month, on new Congress to be seated. Are you
Speaker 8: concerned about some of the We haven't heard much about
Speaker 8: the economic policies of the new administration, but I guess
Speaker 8: tariffs are certainly part of it.
Speaker 9: Tax cuts are part of it.
Speaker 8: Does that raise materially your inflation concerns in this economy, Well.
Speaker 1: It certainly raises the risk scenario. We don't necessarily know
Speaker 1: how these policies are going to impact the economy, how
Speaker 1: these policies are going to impact from an inflation standpoint,
Speaker 1: because we can't look at them in and of themselves.
Speaker 1: Large sizeable tax cuts could be inflationary, but we've heard
Speaker 1: from the incoming Trump administration they're likely to be offset
Speaker 1: with large sizeable reductions in government spending elsewhere, And so
Speaker 1: it depends on how this net plays out from an
Speaker 1: inflation standpoint. Just like tariffs in and of themselves not inflationary,
Speaker 1: but if we see the economy engage in a tit
Speaker 1: for tat retaliatory cycle of consistent increases in tariffs, that
Speaker 1: then could lead to inflationary pressures. So there's still a
Speaker 1: lot of question marks, but I think it does raise
Speaker 1: the upside risk, which in part is why the Committee
Speaker 1: wants to force through as much policy relief as they
Speaker 1: can now before they face that potential downside limitation due
Speaker 1: to fiscal policy restraints.
Speaker 8: Lindsay r economy's seventy percent services here, how's the consumer
Speaker 8: doing from your perspective.
Speaker 1: Well, the consumer is proving surprisingly resilient. We continue to
Speaker 1: to see consumers out in the marketplace spending on goods
Speaker 1: and services.
Speaker 3: Which is wait, wait, wait a minute, Lindsey, you nailed this.
Speaker 3: Go back six months. How did you guess that the
Speaker 3: consumer would be resilient? What was the pixie dust where
Speaker 3: you said the gloom cruse wrong?
Speaker 1: Well, I think the majority of the analysis was looking
Speaker 1: at the primary support for the consumer during the pandemic
Speaker 1: and the immediate aftermath stemming from fiscal stimulus. We pumped
Speaker 1: trillions upon trillions upon trillions of dollars into the marketplace,
Speaker 1: and with that stimulus largely concluding the notion was the
Speaker 1: consumer has to fall off a cliff. We haven't seen
Speaker 1: it yet, but the consumer has to be marching towards
Speaker 1: that endpoint. And I thought not so fast, because there's
Speaker 1: a number of variables that are continuing to support the consumer.
Speaker 1: During the pandemic, we weren't just buying pelotons. We were
Speaker 1: also paying down credit card debt. So the consumer's starting
Speaker 1: point from this de leveraging allows the con zumer to
Speaker 1: take on a good amount of additional leverage, additional borrowing power,
Speaker 1: which will continue to supplement the consumer as we've seen.
Speaker 3: Okay, so bring it forward. We're running out of time,
Speaker 3: but this is important. Bring it forward to Paul's good
Speaker 3: cat question. Does the pigs of consumer boom continue?
Speaker 1: Well, the consumer continues to spend, but at this reduced
Speaker 1: level of about two and a half to three percent
Speaker 1: now certainly nothing to sneeze at, but it is a
Speaker 1: loss of momentum from a more robust pace as we've
Speaker 1: seen over the past year plus. The consumer is still
Speaker 1: the backbone, still the bright spot of the economy, but
Speaker 1: there is a potential for a loss of momentum but
Speaker 1: that's not accounting for a potential change in policy if
Speaker 1: we do see sizeable tax cuts or other supports for
Speaker 1: the consumer from the incoming and minuses.
Speaker 4: So give me the summary here. The Fed's going to
Speaker 4: cut rates in December.
Speaker 3: Do they not cut again until the Red Sox win
Speaker 3: five games in a row?
Speaker 1: Well, I can't necessarily speak to that timeline, but the
Speaker 1: Fed will likely cut rates in December and then stay
Speaker 1: on pole for at least two meetings. Excuse me, for
Speaker 1: at least some portion of the first quarter. We're looking
Speaker 1: for just one rate cut per quarter, totaling three additional
Speaker 1: rate cuts next year, taking us to three and three quarters.
Speaker 1: That's three seventy five, and that's a good neutral level
Speaker 1: for the FED to target we're talking against.
Speaker 4: Sir Lindsay pigs Is. Thank you so much with Steve
Speaker 4: for just.
Speaker 3: Absolutely nailing the growthiness that is surprised all this year.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 3: I'm looking at Gouda Macunda and you know, I'm doing
Speaker 3: selfies with the yel School of Management. And of course
Speaker 3: down in the New York Stock Exchange right now, the
Speaker 3: President is working the floor.
Speaker 4: It's like you're selling. He's psyched, you're selling takeout at McDonald's.
Speaker 4: He's going from Floord toy.
Speaker 7: You know he's missing here our cash, Yes, exactly, you know, you.
Speaker 3: Know art cash it would you know, he'd say, like,
Speaker 3: you know, mister Trump, would you like a selfie with me?
Speaker 4: And mister Trump would be honored?
Speaker 11: Apps so late.
Speaker 3: Missed at the New York's docutionings the President elect ringing
Speaker 3: the bell and of course comments made a half hour
Speaker 3: ago with the Secretary Treasury Designate.
Speaker 4: Assembled as well.
Speaker 3: We get perspective on that event and the event forward
Speaker 3: known as the second term of President Trump. From Gata Macunda,
Speaker 3: Professor Yale's School of Management.
Speaker 4: Is this going to script? Do you feel like this is?
Speaker 4: I mean, it's not Grover.
Speaker 3: Cleveland, Alexander, But do you get the feeling into a
Speaker 3: second term? It's working out?
Speaker 12: Well, it depends on what you mean by working out.
Speaker 12: It's the script, is what I think a lot of
Speaker 12: people anticipated and so far.
Speaker 4: These comments this morning were sort of on script.
Speaker 12: They were on script, they were normal, and there's there
Speaker 12: are certain I would say there are two scripts.
Speaker 11: There's the public script.
Speaker 12: I'm going to be a relatively normal, mainstream Republican script,
Speaker 12: and there's going to make some big changes. And then
Speaker 12: there's the other script, which is Pete Hegseith cash Ptel,
Speaker 12: people like that, you know, Steve Bannon and Steve Miller
Speaker 12: returning to positions of power. That's the other script, and
Speaker 12: that one also seems to be proceeding forward. Now, which
Speaker 12: of those two scripts will be dominant for the next
Speaker 12: four years is kind of the ultimate question that's going
Speaker 12: to decide a lot of things.
Speaker 8: How do you think this US Senate is going to
Speaker 8: deal with some of the more controversial nominations for cabinet
Speaker 8: positions by President link Trump.
Speaker 11: That's the big question. Opposition seems to have focused in on.
Speaker 12: Pete Hegseyth, largely because every week there seems to be
Speaker 12: another new Pete Hegseth scandal, and they seem to be
Speaker 12: worried that there's more coming out.
Speaker 11: It looked like.
Speaker 12: He was in a lot of trouble up until a
Speaker 12: couple of days ago when Jony Ernst kind of surprisingly said, well,
Speaker 12: you know, I'm pretty open to him, clearly in response
Speaker 12: to a lot of pressure from the movement. If he's confirmed,
Speaker 12: it's hard to see. It's hard for me to imagine
Speaker 12: who won't be because given just the number and quantity,
Speaker 12: and just the fact that you know, the Defense Department
Speaker 12: employees over two million people, Pete haggs its last managerial
Speaker 12: experience ended when he was forced out for mismanagement and
Speaker 12: being drunk in office.
Speaker 11: Party like this is a problem.
Speaker 12: So if the Republicans are willing to bite the bullet
Speaker 12: and confirm him, it's hard for me to see who
Speaker 12: they wouldn't confirm.
Speaker 3: The book is picking presidents. It was important in October
Speaker 3: and into November, and maybe just as important now. I
Speaker 3: guess we have picked a president. Like all presidents, he
Speaker 3: will become overcome by events. Is Syria big enough where
Speaker 3: it's his first overcome by events?
Speaker 12: So Siria's huge, and he is going to get, you know,
Speaker 12: however isolates you want to be. He's going to get
Speaker 12: deeply acquainted with events in Syria. And as Tom Friedman
Speaker 12: said that today, countries tend to either in the Middle
Speaker 12: East tend to either implode or explode, and Syria seems
Speaker 12: like it's in an explode phase, which will.
Speaker 11: Certainly ripple through.
Speaker 12: But I wonder how much he will his own tendencies
Speaker 12: towards disengagement, where we'll push in, we'll sort of say, look,
Speaker 12: if there are more refugee flows, that's not our problem.
Speaker 11: We're sort of stable.
Speaker 12: It would be more suspect that the thing will the
Speaker 12: thing that will draw him in is Ukraine. Ukraine is
Speaker 12: too big to be ignored, and it will just pull
Speaker 12: him in over and over and over again because pressure
Speaker 12: to make a settlement that's just not going to come easily.
Speaker 12: The two sides are so far apart on what they
Speaker 12: would demand that absent Trump essentially forcing the Ukrainians to surrender,
Speaker 12: which I cannot actually imagine him doing, just because of
Speaker 12: the political blowback that he would feel. I'm not sure
Speaker 12: how he avoids getting tangled tangled up in that.
Speaker 9: It's been a long time.
Speaker 8: I can't remember when we had a president come in
Speaker 8: for a second term, not you know, sequential.
Speaker 11: Or over Cleveland only happened, thank you very much.
Speaker 9: Is this a lane duck presidentcy?
Speaker 4: Yeah?
Speaker 12: So the analytics that are That's really interesting is we're
Speaker 12: seeing a contest of two forces here and the fur
Speaker 12: the sort of control of the Republican Party. So one
Speaker 12: the reason that Matt Gates went down, the reason you
Speaker 12: saw our initial opposition to Pete Haig Seth, and I
Speaker 12: think the reason you're going to see a lot of
Speaker 12: people who are.
Speaker 11: Looking at cash but talent going come on.
Speaker 12: Is going to be that for the first time since
Speaker 12: Trump took the Republican nomination in twenty sixteen, Republicans don't
Speaker 12: need him anymore, right and need to find as we
Speaker 12: need to get reelected. So if he is not going
Speaker 12: to be on the ticket in twenty twenty eight, absent
Speaker 12: sort of massive changes the constitution, and so they cannot say, well,
Speaker 12: I have to live with this or I have to
Speaker 12: support this because I need him. That story just went away.
Speaker 12: The flip side is his control over the base of
Speaker 12: the Republican Party has no precedent. He is more popular
Speaker 12: with Republicans than Eisenhower or Reagan. We have never seen
Speaker 12: anything like this, and the blowbag of Republicans stand agains
Speaker 12: him is very real.
Speaker 3: I gotta sum this up, and we've only got one
Speaker 3: minute left or a.
Speaker 4: Minute and a half, I got him, Professor, this is
Speaker 4: so important.
Speaker 3: Apple went public nineteen eighty today on the Bloomberg terminal.
Speaker 4: This is from nineteen eighty two.
Speaker 3: I had a you know, Grandpa Sweeney bought you one
Speaker 3: hundred shares, Paul, Yeah, thirty two hundred dollars ape hundred
Speaker 3: shares thirty two dollars per share YEP split adjusted with
Speaker 3: the dividends of one hundred and ninety six thousand dollars.
Speaker 3: Your thirty two hundred is now worth two hundred and
Speaker 3: thirteen thousand dollars twenty percent per year. That's what the
Speaker 3: President elect was talking about. Maybe not that articulate Bloomberg way,
Speaker 3: but that's the experiment, professor, right.
Speaker 11: I mean, if we could all deliver that.
Speaker 12: One of my best friends is one of the world's
Speaker 12: best selling fantasy novelists, and he bought Apple the date
Speaker 12: when public. I asked him if he made more money
Speaker 12: off one of his books are Apple? The answer was
Speaker 12: the books. But it's a lot closer than you would think.
Speaker 12: But I mean, the basic problem here is we know
Speaker 12: that we know that labor markets are sort of as
Speaker 12: tight as they can be. We know that the feder
Speaker 12: will respond to faster economic growth by raising interest rates.
Speaker 12: We see that inflationary pressures have not gone away completely,
Speaker 12: and on some basic level, there are surely hard limits
Speaker 12: to the US economy that mean that we could possibly
Speaker 12: do twenty percent a year. Wonderful as that would be,
Speaker 12: I would love to say, see what will really happen
Speaker 12: and to me, where that growth dijectory will really come
Speaker 12: from is we're looking at biotech and that places in
Speaker 12: there that there's that sort of deep technological progress that
Speaker 12: has been building for a generation and you're starting to
Speaker 12: cebes carve bend right.
Speaker 3: We're going to talk about that tomorrow, folks. Tomorrow an
Speaker 3: extended conversation with Gene Munster and Dan Ives on this
Speaker 3: technology moment that we're seeing across America. I've seen a
Speaker 3: couple of essays here in the last forty eight hours
Speaker 3: just saying this embedded you know, not AI, but is
Speaker 3: embedded technology lift that we're getting is really quite substantial.
Speaker 3: Got a mccunna, thank you so much. With Yale School
Speaker 3: of Management.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 2: starting at seven am Eastern on applecar Play and Android
Speaker 2: Auto with the Bloomberg Business app. You can also watch
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Speaker 2: Bloomberg terminal.
Speaker 4: I look at the front pages. It's Salisa MATEO minute. Okay,
Speaker 4: take more than a minute.
Speaker 13: I went from an hour to a moment to a minute.
Speaker 4: Now from New Jersey emailed in and said, you got
Speaker 4: to give her less than an hour.
Speaker 13: Here we go.
Speaker 4: Okay.
Speaker 13: I want to start with Netflix because there are reports
Speaker 13: that it's walking back it's parental leave policy.
Speaker 5: This was in the Wall Street Journal.
Speaker 13: So about a decade ago, Netflix announced that it was
Speaker 13: offering new moms and dads, Paul, you're gonna love this
Speaker 13: unlimited time off in the child's first year. Okay, eights,
Speaker 13: But a lot of more staffers took an advantage of
Speaker 13: the benefit that they thought. So the Wall Street Journal,
Speaker 13: they spoke with workers former workers who say the companies
Speaker 13: spent the last few years kind of stepping back. They
Speaker 13: haven't taken it away per se, but they're offering vague,
Speaker 13: conflicting guidance internally. The reason why the company's been growing, right,
Speaker 13: they now have like fourteen thousand employees, more than sixty
Speaker 13: percent jump from both before the pandemic. So so they
Speaker 13: have to start making.
Speaker 8: It's Wall Street focus on profitability, not just growth. So
Speaker 8: I think the company is saying, we need to look
Speaker 8: at all of our costs here.
Speaker 4: And when your first kid was issued, how many days
Speaker 4: did you take?
Speaker 9: I had twins in my.
Speaker 4: How many days did you take?
Speaker 9: I was back on the road the next week.
Speaker 4: I took him three days off. Twins cash flow, cash
Speaker 4: flow came out, he was issued, and I took three
Speaker 4: days off. And granted that's stupid. Let's yes it is.
Speaker 9: I'm not saying stupid it was, but come.
Speaker 3: On, Lisa, how how long should maternity leave be or
Speaker 3: paternity leave?
Speaker 13: It's tough. I know. I myself only had three months
Speaker 13: and then I had to take vacation days.
Speaker 8: So it's it's it's much better, much better.
Speaker 9: And like here, I think we have a very good policy.
Speaker 13: We have an excellent policy here. And even excuse.
Speaker 3: Me, you want to tell us something here, because there's
Speaker 3: something we need to know.
Speaker 13: I am way past that has sailed.
Speaker 9: Next.
Speaker 13: Okay, reality TV shows. I'm not sure if you guys
Speaker 13: are fans of any reality TV shows, but Netflix has one.
Speaker 13: It's called Love is Blind. The reason I bring this
Speaker 13: up is because the National Labor Relations broad has brought
Speaker 13: up this complaint and it could start allowing them to
Speaker 13: become union members. We're talking about the castmates of these shows. Okay,
Speaker 13: it gives it because they're talking about different federal legal
Speaker 13: protections opening the door to unionization because it classifies as
Speaker 13: shows contestants as employees. That's what they're trying to fight
Speaker 13: a lot of the contestants have been fighting this. There's
Speaker 13: been lawsuits back and forth about this, but it's this
Speaker 13: particular show that's kind of starting this and opening the
Speaker 13: doors to other shows and saying, hey, wait, maybe we
Speaker 13: should start.
Speaker 8: One of the reasons that the broadcast networks and the
Speaker 8: cable networks like reality programming is it's much lower cost.
Speaker 8: There's no script right, there's no script I mean that
Speaker 8: kind of stuff. And since there's less advertising revenue because
Speaker 8: of cord cutting, that's all you're seeing on broadcast television
Speaker 8: these days on the networks are these reality shows. It's
Speaker 8: very rare that you see a scripted show on the
Speaker 8: networks these days because they're just too expensive.
Speaker 4: Yeah, Season seven was was really it started slow.
Speaker 5: Of Love is Blind, I mean perfect, perfect husband.
Speaker 4: But and you know the tables have turned.
Speaker 3: But then I love in week two where they have
Speaker 3: dirty laundry.
Speaker 4: Now I was just agreed. I did.
Speaker 13: I have to be honest, I didn't know what this
Speaker 13: show was. Apparently like they date one another from separate rooms.
Speaker 13: They don't even see one another. They hear it through
Speaker 13: speakers until they agreed again and gave me eight o'clock
Speaker 13: on t J.
Speaker 4: John Ferrell's within the term The Loves, of course, is fault. Next.
Speaker 13: Okay, Sports Illustrated coming to a stadium in New Jersey. Okay,
Speaker 13: we're talking soccer. They're buying the naming rights to the
Speaker 13: twenty five thousand and seat soccer stadium right near Newark.
Speaker 13: It's a home of the Red Bulls. Yes, great, great stadium.
Speaker 13: I've been there for a game. Thirteen year deal reportedly
Speaker 13: worth more than one hundred million dollars. But the only
Speaker 13: thing is that it has little to do actually with
Speaker 13: Sports Illustrated because if you know, they're they're owned Bio
Speaker 13: Authentic Brands Group, which kind of buys up companies that
Speaker 13: are under pressure, sells the licenses for the use of
Speaker 13: their names.
Speaker 4: Do they still the magazine?
Speaker 13: They do still make the magazine. They're just not making
Speaker 13: as much money, I guess, But that's why they did
Speaker 13: agreed to go with authentic brands because now this company
Speaker 13: gives them money because it helps sell off to the
Speaker 13: use of their name.
Speaker 9: So similar thing.
Speaker 8: But Playboy, by the way, just let they did that too, Okay,
Speaker 8: having covered that stock for many years, but it's also.
Speaker 13: Owned Sports Illustrate Tickets, and I just bring that up
Speaker 13: because now that ticket company is going to be the
Speaker 13: exclusive ticketing partner of the team. So that's another speed
Speaker 13: What do you got, Okay, nice one. We have the
Speaker 13: price of groceries sky high. So what's the solution. Well,
Speaker 13: there's someone running for New York City mayor. His name
Speaker 13: is Zora Mamdani. He says that we should think of
Speaker 13: doing uh a city owned grocery stores. That's what it is.
Speaker 13: He says it's gonna help bring down the cost of
Speaker 13: groceries because they're gonna use city lander buildings, buy food wholesale,
Speaker 13: and would also be exempt from property taxes.
Speaker 4: On those margins.
Speaker 9: I want the city involved in anything.
Speaker 4: I don't. I don't get how they do it.
Speaker 13: It's Kansas, Wisconsin are doing it. They're trying it out. Yes, Chicago, Atlanta,
Speaker 13: they're moving forward with similar proposals, So it's going to
Speaker 13: be brought up today. This all right, this Linmaker, Yeah.
Speaker 4: The newspaper lines. Thank you so much.
Speaker 2: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
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