Speaker 1: Thank you so much for joining us on this good
Speaker 1: Friday edition of Bloomberg Daybreak. I'm Nathan Hagar coming up
Speaker 1: this hour with so much division on Capitol Hill, is
Speaker 1: the US in real jeopardy of defaulting on its debt?
Speaker 1: We'll look at the debate awaiting lawmakers when they get
Speaker 1: back from the holiday with Bloomberg Government's Emily Wilkins. Plus,
Speaker 1: we'll take you to part of the country that has
Speaker 1: traditionally been a pretty good indicator of the economy. We'll
Speaker 1: tell you why it's now flashing signs of a recession. Plus,
Speaker 1: we'll take it to Geneva, where one of the year's
Speaker 1: biggest events in the luxury watch industry just wrapped up. First, though,
Speaker 1: it was a shock to commodity markets to begin the
Speaker 1: week at surprise production cut from OPEC Plus for more
Speaker 1: on the short and long term implications of this move
Speaker 1: in the oil space, We're pleased to welcome Stephen Schork,
Speaker 1: who of course covers energy markets as president of the
Speaker 1: Short Group. Stephen, thanks for being with us. How big
Speaker 1: a surprise was this for you to hear OPEC plus
Speaker 1: come out and say we're going to take more than
Speaker 1: a million barrels off the market every day. It was
Speaker 1: a surprise, but but not shocking surprise. Actually, I thought
Speaker 1: we would have more hawkish rhetoric out of OPEC in
Speaker 1: their prior meeting, so this did come out of the blows.
Speaker 1: So I was surprised that we didn't get a hawkish
Speaker 1: rhetoric the last time and the last go around, and
Speaker 1: I'm surprised that it happened now, but not shocked. So
Speaker 1: the real shocking thing is not the cut itself, but
Speaker 1: what the cut tells us. And first and foremost, it
Speaker 1: isn't a political move. Yeah, there's the old Saint on
Speaker 1: Wall Street that bulls and bears make money, hogs get slaughtered.
Speaker 1: And OPEC is very aware there's a limit to how
Speaker 1: high they want prices to go. And what they're telling
Speaker 1: us now by this production cut is they're very skeptical
Speaker 1: about the economy, the global economy, and therefore they want
Speaker 1: to get ahead of any sort of demand destruction. So
Speaker 1: they've decided to pull that supply off of the market.
Speaker 1: So it's more of a kind of a canary in
Speaker 1: a coal mine, and for all of us, that canary
Speaker 1: is sucking wind right now, telling us that there are
Speaker 1: some economic headwinds in the nearby future. Is that a
Speaker 1: concern that you share with the oil ministers at OPEC,
Speaker 1: Plus that we could see demand concerns for energy in
Speaker 1: the months to come here, Well, it really seems that
Speaker 1: the OPEC and kind of the all the language we
Speaker 1: were getting out of China is China was full steam
Speaker 1: ahead with regard to summer demand. And so I didn't
Speaker 1: quite buy into that. I don't buy into anything that
Speaker 1: comes out of official reports coming out of China. They
Speaker 1: did raise their quotas they did, they did signal some
Speaker 1: some demand uptick and they have been buying for an
Speaker 1: oil they have in buying US crude oil. But that said,
Speaker 1: I cannot argue with this when we look at sort
Speaker 1: of the the headlines that are coming out, the I
Speaker 1: S numbers, n numbers, the industrial production numbers, record credit
Speaker 1: card debt, uh, you know, so forth, there are a
Speaker 1: lot of indications out there that the economy has a
Speaker 1: big up uphill battle and the thing really shaving kind
Speaker 1: of the the you know, the bulls, you know, the
Speaker 1: on the economic front was strong, you know, strong job numbers,
Speaker 1: which are battle you know, to me, they are baffling.
Speaker 1: But look, we just got the job, job opening, and
Speaker 1: labor turnover surveyed. The Jolts report out of the BLS
Speaker 1: the other day and it disappointed. It was a downer
Speaker 1: um and then the ADPEP report came out today with
Speaker 1: jobs again another downer. So if that if we get
Speaker 1: confirmation you know a month, oh you know, this month,
Speaker 1: next month, so forth in the in the BLS employment numbers,
Speaker 1: then yeah, we we Yeah, I'm certainly buying into the
Speaker 1: theory that we got trouble ahead. Okay, so we have
Speaker 1: a lot of these economic potential head wins moving forward. Here.
Speaker 1: What's the potential that if we do start to see
Speaker 1: commodity prices spike with this level of production coming off
Speaker 1: the market, adding even further to those macroeconomic pressure Stephen, Oh,
Speaker 1: if we see the spike, and you know, keep in
Speaker 1: mind we had a significant sell off over the prior
Speaker 1: two weeks related to first with Signature Banking then SVB.
Speaker 1: So there are those issues and the banking system, as
Speaker 1: Jamie Diamonds just said, there are troubles there now. A
Speaker 1: banking crisis has been an antecede into two of the
Speaker 1: prior three recessions. Of course, what we all can remember
Speaker 1: what happened during the mortgage backed securities in Great Recession,
Speaker 1: but we also had the recession that was brought on
Speaker 1: by the SNL crisis. So right now we have one
Speaker 1: of the fuses lit for an implosion in the economy.
Speaker 1: What also, going back to two thousand and eight, what
Speaker 1: we saw was oil prices one hundred and fifty dollars,
Speaker 1: massive increases and energy costs, which of course hampered US
Speaker 1: spending this time around. Yes, we did get to one
Speaker 1: hundred and fifty dollars last year. We didn't stay there,
Speaker 1: but we've stayed high on the energy front and also
Speaker 1: on the entire inflation front. So consumers, I think it's
Speaker 1: thirty three straight months that they're purchasing power has decreased.
Speaker 1: So for thirty three straight months, we're getting poorer each month.
Speaker 1: I just intuitively, logically, I have to think that is
Speaker 1: going to have a carry on. Now, if this spike
Speaker 1: goes any higher than what we've already seen, than yeah,
Speaker 1: the odds are for a significant downturn. But what I
Speaker 1: want to point out now is Sunday night, the first
Speaker 1: opportunity to trade the OPEC number, the market surged higher. Okay,
Speaker 1: hasn't gone any higher since then. So all we are
Speaker 1: right now is right back to where we wore prior
Speaker 1: to the of the S ANDDB a catastrophe. So kind
Speaker 1: of like the market is kind of like pumping the
Speaker 1: brakes here. The bulls are not getting any carry over momentum.
Speaker 1: Now if you're bullish, if you bought Sunday night, you're
Speaker 1: out of the money right now. And you know, with
Speaker 1: us allegedly bullish, this headline was you're not getting any
Speaker 1: followed through and that is a very clear telltale that
Speaker 1: the market is skeptical. I don't think skeptical of the
Speaker 1: OPEC decision that they'll carry through. I think they are
Speaker 1: skeptical of what the OPEC decision is telling them about
Speaker 1: the economy. Speaking with Stephen Short, oil analyst and president
Speaker 1: of the Short Group here on Bloomberg Day Break, So
Speaker 1: we talked about the short term implications here. Stephen, what's
Speaker 1: your longer term view on what this could mean for
Speaker 1: oil prices? Are you changing your target for where barrel
Speaker 1: accrude could go from here? Well, I run probabilistic models
Speaker 1: and ate Nathan that that kind of gives you a
Speaker 1: range and likelihood based on uncertain giving odds of prices happening,
Speaker 1: and we've been in the upper range since the beginning
Speaker 1: of the year. What I've shared with with with with
Speaker 1: clients and analysis for clients, and that was oil bottoming
Speaker 1: in the seventy dollars area, that is the Brent crudal
Speaker 1: market more of a global market, which means that w
Speaker 1: TI would would would bottom some near somewhere around there,
Speaker 1: you know, high sixties. And that's exactly where where we've bottomed. UH.
Speaker 1: And the catalyst was that for was for that major headline,
Speaker 1: the SVB. But we we've ricocheted back. We're back around
Speaker 1: hovering eighty dollars a barrel. So we're right in the
Speaker 1: middle of where I expected to meet and we'll call
Speaker 1: it the sixty eight percent. That that one standard deviation
Speaker 1: of where my outcomes were coming out. They were coming
Speaker 1: out between seventy ninety dollars. Now, when we move further
Speaker 1: out on the tail and we factor in a potential
Speaker 1: UH demand destruction going forth for at least this month,
Speaker 1: UH in the what we can get down into the
Speaker 1: low sixties and in the first quarter oil below fifty
Speaker 1: dollars in a severe recession ALLAH akin to what we
Speaker 1: saw in O eight oh nine that we're talking about
Speaker 1: oil back down below fifty dollars barrel. Do you see
Speaker 1: a move like this having an impact on diversification of
Speaker 1: the energy mix. Do renewables get a lift if we
Speaker 1: start to see more pressure on fossil fuel prices? No,
Speaker 1: because renewables have been one of the catalysts for the
Speaker 1: rise in fossil fuel. I mean nothing, nothing brought coal
Speaker 1: back or wood burning back in Europe this winter than
Speaker 1: what we've seen, the manipulation that we saw with carbon
Speaker 1: credits and renewable prices. So, for crying out loud, Germany
Speaker 1: was cutting down ancient forests for fuel this So no,
Speaker 1: I don't I think what's going to happen is not diversification.
Speaker 1: We need national security. And the problem with renewables, which
Speaker 1: I'm a big fan of, Nathan, you and I were
Speaker 1: just having an off phone talk here. We both have
Speaker 1: versions of you. You have all electric, I have hybrid electric.
Speaker 1: I'm a big fan of it. But it can't do
Speaker 1: it alone, nowhere near alone. So the renewables are part
Speaker 1: of the answer. Fossil fuels hydrocarbons are more of the
Speaker 1: complete answer. And I'm not even go to nukes because
Speaker 1: that's the hundred percent answer. We're not there yet at
Speaker 1: this point. So no, given I think renewables are a
Speaker 1: big driver with the lack of money so forth going
Speaker 1: into hydrocarbon infrastructure longer term out, they're the catalyst, that's
Speaker 1: the catalyst for high prices. So as long as we continue,
Speaker 1: we in the West, continue to pursue a zero sum
Speaker 1: game where we don't want any investments in hydrocarbons and
Speaker 1: we want it in a source that is not reliable.
Speaker 1: Wind solar not reliable, and they're terrible. They're just as
Speaker 1: bad for the environment, Believe it or not, when we
Speaker 1: talk about non recyclable plastics in windmills, we talked about batteries,
Speaker 1: we're talking about landfill fill ups, We're talking about degradation
Speaker 1: of the environment. We're digging up these rare earths, and
Speaker 1: we're digging up rare earths in countries that are not
Speaker 1: exact be friendly to the United States. But yet we
Speaker 1: want all of our investment to go into this one commodity,
Speaker 1: and it's it's it's a terrible risk we are taking.
Speaker 1: So to reiterate my answer, no, you'll see the political moves.
Speaker 1: But with the crash of SVB and the lack of
Speaker 1: return on HT that we are seeing both from an
Speaker 1: economic and a social cost. I would think this would
Speaker 1: be the catalyst to diversify more towards and bring hydrocarbons
Speaker 1: that conversation back into the mix. Now we're going to
Speaker 1: be keeping an eye on the crude market very closely
Speaker 1: as we had even closer to summer driving season. Thanks
Speaker 1: as always, Stephen, good having you with us. Thank you, Nathan.
Speaker 1: That's Stephen Short, the president of the Short Group. And
Speaker 1: up next, time is on our side. One of the
Speaker 1: world's biggest events in the luxury watch its has wrapped up.
Speaker 1: We'll get the highlights from Geneva. Next. I'm Nathan Tiger
Speaker 1: and this is welcome back to the special edition of
Speaker 1: Bloomberg Daybreak. I'm Nathan Hagar. US markets are closed on
Speaker 1: this good Friday, and speaking of time and the future,
Speaker 1: let's talk about time and how we keep track of
Speaker 1: it on our wrists if you can afford it. We
Speaker 1: just wrapped up one of the biggest events of the
Speaker 1: year for the luxury watch business. It happened in Geneva,
Speaker 1: and Bloomberg's Andy Hoffman was there at this event and
Speaker 1: joins us for some of the TikTok I had to
Speaker 1: say it, Andy, thanks for being here. What better place
Speaker 1: to join us from then, the home of luxury Swiss
Speaker 1: time pieces. Tell us more about this event. For those
Speaker 1: who are not in the know, it's called Watches and Wonders, right,
Speaker 1: indeed it is. It's called Watches and Wonders. It is,
Speaker 1: without a doubt, the biggest industry event for the watch
Speaker 1: industry each year. It's where most of the top brands,
Speaker 1: including Rolex protect for the old Richmon's own brands come
Speaker 1: together and they present their new watches, their new wares,
Speaker 1: to retailers, to their best collectors, and of course to
Speaker 1: the growing watch press who come. And it was five
Speaker 1: days this week for that private event, and then it
Speaker 1: was two days open to the public for the first time. Overall,
Speaker 1: I think there was something like forty thousand people who
Speaker 1: attended this event, which was twice as many as last year. Wow.
Speaker 1: So that gives you something of an idea of just
Speaker 1: how high demand continues to be in the luxury space
Speaker 1: even with all the macro head ones we continue to
Speaker 1: talk about here on Bloomberg. What are some of the
Speaker 1: highlights for you? What really stood out let's start with
Speaker 1: I mean Rolex. I mean, that's one of the biggest
Speaker 1: brands in Switzerland. What's new from them? Rolex is always
Speaker 1: sort of the focus in the center of attention. They
Speaker 1: are the biggest brand. Their sales or something like nine
Speaker 1: point three billion Swiss francs a year. They have about
Speaker 1: twenty nine percent market share. And so what role X
Speaker 1: does at watches and Wonders is it shows everybody it's
Speaker 1: new models each year, and they also would reveal which
Speaker 1: models they will be discontinuing, and this has a great
Speaker 1: impact obviously on demand and supply for certain models. And
Speaker 1: then what we often see is that, you know, models
Speaker 1: that are discontinued, their value on the secondary market will
Speaker 1: generally increase because we know there will be less supply
Speaker 1: going forward. So what are some of the most notable
Speaker 1: new designs that you saw from Rolex? It was quite interesting.
Speaker 1: I mean, it is an anniversary for the Rolex Daytona,
Speaker 1: their chronograph, and they did a new model which has
Speaker 1: an open case back so you can actually see the
Speaker 1: movement and this is a first for Rolex, They've never
Speaker 1: done this before. They also did a really wild surprise
Speaker 1: version of their day date watch that had a sort
Speaker 1: of a puzzle um pattern on the dial, and then
Speaker 1: instead of days or um there there are sort of
Speaker 1: words like love and emotions and things like that, and
Speaker 1: there's emojis in the in where the date wheel normally
Speaker 1: is so fly one different emojiss. Those quite bold and
Speaker 1: strange for Rolex to do, which is generally a very
Speaker 1: safe and conservative brand. Yeah, I mean that really sort
Speaker 1: of flies in the face of what you think about
Speaker 1: when you think of a Rolex. Did you get a
Speaker 1: chance to talk to any of the officials from Rolex
Speaker 1: about what their strategy might be with some of these
Speaker 1: left field ideas. It's a good question. I mean, we
Speaker 1: get we do get to speak to some of the
Speaker 1: people from Rolex, but their CEO is known for not
Speaker 1: giving interviews about rolex Um. But yeah, I mean, you
Speaker 1: know they're they're very careful and garden with what they say,
Speaker 1: but they you know, for those who get the invite,
Speaker 1: you do get the chance to come and see the
Speaker 1: new models in the flash, So you get to hold
Speaker 1: these things in your hand and put them on your
Speaker 1: wrist and you know it's you and you can feel
Speaker 1: the weight as it were. So indeed, quite interesting. Yeah,
Speaker 1: anything to dream. We're speaking with Andy Hoffman of Bloomberg
Speaker 1: News talking about the Watches and Wonders event in Geneva,
Speaker 1: Switzerland for luxury time piece collectors. Now, I know you
Speaker 1: did get a chance to talk with the CEO of
Speaker 1: another well known Swiss brandon that would be Potech Philippe.
Speaker 1: What did he have to tell you? We were very fortunate.
Speaker 1: My colleague Chris Rosar and I sat down with Terry Stern,
Speaker 1: who is the chairman of Protect Philip. But it was
Speaker 1: really quite interesting. Mister Stern was very talkative and he
Speaker 1: was in a very good mood, and he revealed to
Speaker 1: us that, you know, they have a prototype ready and
Speaker 1: they you know, they want to get all the final
Speaker 1: designs in place before they start producing. But they are
Speaker 1: going to introduce their first model line for the first
Speaker 1: time since nineteen ninety nine, so it's almost a quarter century.
Speaker 1: So this is a major deal for them. And what
Speaker 1: Potech is trying to do, and we don't know what
Speaker 1: the watch is or what the design is, but what
Speaker 1: they're trying to do is, you know, give their customers
Speaker 1: and the collectors who buy their time pieces, you know,
Speaker 1: something to look beyond the Nautilus and you know those
Speaker 1: great complicated watch that's watches that they're known for. They
Speaker 1: want to be more diversified, you know, like a portfolio
Speaker 1: or something, and they don't want to be just a
Speaker 1: one trick pony. We'll see if they're a new design
Speaker 1: includes any emojis as well, that'd be something. I know,
Speaker 1: you broke some news as well, Andy with another legendary
Speaker 1: Swiss brand, ottomarp Gay and an effort to fight watch theft.
Speaker 1: This is becoming something that's become quite a big concern
Speaker 1: for watchmakers. Yeah, I mean, you know, we've been writing
Speaker 1: stories over the past year. I mean, you know what's
Speaker 1: going on with watches the is you know that more
Speaker 1: of the world is paying attention to watches. People are,
Speaker 1: you know, showing off their watches on Instagram and social media.
Speaker 1: And at the same time, the problem of watch theft,
Speaker 1: people getting mugged for their watches has become a huge issue.
Speaker 1: You know, this in fact, could present a sort of
Speaker 1: existential crisis for the major luxury brands, most of which
Speaker 1: are here in Switzerland. If customers are afraid to wear
Speaker 1: their time pieces, you know, they just might stop buying them.
Speaker 1: And you know, nobody wants. Everybody buys a watch because
Speaker 1: they want to wear it. It's just an unprecedented thing
Speaker 1: that they're doing. They've got a new program where if
Speaker 1: you bought an Odemarpgay watch such as the Royal Oak,
Speaker 1: which is the watch that they're known for in twenty
Speaker 1: twenty two, which was the fiftieth anniversary of that watch,
Speaker 1: or in twenty twenty three this year, you can register
Speaker 1: that watch with Odomarp Gay and become part of an
Speaker 1: extended service program. And if that watch is stolen or
Speaker 1: lost or damaged. You know, the language they use is
Speaker 1: suddenly and unexpectedly i e. And a robbery, they will replace,
Speaker 1: refund or repair that watch. No one has ever done
Speaker 1: this before in the luxury watch industry. It's quite unprecedented.
Speaker 1: We don't know how it's going to play out. It's
Speaker 1: indeed quite a bold move. Yeah, interesting that there hasn't
Speaker 1: been something like that before, But lots to think about
Speaker 1: coming out of the Watches and Wonders event in Geneva.
Speaker 1: Thanks for this, Andy, great having you with us. That's
Speaker 1: Bloomberg's Andy Hoffman from Geneva, Switzerland and still ahead on
Speaker 1: Bloomberg day Break is a US debt default really a risk.
Speaker 1: We speak with Bloomberg government reporter Emily Wilkins. Next, I'm
Speaker 1: Nathan Hagar, and this is Bloomberg. Welcome back to the
Speaker 1: special Good Friday edition of burg Daybreak. I'm Nathan Hagar.
Speaker 1: It is a holiday not just on Wall Street, but
Speaker 1: on Capitol Hill. Lawmakers in factor in the middle of
Speaker 1: a two week spring recess, getting a break from a
Speaker 1: debate that is going to get even more pressing for
Speaker 1: the markets as we get closer to summer. It's over
Speaker 1: the debt ceiling, the risk of an unprecedented default on
Speaker 1: the nation's obligations. House Speaker Kevin McCarthy says he has
Speaker 1: a message for the White House. Mister President, I'm ready
Speaker 1: at any time, at any moment, I'll come tonight. It
Speaker 1: doesn't make it difficult to sit down and negotiate and
Speaker 1: find common ground to make America a little stronger and
Speaker 1: make sure we stop overspending. But the message from White
Speaker 1: House Press Secretary Karine Jean Pierre is President Biden's shown
Speaker 1: Republicans his budget. Now they should show him theirs what
Speaker 1: we have seen, our is and heard our excuses after
Speaker 1: excuses after excuses. But they should be transparent to the
Speaker 1: American people. They should lay out what is it that
Speaker 1: they want to cut Karne, Jean Pierre and Kevin McCarthy
Speaker 1: drawing their lines in this debate over the debt. Let's
Speaker 1: bring it. Bloomberg government reporter Emily Wilkins, who's going to
Speaker 1: be keeping a very close eye on these negotiations once
Speaker 1: lawmakers return to Washington from their home districts. Emily, I
Speaker 1: know you're paying attention to this, but how much attention
Speaker 1: should market participants be paying at this point? I think
Speaker 1: you do have to pay some attention because the agreements
Speaker 1: that they're being worked out right now. We all knew
Speaker 1: that this was going to take time, but at the
Speaker 1: same point, and we're getting kind of early indicators now
Speaker 1: about how easy or difficult this will be, and it's
Speaker 1: going to be quite difficult, as we're seeing now. You know,
Speaker 1: initially saw the meeting between Biden and McCarthy. They sat down,
Speaker 1: it was pretty pleasant, and then Biden kind of said, hey,
Speaker 1: I'm going to release my budget and he expected Republicans
Speaker 1: to do the same. For a minute, it did look
Speaker 1: like Republicans we're going to release a budget either this
Speaker 1: month in April or potentially even next month in May,
Speaker 1: that now seems a little bit less likely. Kevin McCarthy
Speaker 1: sent a letter to Biden with basically four bullets points
Speaker 1: of what Republicans want to see in a Deadlomit agreement,
Speaker 1: and they're basically now saying that they're not going to
Speaker 1: move forward anymore until Biden sits down with them again.
Speaker 1: So it feels like both the sides are a deadlock
Speaker 1: right now. Of course, there is some time to work
Speaker 1: it out, but remember Congress is not a body that
Speaker 1: moves particularly quickly. With any sort of agreement. You're going
Speaker 1: to have to have at least a couple different weeks
Speaker 1: for it to go through the Senate, go through the House,
Speaker 1: have the debate, go through the process. And so I
Speaker 1: don't think we're in a spot yet where we need
Speaker 1: to panic, but things aren't looking super great at the
Speaker 1: moment for getting this agreement done well. I wonder if
Speaker 1: they're feeling any more pressure to move forward on this
Speaker 1: when they get back. Given the turmoil we saw in
Speaker 1: the banking sector with the collapse of Silicon Valley Bank
Speaker 1: and Signature Bank, it's raised all these questions that you
Speaker 1: know when you have a financial system that is so
Speaker 1: reliant on treasuries. If there is a concern about those
Speaker 1: treasuries default, we could be in some trouble. Emily, Oh,
Speaker 1: we definitely could be in some trouble. And I feel
Speaker 1: like every lawmaker understands the states for not raising the
Speaker 1: debt limit. I don't think they're really particularly among leadership.
Speaker 1: A lot of Republicans who don't want to see the
Speaker 1: limit raised in some capacity. They just want to be
Speaker 1: able to say that they've also gotten cuts to do so.
Speaker 1: And so when we think a little bit about you know,
Speaker 1: what is coming next and how the banking crisis relates,
Speaker 1: I think it's also just important to point out Congress
Speaker 1: is certainly taking the banking crisis seriously. You have Financial
Speaker 1: Services Chairman Patrick McHenry, who I think is interested in
Speaker 1: holding more hearings, kind of looking into banking from a
Speaker 1: holistic perspective and seeing what needs to be done there.
Speaker 1: At the same point, a Congress is kind of done
Speaker 1: with like the crisis mode on the banks. They're feeling
Speaker 1: free to kind of look at other issues, look at
Speaker 1: other concerns. There's a sense now that because we haven't
Speaker 1: seen more bank shutter that the bleeding has at least
Speaker 1: been stopped, even if the wound hasn't been fully healed.
Speaker 1: And so I do question you know exactly how much
Speaker 1: pressure the banking is going to be putting on the
Speaker 1: debt limit, if only because I don't think Congress can
Speaker 1: use that as an emergency situation anymore, even though they
Speaker 1: still see it as an important situation that they'll continue
Speaker 1: to focus on. So what are you going to be
Speaker 1: looking for once lawmakers do get back. You mentioned that
Speaker 1: list of bullet points that Republicans put out before the break.
Speaker 1: Are you expecting that we're going to see any further
Speaker 1: details of what Republicans are looking for when it comes
Speaker 1: to cuts before they get into these negotiations with the
Speaker 1: White House. So I think two things that I'm looking for.
Speaker 1: Number one is that if the White House and House Republicans,
Speaker 1: if Kevin McCarthy does sit down with Joe Biden again
Speaker 1: at this point, that seems unlikely because the White House
Speaker 1: is saying that Republicans need to put out a budget
Speaker 1: before they sit down and talk. That just does not
Speaker 1: seem likely. So it'll be interesting to see kind of
Speaker 1: the balls in both courts. I'd say the White House
Speaker 1: could make a move that could change things, so could
Speaker 1: House Republicans. But look, Republicans acknowledge that if they are
Speaker 1: going to pass some debt limit deal through, they want
Speaker 1: to do it through what they call regular order, and
Speaker 1: that basically just means a longer process. It means they
Speaker 1: actually want to bring legislation to committees. The committees, they
Speaker 1: hold a hearing, they mark it up, they bring it
Speaker 1: to the Rules Committee, they prep it for the House floor,
Speaker 1: they bring it. This is all things that take time,
Speaker 1: and at this point, it doesn't really look like Republicans
Speaker 1: have a lot of this legislation written yet. And of course,
Speaker 1: the more details that Republicans begin to put down on paper,
Speaker 1: the more they risk isolating various factions of their conference
Speaker 1: into saying, hey, we're simply not going to support this,
Speaker 1: and that's where things are going to get really tricky
Speaker 1: and really messy. And we just haven't even gotten to
Speaker 1: that part yet. Because the four bullet points that Republicans
Speaker 1: have put out, I mean, they're pretty vague all things considered.
Speaker 1: I mean, it's things like clineback COVID nineteen funding, having
Speaker 1: stricter work requirements, passing bills that's basically all of them
Speaker 1: agree to but some of these things aren't going to
Speaker 1: be no goes with the White House. And to get
Speaker 1: more into details on that, you know, it's they only
Speaker 1: have a four vote majority, so it really does not
Speaker 1: take a lot of members to decide, hey, we don't
Speaker 1: want this to completely stall the process. Speaking with Bloomberg
Speaker 1: government reporter Emily Wilkins, who keeps say, a very close
Speaker 1: eye on what's happening with the debt ceiling negotiations that
Speaker 1: are going to be ramping up really heading into the summer. Here,
Speaker 1: I want to ask you, specifically, Emily, about that four
Speaker 1: seat majority in the Republican Party and the factions and
Speaker 1: the difficulty that how Speaker McCarthy has keeping his caucus
Speaker 1: in line. Are there certain lawmakers that you're looking at
Speaker 1: in particular who could potentially go one way or the
Speaker 1: other to try to come to some kind of majority
Speaker 1: that can get around the idea of doing something either
Speaker 1: about spending cuts or raising the dead ceiling. So I
Speaker 1: think in the case like this, you always kind of
Speaker 1: have to look at what the extremes are on either side.
Speaker 1: I mean, certainly on one end you have hardliners, conservative hardliners.
Speaker 1: It looks like Lauren Bob and Matt Gates, who have
Speaker 1: shown before that they are willing to buck Kevin McCarthy
Speaker 1: until he gives them what they want. And you know,
Speaker 1: it's the question of sort of exactly what do they want?
Speaker 1: What are they going to be willing to accept. We've
Speaker 1: seen the Conservative Freedom Caucus put out a couple of
Speaker 1: proposals at the same point. Ki McCarthy's majority rests on
Speaker 1: a number of lawmakers, Republican lawmakers who won in twenty
Speaker 1: twenty two in districts that Biden carried in twenty to
Speaker 1: twenty and so these are Republican lawmakers representing moderate districts.
Speaker 1: They need to make sure that they're continuing to get
Speaker 1: support from independence and Democrats there. And so there's really
Speaker 1: only so far that they can go with various cuts.
Speaker 1: And so those are kind of two groups that I'm
Speaker 1: keeping a very close eye on. But the fact is
Speaker 1: sort of anyone could potentially move or be a mover
Speaker 1: or shaker here for various reasons. Tony Gonzalez, a congressman
Speaker 1: from Texas who's been pretty vocal on bills dealing with
Speaker 1: border security and immigration. He tweeted out something the other
Speaker 1: week basically saying, look if if any bills come to
Speaker 1: the floor that he deems his anti immigrant, he's not
Speaker 1: going to support the debt limit. And usually if you
Speaker 1: had a bigger majority, it would be a kind of
Speaker 1: a thing where it's like, you don't have any leverage here.
Speaker 1: But all he needs is three more Republicans with a
Speaker 1: similar mindset to join him, and that again is going
Speaker 1: to pose another hurdle for McCarthy to have to navigate
Speaker 1: around as he tries to figure out what the denlop
Speaker 1: it's going to be. So this is definitely a thing
Speaker 1: where if you've got you know, if you're a lawmaker
Speaker 1: and you've got three other lawmakers and you all desperately
Speaker 1: care about an issue, when you want to have leverage
Speaker 1: on it, and this is a point where you can
Speaker 1: really use that leverage. Of course, it comes at the
Speaker 1: risk of potentially defaulting on our national debt. So when
Speaker 1: do you expect this to really start to heat up, Emily,
Speaker 1: do we have a really clear idea of what that
Speaker 1: X state is and when we could potentially face that
Speaker 1: risk of debt default. So initially we had all talked
Speaker 1: about the X state as being June sets, and I
Speaker 1: think that date is still in many lawmakers minds, but
Speaker 1: it is not the It is kind of considered on
Speaker 1: the early side of things. It's now looking like the
Speaker 1: X date could occur a little bit into the summer,
Speaker 1: potentially even into the fall. At this point, I still
Speaker 1: think we don't quite know. Me Jenny Yellen is updating
Speaker 1: Congress as much as she can on it. But I
Speaker 1: think there's a sense that, you know, as far as
Speaker 1: things getting really intense, it's when you're going to hit
Speaker 1: June and you kind of hit that first projected deadline.
Speaker 1: Is that going to be the deadline? Maybe not, but
Speaker 1: it's going to sort of be when when people realize that, Okay,
Speaker 1: now is the time that we need to move. Yeah,
Speaker 1: so we have several more weeks, if not months, to
Speaker 1: keep talking about this. Thank you as always, Bloomberg Government's
Speaker 1: Emily Wilkins. And up next on this Good Friday edition
Speaker 1: of Bloomberg Daybreak, recession signs from one of the key
Speaker 1: areas of the US economy. I'm Nathan Hagar, and this
Speaker 1: is welcome back to this special edition of Bloomberg Daybreak.
Speaker 1: I'm Nathan Hagar. US markets are closed for this Good
Speaker 1: Friday holiday. We now want to turn to the economy
Speaker 1: and a key area of the country that has traditionally
Speaker 1: been a pretty good indicator of the nation's economic health,
Speaker 1: and right now it is flashing warning signs for recession.
Speaker 1: Bloomberg's Augusta Suriva's been covering this and is here with
Speaker 1: us now for more on this story. Thanks for being here, Augusta. So,
Speaker 1: where is this geographical economic indicator in the US? Thank
Speaker 1: you for having me. So, this is an area called
Speaker 1: the Inland Empire, and it's located next to La and
Speaker 1: it's called an empire because it's so big. Gets started
Speaker 1: as a farming location and then because of its because
Speaker 1: of its location so close to the largest port complex
Speaker 1: in the country, which is located in LA, it gave prominence.
Speaker 1: They started building warehouse after warehouse until we became North
Speaker 1: America's warehousing mecca in a way. So it started as
Speaker 1: a farming mecca, now a warehousing mecca. Obviously, we've come
Speaker 1: out of penn Emmic where we've had supply chain issues
Speaker 1: and is that what we're seeing here in the Inland
Speaker 1: Empire that it's starting to come into focus where goods
Speaker 1: get stored in this country exactly in the way this
Speaker 1: region was storried of a post her child of the pandemic,
Speaker 1: Most of the goods we were buying in places like
Speaker 1: Amazon and Target passed by this region before they were
Speaker 1: shipped out to the rest of the country. So there
Speaker 1: are more than four thousand warehouses in the region, so
Speaker 1: pretty much everything we buy online is stored there at
Speaker 1: some point nowadays. And you mentioned it's close to Los Angeles,
Speaker 1: which is of course the Port of Los Angeles and
Speaker 1: the Port of Long Beach. What are the changes that
Speaker 1: we're seeing between the end of the pandemic, when we
Speaker 1: sort of had this glut of supply chain issues to now.
Speaker 1: So one of the things that we're seeing now economically
Speaker 1: is the slowdown when it comes to good spanning rain.
Speaker 1: It could be both because people are starting to tight
Speaker 1: under belts, but also because people are going back to
Speaker 1: spanning on services. We were always a service economy, and
Speaker 1: now people are spending more on experiences and less and
Speaker 1: are spending lost time buying things online. Right, So for
Speaker 1: a region where now one and three people now work
Speaker 1: in the broad transportation sector, that's a warning sign, right,
Speaker 1: what's going to happen to this place when people start
Speaker 1: buying less? What does this mean, for the economic health
Speaker 1: of that part of the country. How does it compare
Speaker 1: to the rest of the country when it comes to
Speaker 1: the quality of jobs and wages that people get in
Speaker 1: that part of the country. So this is a region
Speaker 1: that is used to boom and bus cycles. When we
Speaker 1: had the Great Recession, it was hardly hit. The unemployment
Speaker 1: rate spiked to above fourteen percent, it's a rampant foreclosures.
Speaker 1: So it's a region that's used to that. But right
Speaker 1: now it's a region that has become overreliant on a
Speaker 1: single industry, and that's why people are concerned. And not
Speaker 1: only that, but as you mentioned wages, it's a region
Speaker 1: where the warehousing workers specifically make on average eight dollars
Speaker 1: less than the national average for all occupations. So some
Speaker 1: people say that these jobs, even though they're booming and
Speaker 1: they do provide jobs for workers in the region, they're
Speaker 1: not sustainable in the long run. So are there efforts
Speaker 1: underway to try to diversify the economy and the inland
Speaker 1: empire away from warehousing or is it even possible to
Speaker 1: do that. I would say right now the region is
Speaker 1: very reliant on a single industry, But of course you
Speaker 1: have efforts to not only diversify to other industries, so
Speaker 1: healthcare for example, as an industry that's a major employer
Speaker 1: to They're trying to bring more more jobs in the
Speaker 1: scientific sector for example, and not only that, but also
Speaker 1: efforts to improve education levels in the region, which tend
Speaker 1: to be lower than another parts of the country. But
Speaker 1: right now it seems like the focus when it comes
Speaker 1: to governments is to invest more in the warehousing sector
Speaker 1: in an effort to make this a more sustainable industry,
Speaker 1: not necessarily straight away from it. An interesting insight and
Speaker 1: good to have you on with us to talk more
Speaker 1: about it. Thanks for this, Augusta, really good at having
Speaker 1: you with us. Thank you for having me Bloomberg's Augusta,
Speaker 1: Sorry Eva joining us on the special edition of Bloomberg Daybreak,
Speaker 1: and our thanks as well to Bloomberg Government reporter Emily Wilkins,
Speaker 1: Bloomberg's Andy Hoffman with us from Geneva, Switzerland along with
Speaker 1: oil industry analyst Stephen Shark. We want to thank you
Speaker 1: for joining us as well on this good Friday. I'm
Speaker 1: Nathan Hagert. Stay with us. Today's top stories and global
Speaker 1: business news headlines are coming up right now.