1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify, or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,920 Speaker 2: Terminal and the Bloomberg Business App. Chris Harvey of Wells Fargo, writing, 10 00:00:37,960 --> 00:00:42,239 Speaker 2: this growing crisis of confidence brewing. Stop market vigilantes will 11 00:00:42,280 --> 00:00:44,920 Speaker 2: not be that patient or ignored. It probably needs to 12 00:00:44,960 --> 00:00:48,279 Speaker 2: get worse before it gets better. Chris joins us now 13 00:00:48,320 --> 00:00:49,959 Speaker 2: for more. Chris, good morning, Good to see you. 14 00:00:50,000 --> 00:00:50,720 Speaker 3: Good to see you too. 15 00:00:50,920 --> 00:00:53,400 Speaker 2: This is a really difficult one, So let's take a beat. 16 00:00:53,600 --> 00:00:55,640 Speaker 2: Typically we sit here and think about the kind of 17 00:00:55,680 --> 00:00:58,480 Speaker 2: threshold that it would take for a policymaker to step 18 00:00:58,520 --> 00:01:00,960 Speaker 2: in and act as the circuit breaker. Time the policy 19 00:01:01,000 --> 00:01:03,920 Speaker 2: maker is the source of the risk, maybe not the solution. 20 00:01:04,319 --> 00:01:06,080 Speaker 4: How different is this as a moment for you and 21 00:01:06,120 --> 00:01:06,600 Speaker 4: a team. 22 00:01:07,360 --> 00:01:08,200 Speaker 3: It's very different. 23 00:01:08,440 --> 00:01:10,920 Speaker 5: And the issue is, and we go back to green 24 00:01:10,959 --> 00:01:13,720 Speaker 5: Span before the ER four tightening cycle, they said, we 25 00:01:13,720 --> 00:01:15,880 Speaker 5: can raise rates, right, but what we need to do 26 00:01:15,959 --> 00:01:18,080 Speaker 5: is we need to communicate that to you. We need 27 00:01:18,120 --> 00:01:19,800 Speaker 5: to tell you how we're going to raise raids over 28 00:01:19,840 --> 00:01:21,800 Speaker 5: what time periods so you can plan. If you're going 29 00:01:21,800 --> 00:01:23,600 Speaker 5: to buy a house, you can speed up that house purchase, 30 00:01:23,640 --> 00:01:25,080 Speaker 5: going to buy a car, you can speed that up. 31 00:01:25,400 --> 00:01:28,319 Speaker 5: This administration is talking a lot, but they're not communicating 32 00:01:28,319 --> 00:01:31,399 Speaker 5: a lot. This weekend, we had one person saying tarish 33 00:01:31,440 --> 00:01:34,199 Speaker 5: and negotiable. We had somebody else saying they're non negotiable. 34 00:01:34,360 --> 00:01:37,160 Speaker 5: What are they? What's your goal? What you're trying to do? 35 00:01:37,400 --> 00:01:39,960 Speaker 5: What are we handicapping over what time period? You need 36 00:01:39,959 --> 00:01:42,640 Speaker 5: to communicate better. The other thing is the market is 37 00:01:42,680 --> 00:01:45,080 Speaker 5: sending a big signal. It's not a good idea to 38 00:01:45,120 --> 00:01:45,679 Speaker 5: ignore that. 39 00:01:45,880 --> 00:01:47,760 Speaker 2: China sending a big signal right now as well, So 40 00:01:47,760 --> 00:01:50,200 Speaker 2: i'd love your thoughts on that too. Big Taris's coming 41 00:01:50,240 --> 00:01:53,400 Speaker 2: from the US side overnight, China responding with eighty four percent. 42 00:01:53,720 --> 00:01:55,200 Speaker 2: I think at the moment for a lot of investors 43 00:01:55,240 --> 00:01:57,080 Speaker 2: they look at that head down and say, you know, 44 00:01:57,160 --> 00:01:59,320 Speaker 2: what given how little we sell to China, that's not 45 00:01:59,400 --> 00:02:00,920 Speaker 2: much for a big deal. But I think the bigger 46 00:02:01,000 --> 00:02:03,200 Speaker 2: raid across, the bigger raid through at the moment, that 47 00:02:03,240 --> 00:02:06,200 Speaker 2: makes it much much harder to get to the negotiating 48 00:02:06,280 --> 00:02:09,360 Speaker 2: table with this president who's pushed back against China threatening 49 00:02:09,360 --> 00:02:10,760 Speaker 2: to do exactly this. 50 00:02:11,440 --> 00:02:11,639 Speaker 3: Yeah. 51 00:02:11,760 --> 00:02:14,799 Speaker 5: So what people have realized is the weak spot for 52 00:02:14,840 --> 00:02:17,480 Speaker 5: the US, the capital markets, and the economy. If they 53 00:02:17,520 --> 00:02:20,440 Speaker 5: push back, right, we're going to lose and we are 54 00:02:20,440 --> 00:02:22,079 Speaker 5: losing some negotiating leverage. 55 00:02:22,160 --> 00:02:23,000 Speaker 3: What are we talking about. 56 00:02:23,000 --> 00:02:25,600 Speaker 5: We're talking about recession, We're talking about job losses. We're 57 00:02:25,600 --> 00:02:28,480 Speaker 5: talking about the negative wealth effect. We're talking inter recession. 58 00:02:28,720 --> 00:02:31,520 Speaker 5: The deficit goes wider, not tighter. And people know that, 59 00:02:31,800 --> 00:02:34,600 Speaker 5: so they're saying, Okay, fine, if we're going to do this, 60 00:02:34,880 --> 00:02:36,560 Speaker 5: we're all going to We're just going to pull everyone 61 00:02:36,639 --> 00:02:39,360 Speaker 5: down into the mark and what you're seeing is just 62 00:02:39,400 --> 00:02:40,200 Speaker 5: not great. 63 00:02:40,520 --> 00:02:43,119 Speaker 6: Well, I'm looking right now. China also added six more 64 00:02:43,160 --> 00:02:46,040 Speaker 6: firms from the US to the unreliable list at the 65 00:02:46,040 --> 00:02:48,280 Speaker 6: same time that we've seen incredible losses and the likes 66 00:02:48,280 --> 00:02:50,680 Speaker 6: of Apple, which seems to be very much in the 67 00:02:50,680 --> 00:02:53,560 Speaker 6: crosshairs of this. How much does this discourage you from 68 00:02:53,560 --> 00:02:57,280 Speaker 6: going to the multinational companies actually at a time when 69 00:02:57,280 --> 00:02:59,600 Speaker 6: they potentially could be the most exposed. 70 00:03:00,080 --> 00:03:02,080 Speaker 5: Yeah, a Lisa, what we need to do is we 71 00:03:02,120 --> 00:03:05,160 Speaker 5: need to figure out exactly what we're dealing with. And 72 00:03:05,240 --> 00:03:07,960 Speaker 5: because it's a moving target, that's why it's so hard 73 00:03:07,960 --> 00:03:09,959 Speaker 5: to That's why the markets are so fluid at this 74 00:03:10,000 --> 00:03:12,280 Speaker 5: point in time. And you're right, where are the safe havens. 75 00:03:12,280 --> 00:03:14,560 Speaker 5: The safe havens are at the front end of the curve. 76 00:03:14,880 --> 00:03:17,360 Speaker 5: Safe havens are in low vold, they're in defensives, but 77 00:03:17,440 --> 00:03:20,200 Speaker 5: even those are still that's a place where we've like, 78 00:03:20,480 --> 00:03:22,880 Speaker 5: but it's still have it showing some stress, right, So 79 00:03:22,919 --> 00:03:25,600 Speaker 5: it's very difficult to find a safe haven. It's very 80 00:03:25,600 --> 00:03:28,720 Speaker 5: difficult to really preserve your money or your assets at 81 00:03:28,760 --> 00:03:29,320 Speaker 5: this point in time. 82 00:03:29,440 --> 00:03:29,639 Speaker 3: Yeah. 83 00:03:29,639 --> 00:03:31,760 Speaker 6: The reason why is because ten year yields are up 84 00:03:31,760 --> 00:03:34,040 Speaker 6: through four forty you're looking at thirty year yields now 85 00:03:34,080 --> 00:03:35,960 Speaker 6: almost four point nine percent. 86 00:03:36,520 --> 00:03:38,040 Speaker 4: They've absolutely been surging. 87 00:03:38,560 --> 00:03:40,720 Speaker 6: What's going on, I mean, what are you doing with this? 88 00:03:41,480 --> 00:03:43,200 Speaker 3: So there's lots of talk. 89 00:03:43,760 --> 00:03:48,280 Speaker 5: One conversation is that out of Asia that they're selling duration, right, 90 00:03:48,360 --> 00:03:51,040 Speaker 5: So they're selling longer bonds and buying shorter bonds for 91 00:03:51,160 --> 00:03:53,960 Speaker 5: liquidity issues to send a message. There's other talk about 92 00:03:54,000 --> 00:03:54,680 Speaker 5: basis trades. 93 00:03:54,720 --> 00:03:56,560 Speaker 3: There's if you look at. 94 00:03:56,520 --> 00:03:59,720 Speaker 5: What's happening nominals the last time I looked, nominals are 95 00:03:59,760 --> 00:04:02,400 Speaker 5: going higher bud but it's being forced by reels. It's 96 00:04:02,400 --> 00:04:04,040 Speaker 5: not being forced by at least in the last couple 97 00:04:04,040 --> 00:04:07,240 Speaker 5: of days, by inflation expectation. That seems more like a 98 00:04:07,320 --> 00:04:11,000 Speaker 5: liquidity issue, people moving around positions, not so much fundamental 99 00:04:11,040 --> 00:04:14,200 Speaker 5: driven right The other thing is, obviously we've got issue 100 00:04:14,200 --> 00:04:17,599 Speaker 5: INCE coming and there's more and more fear. Even though 101 00:04:18,120 --> 00:04:21,600 Speaker 5: right now inflation expectations or break evens aren't moving, there's 102 00:04:21,600 --> 00:04:23,560 Speaker 5: fear that that will continue in the future. 103 00:04:23,680 --> 00:04:25,560 Speaker 2: Seeing some big moves right now, that's for sure. If 104 00:04:25,600 --> 00:04:27,840 Speaker 2: you are just joining us, welcome to the program. Eighty 105 00:04:27,960 --> 00:04:31,479 Speaker 2: four percent tariffs from China. China raising tariffs on US 106 00:04:31,520 --> 00:04:35,960 Speaker 2: goods to eighty four percent, and the spillover immedia equity 107 00:04:36,000 --> 00:04:38,359 Speaker 2: features down by one point six percent on the S 108 00:04:38,400 --> 00:04:40,599 Speaker 2: and P five hundred, the rustle down by two point 109 00:04:40,720 --> 00:04:44,480 Speaker 2: five the DAX is down by four full percentage points. 110 00:04:44,480 --> 00:04:47,679 Speaker 2: And in the commodity market you're seeing crude rollover as well. 111 00:04:47,839 --> 00:04:50,599 Speaker 2: On WCI and Don Brent were down by six percent. 112 00:04:50,680 --> 00:04:54,840 Speaker 2: Bran CREWD fifty eight ninety eight, WCI fifty five eighty five. 113 00:04:55,040 --> 00:04:57,520 Speaker 2: There will be some individuals in America making a lot 114 00:04:57,520 --> 00:04:59,480 Speaker 2: of noise today off the back of this headline. 115 00:04:59,520 --> 00:05:02,440 Speaker 4: I'm thinking the farmers in a few red states. 116 00:05:02,200 --> 00:05:05,080 Speaker 1: Absolutely, because remember Trump one point zero. The farmers were 117 00:05:05,080 --> 00:05:07,240 Speaker 1: the ones that got hit the worst because they didn't 118 00:05:07,279 --> 00:05:09,520 Speaker 1: have the export market of China to go to, and 119 00:05:09,520 --> 00:05:11,720 Speaker 1: then we the United States, had to bail them out. 120 00:05:11,720 --> 00:05:13,920 Speaker 1: But Jonathan, you started this conversation this morning where you're 121 00:05:13,920 --> 00:05:17,120 Speaker 1: look into policy makers for the answers for the solutions. 122 00:05:17,120 --> 00:05:20,120 Speaker 1: When I asked the President directly the pain threshold he 123 00:05:20,200 --> 00:05:22,640 Speaker 1: was willing to take on for the market, he said, 124 00:05:22,880 --> 00:05:25,719 Speaker 1: sometimes you have to take medicine to fix something. They 125 00:05:25,760 --> 00:05:28,800 Speaker 1: think the tariffs are the medicine. Well, what's going to 126 00:05:28,800 --> 00:05:31,160 Speaker 1: be the solution and the medicine to what is happening 127 00:05:31,240 --> 00:05:33,120 Speaker 1: right now? They'll fallout from these tariffs. 128 00:05:33,120 --> 00:05:35,760 Speaker 2: Some big moves elsewhere as well. Apple's had a difficult 129 00:05:35,839 --> 00:05:37,880 Speaker 2: run of things. That name is down by two percent 130 00:05:37,920 --> 00:05:39,920 Speaker 2: in the pre market at the moment. Apple is down 131 00:05:39,960 --> 00:05:43,280 Speaker 2: before today by more than twenty percent in just four sessions, 132 00:05:43,320 --> 00:05:46,200 Speaker 2: the worst run for that name going back to two thousand. 133 00:05:46,400 --> 00:05:49,240 Speaker 2: The year two thousand, the worst four day run in 134 00:05:49,360 --> 00:05:52,280 Speaker 2: twenty five years for one of the biggest companies on 135 00:05:52,320 --> 00:05:55,680 Speaker 2: the planet. Chris Harvey not to talk about single names exclusively, 136 00:05:55,720 --> 00:05:58,520 Speaker 2: but we can talk about MAC seven. They had a 137 00:05:58,520 --> 00:06:01,080 Speaker 2: difficult moment now and a bigger way than maybe we've 138 00:06:01,080 --> 00:06:02,600 Speaker 2: ever seen for those names. 139 00:06:02,800 --> 00:06:07,240 Speaker 5: So some yes, and obviously Apple is more of a 140 00:06:07,279 --> 00:06:09,680 Speaker 5: focus beca because there the tariffs and what they manufacture 141 00:06:10,279 --> 00:06:11,440 Speaker 5: in China. 142 00:06:11,680 --> 00:06:12,560 Speaker 3: Right the rest of. 143 00:06:12,560 --> 00:06:15,160 Speaker 5: The MAC seven, more of the communication names. They're in 144 00:06:15,240 --> 00:06:17,440 Speaker 5: a little bit better space, but it's not as if 145 00:06:17,440 --> 00:06:19,880 Speaker 5: anyone's in great space. It's not as if you can say, wow, 146 00:06:20,040 --> 00:06:22,560 Speaker 5: this is a perfect spot, this is fantastic for these guys. 147 00:06:22,800 --> 00:06:23,760 Speaker 3: Couldn't be any better. 148 00:06:24,000 --> 00:06:27,880 Speaker 5: It's just relative who's worse, who's better, and who's going 149 00:06:27,960 --> 00:06:30,440 Speaker 5: to get hurt a little bit more? Where's the defensive 150 00:06:30,440 --> 00:06:32,840 Speaker 5: this right now? What we're doing is everything is across 151 00:06:33,040 --> 00:06:35,520 Speaker 5: a risk spectrum, and which one has less risk? 152 00:06:35,640 --> 00:06:36,320 Speaker 3: That's all you're doing. 153 00:06:36,360 --> 00:06:38,760 Speaker 2: What's on your dashboard at the moment to establish where 154 00:06:38,760 --> 00:06:39,840 Speaker 2: a tradable bottom might be. 155 00:06:39,960 --> 00:06:41,240 Speaker 4: Is that impossible right now? 156 00:06:41,240 --> 00:06:41,440 Speaker 3: For you? 157 00:06:41,440 --> 00:06:41,800 Speaker 4: In the scene. 158 00:06:41,839 --> 00:06:43,680 Speaker 5: Oh no, so John, this is what we're looking at 159 00:06:43,720 --> 00:06:46,000 Speaker 5: because we see a setup. We don't see the bottom, 160 00:06:46,040 --> 00:06:46,840 Speaker 5: but we see a setup. 161 00:06:46,920 --> 00:06:47,080 Speaker 3: Right. 162 00:06:47,080 --> 00:06:49,320 Speaker 5: We want to see one Q numbers reset. We want 163 00:06:49,320 --> 00:06:52,440 Speaker 5: to see them cut. We want to see an inversion 164 00:06:52,920 --> 00:06:54,599 Speaker 5: in the front end of the curve between two years 165 00:06:54,600 --> 00:06:56,600 Speaker 5: and fed funds of one hundred bases points or more. 166 00:06:56,760 --> 00:06:57,560 Speaker 3: That tells us. 167 00:06:57,480 --> 00:07:00,359 Speaker 5: That the market's indicating we need to move fast, you 168 00:07:00,400 --> 00:07:03,840 Speaker 5: need to hurry up, and potential monetary policies coming. In 169 00:07:03,839 --> 00:07:06,919 Speaker 5: addition to that, we want to hear the conversation become 170 00:07:07,000 --> 00:07:09,680 Speaker 5: more productive. We want it either to shift from tariffs 171 00:07:09,840 --> 00:07:14,200 Speaker 5: to taxes or the acknowledgement that, oh, yes, everyone knows 172 00:07:14,480 --> 00:07:17,760 Speaker 5: there's going to be pain, but the issue is they 173 00:07:18,000 --> 00:07:20,440 Speaker 5: just don't know that the cure seems to be worse 174 00:07:20,480 --> 00:07:22,840 Speaker 5: than the disease right now, or that's what the market's saying. 175 00:07:23,120 --> 00:07:25,960 Speaker 5: You have to acknowledge that, hey, yes there's going to 176 00:07:25,960 --> 00:07:27,960 Speaker 5: be pain, but there's there's light at the end of 177 00:07:28,000 --> 00:07:30,400 Speaker 5: the tunnel. Here's what we're doing, here's our goals when 178 00:07:30,440 --> 00:07:31,160 Speaker 5: we get there. 179 00:07:31,320 --> 00:07:33,200 Speaker 3: This is what's going to happen in the meantime. 180 00:07:33,240 --> 00:07:35,920 Speaker 6: Delta with Drew, It's guidance for the full year. Walmart 181 00:07:35,920 --> 00:07:36,920 Speaker 6: reaffirmed us guidance. 182 00:07:37,240 --> 00:07:37,960 Speaker 4: What do you do with this? 183 00:07:39,600 --> 00:07:42,160 Speaker 5: So we actually had this conversation yesterday and I've been 184 00:07:42,200 --> 00:07:44,880 Speaker 5: having this conversation a lot. We expect numbers to come down. 185 00:07:45,480 --> 00:07:47,760 Speaker 5: It's going to range some people. We were talking to 186 00:07:47,760 --> 00:07:50,880 Speaker 5: our audio analysts and he would not be surprised if 187 00:07:51,160 --> 00:07:53,640 Speaker 5: there would be a suspension of guidance there. We were 188 00:07:53,640 --> 00:07:55,920 Speaker 5: talking to others saying, and maybe it's going to be 189 00:07:55,960 --> 00:07:58,720 Speaker 5: five percent, maybe ten percent. What we're going to hear 190 00:07:58,800 --> 00:08:01,240 Speaker 5: is the cease going to say, out of an abundance 191 00:08:01,280 --> 00:08:02,880 Speaker 5: of caution, here's what we're doing. 192 00:08:03,000 --> 00:08:04,480 Speaker 3: We're lowering the top end of guidance. 193 00:08:04,520 --> 00:08:07,120 Speaker 5: We're cutting five percent, we're cutting ten percent. Because of 194 00:08:07,160 --> 00:08:09,480 Speaker 5: the uncertainty, we have to remove guidance. So it's going 195 00:08:09,520 --> 00:08:10,679 Speaker 5: to be right across the board. 196 00:08:11,240 --> 00:08:11,840 Speaker 3: And you're right. 197 00:08:12,120 --> 00:08:14,440 Speaker 5: The example of Walmart DELT is a good one because 198 00:08:14,440 --> 00:08:15,800 Speaker 5: you have the two ends of the spectrum. 199 00:08:16,000 --> 00:08:18,120 Speaker 2: This is where we really start the conversation. Where does 200 00:08:18,120 --> 00:08:20,800 Speaker 2: the circuit break come from? Could it come from Capitol Hill? 201 00:08:21,200 --> 00:08:22,600 Speaker 3: It has to come from Capitol Hill. 202 00:08:22,720 --> 00:08:26,440 Speaker 5: You have to hear the administration acknowledge what's going on 203 00:08:26,600 --> 00:08:29,360 Speaker 5: and you have to have them acknowledge and communicate that 204 00:08:29,400 --> 00:08:32,400 Speaker 5: they see it, they understand it, and you have to 205 00:08:32,480 --> 00:08:35,400 Speaker 5: have them start to slow things down. This conversation about 206 00:08:35,600 --> 00:08:37,840 Speaker 5: a thirty day pause, a sixty day pauses, a ninety 207 00:08:37,880 --> 00:08:41,000 Speaker 5: day pause. Something has to happen. You cannot continually walk 208 00:08:41,040 --> 00:08:44,560 Speaker 5: in and have more tarfs and more stress in the system, 209 00:08:44,600 --> 00:08:47,160 Speaker 5: because the more you do that, the faster we go 210 00:08:47,200 --> 00:08:50,200 Speaker 5: to a recession, the faster job losses come, and the 211 00:08:50,200 --> 00:08:51,560 Speaker 5: faster this gets out of control. 212 00:08:51,640 --> 00:08:52,720 Speaker 2: But right now it's just rhetoric. 213 00:08:52,720 --> 00:08:54,880 Speaker 1: Do you actually see Congress pulling back the reins and 214 00:08:54,920 --> 00:08:57,560 Speaker 1: trying to take control, giving less authority to the executive 215 00:08:57,559 --> 00:09:00,000 Speaker 1: branch when it comes to trade policy, Yeah. 216 00:09:00,040 --> 00:09:03,280 Speaker 5: Emory, I think if it continues, you go down that route. 217 00:09:03,280 --> 00:09:06,000 Speaker 5: But that's a much slower route, right and the market's 218 00:09:06,000 --> 00:09:08,240 Speaker 5: going to move much quicker. And this is a question 219 00:09:08,280 --> 00:09:11,719 Speaker 5: of confidence. Does do the markets? Do business folks have 220 00:09:12,400 --> 00:09:16,200 Speaker 5: confidence in the plan? And what's the spill out. 221 00:09:16,080 --> 00:09:16,560 Speaker 3: From the plan? 222 00:09:16,800 --> 00:09:19,480 Speaker 5: And right now the markets are saying we're losing confidence, 223 00:09:19,480 --> 00:09:20,720 Speaker 5: and we're losing confidence quickly. 224 00:09:20,800 --> 00:09:22,439 Speaker 1: So when it comes a circuit breaker, you think it's 225 00:09:22,480 --> 00:09:24,880 Speaker 1: actually Republicans in Congress that could be the ones to 226 00:09:24,880 --> 00:09:26,440 Speaker 1: put a stop to this. You don't see maybe it 227 00:09:26,600 --> 00:09:29,080 Speaker 1: Shijing ping or Donald Trump himself blinking. 228 00:09:30,240 --> 00:09:34,199 Speaker 5: I don't see in the conversation. So a couple things there, 229 00:09:34,240 --> 00:09:38,840 Speaker 5: because that's a big question, right the situation between China 230 00:09:38,960 --> 00:09:42,359 Speaker 5: and US. US appears to think that China. 231 00:09:42,240 --> 00:09:43,480 Speaker 3: Is the existential threat. 232 00:09:43,920 --> 00:09:46,959 Speaker 5: We can have that continue, and likely that does continue. 233 00:09:47,040 --> 00:09:50,320 Speaker 5: But if we get positive news from the EU, from Japan, 234 00:09:50,400 --> 00:09:54,880 Speaker 5: from other places where there is actually progress, then things 235 00:09:54,920 --> 00:09:59,560 Speaker 5: can improve. China is towards the end of my concern 236 00:10:00,000 --> 00:10:02,360 Speaker 5: this point in time. Can we get our allies to 237 00:10:02,360 --> 00:10:05,160 Speaker 5: come on board, can we strike deals? Can we move forward? 238 00:10:05,240 --> 00:10:08,320 Speaker 5: Can we make progress? If we're showing progress, the markets 239 00:10:08,320 --> 00:10:11,280 Speaker 5: will react positively. If we do not show progress, the 240 00:10:11,320 --> 00:10:12,360 Speaker 5: markets are not going to react. 241 00:10:12,360 --> 00:10:14,959 Speaker 6: Possibly, there's a story in the Financial Times about how 242 00:10:15,080 --> 00:10:17,320 Speaker 6: US ports are getting really crowded, that a lot of 243 00:10:17,320 --> 00:10:20,520 Speaker 6: companies are delaying their car shipments and they're just holding 244 00:10:20,600 --> 00:10:22,720 Speaker 6: them at the ports hoping that maybe in a couple 245 00:10:22,800 --> 00:10:25,760 Speaker 6: days these tariffs will be removed. Maybe it'll take four days, 246 00:10:25,760 --> 00:10:28,120 Speaker 6: maybe it'll take five days, and they're about to reach 247 00:10:28,160 --> 00:10:31,240 Speaker 6: capacity at these ports. What will it take for both 248 00:10:31,280 --> 00:10:34,760 Speaker 6: companies and for the markets to realize this is real. 249 00:10:36,000 --> 00:10:39,400 Speaker 5: Listen, it's real, right, So the complexity of this you 250 00:10:39,520 --> 00:10:41,520 Speaker 5: cannot turn around in a couple of days, in a 251 00:10:41,520 --> 00:10:45,160 Speaker 5: couple of weeks, because you've basically tariff or taxed almost 252 00:10:45,160 --> 00:10:47,920 Speaker 5: every single country out there in order to unwind that. 253 00:10:48,600 --> 00:10:52,120 Speaker 3: It's no small feet. The other thing is governments do. 254 00:10:52,080 --> 00:10:55,079 Speaker 5: Not move quickly, right, and because of what we've done, 255 00:10:55,320 --> 00:10:56,839 Speaker 5: people want to protect themselves. 256 00:10:56,960 --> 00:10:57,880 Speaker 3: So they're going. 257 00:10:57,720 --> 00:11:01,000 Speaker 5: To have to talk to their lawyer, to their leaders, 258 00:11:01,040 --> 00:11:04,120 Speaker 5: to their parliament or whoever before they take some action. 259 00:11:04,400 --> 00:11:07,160 Speaker 5: We can have the conversation, but the actual action and 260 00:11:07,240 --> 00:11:09,840 Speaker 5: execution is going to take a lot, I think a 261 00:11:09,840 --> 00:11:10,640 Speaker 5: long period of time. 262 00:11:10,800 --> 00:11:13,120 Speaker 6: What are we seeing in markets? Is this just the 263 00:11:13,120 --> 00:11:15,400 Speaker 6: fear that this is going to have a suppression to 264 00:11:15,440 --> 00:11:18,160 Speaker 6: growth or are we getting actually a sense of what 265 00:11:18,320 --> 00:11:21,000 Speaker 6: markets are repricing as the new normal? 266 00:11:21,679 --> 00:11:26,000 Speaker 5: Yeah, the markets don't really know the end goal, right, 267 00:11:26,160 --> 00:11:28,720 Speaker 5: is it negotiation, is it revenue generation? 268 00:11:29,400 --> 00:11:31,640 Speaker 3: Or is it something much bigger? Right? 269 00:11:32,040 --> 00:11:34,520 Speaker 5: Do we want to change the way we do trade 270 00:11:34,520 --> 00:11:35,520 Speaker 5: throughout the world and for. 271 00:11:35,480 --> 00:11:38,080 Speaker 3: The rest of time. That's a big question. 272 00:11:38,480 --> 00:11:40,400 Speaker 5: So the markets are just trying to figure out what's 273 00:11:40,440 --> 00:11:42,320 Speaker 5: going on, and the markets are trying to send the 274 00:11:42,320 --> 00:11:45,760 Speaker 5: message we need better communication. We need to understand the goal. 275 00:11:46,000 --> 00:11:47,680 Speaker 5: When we get to the goal, what are you going 276 00:11:47,720 --> 00:11:49,600 Speaker 5: to do? And how are we going to do it? 277 00:11:50,080 --> 00:11:53,720 Speaker 2: To start that process, to engineer that supply side response, 278 00:11:53,720 --> 00:11:55,599 Speaker 2: you've got to believe that these are the rules of 279 00:11:55,640 --> 00:11:59,280 Speaker 2: the gang, and we're saying is this a negotiation or 280 00:11:59,800 --> 00:12:00,920 Speaker 2: the rules of the game. 281 00:12:01,040 --> 00:12:03,360 Speaker 6: I love how Chris puts it. The market is crying 282 00:12:03,400 --> 00:12:05,920 Speaker 6: to the White House, we want better communication. Can we 283 00:12:05,960 --> 00:12:08,319 Speaker 6: have a therapist come in here and try to clarify 284 00:12:08,360 --> 00:12:11,360 Speaker 6: what the end goal is? Are we meant to be together? 285 00:12:11,600 --> 00:12:13,000 Speaker 6: Are we meant to be apart? 286 00:12:13,160 --> 00:12:14,079 Speaker 4: Is this therapy again? 287 00:12:14,240 --> 00:12:16,000 Speaker 6: Well, it sounds like a lot of people are trying 288 00:12:16,040 --> 00:12:17,440 Speaker 6: to get into the psychology of the moment. 289 00:12:17,559 --> 00:12:18,880 Speaker 4: What do people say, cry harder? 290 00:12:21,000 --> 00:12:22,760 Speaker 6: I think that that's what we're doing on every single market. 291 00:12:22,760 --> 00:12:24,200 Speaker 2: I got to find some light humor in a moment 292 00:12:24,280 --> 00:12:26,319 Speaker 2: like this one. We're down again by one point four 293 00:12:26,360 --> 00:12:28,079 Speaker 2: percent on the S and P. A special thanks to 294 00:12:28,160 --> 00:12:41,439 Speaker 2: Chris Harvey of Wells Fargo Richard Bernstein. If Bernstein advises 295 00:12:41,480 --> 00:12:43,840 Speaker 2: writing the FED is caught between a rock and a 296 00:12:43,840 --> 00:12:47,640 Speaker 2: hard place. GENP forecasts are being revised downward, but inflation 297 00:12:47,760 --> 00:12:51,680 Speaker 2: expectations seem poised to accelerate. Richard joins us Now for more, Richard, 298 00:12:51,760 --> 00:12:53,599 Speaker 2: welcome to the program. You put it in your not 299 00:12:53,720 --> 00:12:56,319 Speaker 2: Everyone's got a plan until they get punched in the face. 300 00:12:56,360 --> 00:12:59,439 Speaker 2: That famous strategist on Wall Street, my Tyson, how strong 301 00:12:59,480 --> 00:13:00,440 Speaker 2: is that punched this morning? 302 00:13:01,640 --> 00:13:05,560 Speaker 7: I think the punch is a real it's not a jab, 303 00:13:05,640 --> 00:13:07,360 Speaker 7: it's a real roundhouse punch. 304 00:13:07,800 --> 00:13:08,600 Speaker 3: And I think. 305 00:13:09,880 --> 00:13:11,800 Speaker 7: John, look, you've been talking a lot about all the 306 00:13:11,800 --> 00:13:13,640 Speaker 7: different uncertainties and all the different things that. 307 00:13:13,640 --> 00:13:14,199 Speaker 3: Are going on. 308 00:13:14,600 --> 00:13:17,439 Speaker 7: That's fine, but I think one also has to realize 309 00:13:17,600 --> 00:13:22,520 Speaker 7: that we entered the year with investors historically confident, so 310 00:13:22,640 --> 00:13:27,199 Speaker 7: this has a magnified effect on investors' confidence that they're 311 00:13:27,240 --> 00:13:29,640 Speaker 7: being shaken. So that was my point about that everybody 312 00:13:29,679 --> 00:13:31,439 Speaker 7: has a plan until they get punched in the mouth. 313 00:13:32,360 --> 00:13:34,240 Speaker 7: Because everybody had a plan. They thought it was easy. 314 00:13:34,320 --> 00:13:36,040 Speaker 7: They thought this was like, oh, you know, it's just 315 00:13:36,040 --> 00:13:38,440 Speaker 7: buy an index funder, let's buy the mag seven. And 316 00:13:38,480 --> 00:13:41,240 Speaker 7: all of a sudden they're realizing that was the unusual 317 00:13:41,280 --> 00:13:44,360 Speaker 7: period and now we're going back to something that's much 318 00:13:44,400 --> 00:13:47,559 Speaker 7: more uncertain and they're getting punched in the mouth. 319 00:13:48,000 --> 00:13:51,880 Speaker 6: Richard Scott beston Treasure Secretary speaking with Henry our own 320 00:13:52,440 --> 00:13:55,440 Speaker 6: here and saying that this then is not necessarily a 321 00:13:55,480 --> 00:13:57,280 Speaker 6: MAGA problem, it's a mag seven problem. 322 00:13:57,480 --> 00:13:57,959 Speaker 8: Do agree? 323 00:13:58,000 --> 00:14:00,199 Speaker 6: Is that basically what you're seeing right now is the 324 00:14:00,200 --> 00:14:03,480 Speaker 6: wine of an overvaluation of a crowded trade at the 325 00:14:03,559 --> 00:14:05,520 Speaker 6: end of the last year beginning of this one. 326 00:14:06,080 --> 00:14:09,480 Speaker 7: Well, well, Lisa, I understand where he's going with that question, 327 00:14:09,600 --> 00:14:12,040 Speaker 7: But my response would be, why is the Russell two 328 00:14:12,080 --> 00:14:15,040 Speaker 7: thousand and performing so dramatically here? If it were just 329 00:14:15,080 --> 00:14:18,040 Speaker 7: a mag seven point? Why are the domestic the most 330 00:14:18,040 --> 00:14:24,240 Speaker 7: domestically focused companies in America? Smaller companies are underperforming? Right? 331 00:14:24,440 --> 00:14:24,680 Speaker 6: So? 332 00:14:25,280 --> 00:14:27,960 Speaker 7: How is this just a large cap MAGA effect? Is 333 00:14:28,000 --> 00:14:31,120 Speaker 7: clearly it's clearly not our mag seven effects. Sorry, it's 334 00:14:31,160 --> 00:14:34,240 Speaker 7: clearly not the you know, I think this is a 335 00:14:34,360 --> 00:14:37,160 Speaker 7: common The markets are are making a comment on the 336 00:14:37,200 --> 00:14:41,240 Speaker 7: broad economy in the United States, and and you know, 337 00:14:41,280 --> 00:14:43,440 Speaker 7: I think also the notion that this is an orderly 338 00:14:43,640 --> 00:14:45,240 Speaker 7: processed that's fine. 339 00:14:45,400 --> 00:14:46,600 Speaker 4: I would agree with that. 340 00:14:47,000 --> 00:14:50,400 Speaker 7: But the process is not positive one. The markets are 341 00:14:50,440 --> 00:14:53,120 Speaker 7: not giving a positive verdict on that. And that's kind 342 00:14:53,160 --> 00:14:55,880 Speaker 7: of what I think people are still sort of missing here. 343 00:14:56,520 --> 00:15:00,280 Speaker 6: Richard, how do you navigate a situation like this? The 344 00:15:00,360 --> 00:15:03,000 Speaker 6: rules of the world may be be called into question 345 00:15:03,080 --> 00:15:06,840 Speaker 6: over a longer period of time, and acid allocation potentially 346 00:15:07,240 --> 00:15:09,800 Speaker 6: could look very different if the trends that we're seeing 347 00:15:09,800 --> 00:15:13,480 Speaker 6: in markets today would hold. So how are you thinking 348 00:15:13,680 --> 00:15:16,920 Speaker 6: about not just short term investing, but the one year, 349 00:15:17,080 --> 00:15:18,720 Speaker 6: two year, five years ahead? 350 00:15:19,440 --> 00:15:22,480 Speaker 7: Right? So, so, Lisa, I think in the short term, 351 00:15:23,000 --> 00:15:25,520 Speaker 7: you know, you're using the word uncertainty. Everybody's using the 352 00:15:25,520 --> 00:15:28,120 Speaker 7: word uncertainty. I shouldn't personalize it like that. Everybody's using 353 00:15:28,120 --> 00:15:31,479 Speaker 7: the word uncertainty. So what that means is the scarcity 354 00:15:31,600 --> 00:15:36,160 Speaker 7: in the marketplace is certainty. That's what that's what will 355 00:15:36,160 --> 00:15:39,240 Speaker 7: command a premium through time is certainty. What does that mean? 356 00:15:40,040 --> 00:15:43,520 Speaker 7: That means quality, That means more certain cash flows, it 357 00:15:43,560 --> 00:15:47,000 Speaker 7: means dividends, it means near you know, really kind of 358 00:15:47,000 --> 00:15:51,080 Speaker 7: focusing on near term fundamentals as opposed to long term 359 00:15:51,120 --> 00:15:54,920 Speaker 7: growth stories. The second thing is, you know, what do 360 00:15:54,960 --> 00:15:58,040 Speaker 7: you do for three years, five years, ten years, two years, whatever? 361 00:15:58,680 --> 00:16:01,080 Speaker 7: And I think, look, the goal all of what's going on, 362 00:16:01,440 --> 00:16:05,840 Speaker 7: returning industrial processing back to the United States and manufacturing 363 00:16:05,840 --> 00:16:09,480 Speaker 7: back to the United States. I think that's a great goal. 364 00:16:09,640 --> 00:16:11,560 Speaker 7: In fact, we've been talking about it in my firm 365 00:16:11,600 --> 00:16:14,440 Speaker 7: at Richard Percy Advisors for ten years. I wrote an 366 00:16:14,440 --> 00:16:17,200 Speaker 7: op ed in twenty eleven in the Financial Times about 367 00:16:17,200 --> 00:16:20,320 Speaker 7: this topic and how important it was. This is the 368 00:16:20,440 --> 00:16:23,920 Speaker 7: goal is real. However, the method that they're choosing to 369 00:16:24,000 --> 00:16:26,960 Speaker 7: try and get to that goal, what personal opinion here 370 00:16:27,000 --> 00:16:31,320 Speaker 7: for a second, is incredibly ham handed. There are many 371 00:16:31,520 --> 00:16:33,880 Speaker 7: better ways to do with that. Do not place attacks 372 00:16:33,920 --> 00:16:34,800 Speaker 7: on the US consumer. 373 00:16:35,280 --> 00:16:35,640 Speaker 4: Richard. 374 00:16:35,640 --> 00:16:38,320 Speaker 2: We had from one ECP official earlier on this morning 375 00:16:38,360 --> 00:16:40,800 Speaker 2: that said, there's no reason for a rate cut right now. 376 00:16:40,800 --> 00:16:44,640 Speaker 2: I think you refer to fifty basis point cons as ridiculous. 377 00:16:44,920 --> 00:16:47,520 Speaker 2: Mary Daily, the San Francisco FED President, putting out a 378 00:16:47,520 --> 00:16:49,920 Speaker 2: post on LinkedIn saying we have the time and space 379 00:16:50,000 --> 00:16:53,320 Speaker 2: to deliberate our next moves. Lisa, that's what's different about 380 00:16:53,320 --> 00:16:57,280 Speaker 2: this moment. These officials are these central banks on Russian 381 00:16:57,280 --> 00:16:59,960 Speaker 2: to race in Russian to step in and provide support. 382 00:17:00,200 --> 00:17:02,640 Speaker 2: Maybe they would have done a number of years ago and. 383 00:17:02,760 --> 00:17:05,160 Speaker 6: For the correct reasons, which is this is a very 384 00:17:05,160 --> 00:17:07,399 Speaker 6: different type of crisis that is not of the credit 385 00:17:07,440 --> 00:17:11,080 Speaker 6: markets making. This is about policy uncertainty and the potential 386 00:17:11,080 --> 00:17:14,360 Speaker 6: stagflationary shock that comes along with inflation. If you take 387 00:17:14,400 --> 00:17:17,000 Speaker 6: a look at two year break even rates, they've actually 388 00:17:17,080 --> 00:17:19,240 Speaker 6: hit the highest level going back to two thousand and 389 00:17:19,240 --> 00:17:22,840 Speaker 6: two earlier this morning. It's shifting around incredibly volatile markets, 390 00:17:22,840 --> 00:17:25,200 Speaker 6: but the signal it is not so clear in terms 391 00:17:25,200 --> 00:17:26,959 Speaker 6: of how they should act, let alone. 392 00:17:27,040 --> 00:17:29,760 Speaker 2: If Richard, are you thinking about where pockets and leverage 393 00:17:29,840 --> 00:17:33,160 Speaker 2: might be? This has been a really unusual cycle hearing 394 00:17:33,160 --> 00:17:35,359 Speaker 2: the UNATO styce and worldwide because of the support that 395 00:17:35,440 --> 00:17:38,560 Speaker 2: was offered through the pandemic and through the recovery as well. 396 00:17:38,600 --> 00:17:40,560 Speaker 2: When you think about where pockets of leverage might be 397 00:17:40,800 --> 00:17:42,840 Speaker 2: this time around, how do you ask that question? 398 00:17:43,760 --> 00:17:46,479 Speaker 7: So, John, that's related to you and Lisa were just 399 00:17:46,520 --> 00:17:51,159 Speaker 7: hawking about. The FED was spoiled for many, many years 400 00:17:51,240 --> 00:17:56,119 Speaker 7: decade two to two, three decades by globalization. Globalization was 401 00:17:56,119 --> 00:18:00,879 Speaker 7: a massive disinflationary force on the US economy. Why because 402 00:18:00,880 --> 00:18:03,280 Speaker 7: we were just increasing competition, and we all know when 403 00:18:03,320 --> 00:18:06,359 Speaker 7: you increase competition, you put downward pressure on prices. So 404 00:18:06,480 --> 00:18:08,960 Speaker 7: the FED could play the hero and ride in on 405 00:18:09,000 --> 00:18:12,920 Speaker 7: the white horse and save the day. Now what we're 406 00:18:12,920 --> 00:18:17,760 Speaker 7: seeing is de globalization. That whole disinflationary process is now 407 00:18:17,840 --> 00:18:22,439 Speaker 7: being reversed, so it's now an inflationary process that ties 408 00:18:22,560 --> 00:18:26,720 Speaker 7: the fed's hands, and the FED can't play the hero anymore. 409 00:18:27,080 --> 00:18:28,879 Speaker 7: And I think that's one of the things that's happening. 410 00:18:28,920 --> 00:18:31,800 Speaker 7: So where is the pocket of leverage. I don't really know. 411 00:18:31,960 --> 00:18:34,199 Speaker 7: You know, one could argue that it's in the private 412 00:18:34,240 --> 00:18:37,880 Speaker 7: market somewhere, because I think that a lot of their 413 00:18:37,880 --> 00:18:42,120 Speaker 7: returns have been boosted by by leverage and the ability 414 00:18:42,160 --> 00:18:45,320 Speaker 7: to borrow cheaply to make acquisitions. Maybe that's where it is, 415 00:18:46,040 --> 00:18:48,359 Speaker 7: you know, it certainly you know not going to be 416 00:18:48,400 --> 00:18:51,159 Speaker 7: I would argue it's unlikely to be in the big banks. 417 00:18:51,200 --> 00:18:54,400 Speaker 7: The big banks, for all the all the their whining 418 00:18:54,440 --> 00:18:57,959 Speaker 7: about over regulation, big bank balance sheets are pretty strong. 419 00:18:58,080 --> 00:19:01,000 Speaker 7: It looks like the regulation has worked. But where is 420 00:19:01,040 --> 00:19:04,159 Speaker 7: that leverage. It's in things like private debt and all 421 00:19:04,200 --> 00:19:06,800 Speaker 7: of that. So the risk hasn't gone away, it's just moved, 422 00:19:06,840 --> 00:19:09,080 Speaker 7: I think from the public markets to the private markets. 423 00:19:09,280 --> 00:19:13,240 Speaker 7: It's an interesting monetary and fiscal question is that if 424 00:19:13,280 --> 00:19:15,720 Speaker 7: there is some kind of problem in the private markets 425 00:19:15,920 --> 00:19:19,040 Speaker 7: they're supposed to be private, will they come to the rescue. 426 00:19:19,160 --> 00:19:21,040 Speaker 7: I would think they'd be very hesitant to do that. 427 00:19:21,119 --> 00:19:23,440 Speaker 1: The Treasury Secretary this morning is saying really nothing to 428 00:19:23,480 --> 00:19:25,639 Speaker 1: see here. I feel like I'm going to sound like Lisa, 429 00:19:25,720 --> 00:19:28,240 Speaker 1: But how do you think this bond auction is going 430 00:19:28,240 --> 00:19:29,440 Speaker 1: to go today? For the ten year? 431 00:19:30,320 --> 00:19:33,879 Speaker 7: Well, a little outside my area of expertise, I just 432 00:19:34,000 --> 00:19:36,639 Speaker 7: don't think. I think what we are seeing is a 433 00:19:36,720 --> 00:19:41,280 Speaker 7: complete repricing of US assets with a higher risk premium. 434 00:19:41,680 --> 00:19:43,680 Speaker 7: Right if you think about it, we've taken about five, 435 00:19:43,800 --> 00:19:47,639 Speaker 7: maybe six multiple points off the SMP despite good earnings. 436 00:19:47,960 --> 00:19:50,159 Speaker 7: We're seeing in a very short period of time the 437 00:19:50,280 --> 00:19:53,000 Speaker 7: ten years sell off. But certainly bond volatility has gone up. 438 00:19:53,000 --> 00:19:55,520 Speaker 7: Whether you grew with my statement about the risk pream renout, 439 00:19:55,600 --> 00:19:58,200 Speaker 7: certainly bond volatility has gone up. And I think what's 440 00:19:58,200 --> 00:20:02,080 Speaker 7: happening is US assets are being priced. You know, you 441 00:20:02,160 --> 00:20:04,639 Speaker 7: mentioned before about you know, or are we a safe 442 00:20:04,640 --> 00:20:05,480 Speaker 7: haven anymore? 443 00:20:06,440 --> 00:20:06,879 Speaker 3: Maybe not? 444 00:20:07,240 --> 00:20:08,560 Speaker 7: And that's kind of what we're seeing. 445 00:20:08,760 --> 00:20:11,399 Speaker 2: I spy the Tottenham memblanm right behind you as well, Richard. 446 00:20:11,560 --> 00:20:14,280 Speaker 2: Super depressing stuff for you, A I appreciate. 447 00:20:13,800 --> 00:20:16,760 Speaker 4: The time as always, rough rough season. 448 00:20:16,840 --> 00:20:19,720 Speaker 2: Thank you, sir, Richard Bernstein and Richard Burnstein Advisors, thank 449 00:20:19,760 --> 00:20:31,160 Speaker 2: you very much. If you are just joining against these 450 00:20:31,160 --> 00:20:33,360 Speaker 2: with the numbers. So basically what they've done is withdrawn 451 00:20:33,520 --> 00:20:36,879 Speaker 2: their full year guidance, citing uncertainty around global trade. The 452 00:20:36,880 --> 00:20:40,040 Speaker 2: CEO at Bastian saying, quote, it's very difficult to predict 453 00:20:40,040 --> 00:20:42,400 Speaker 2: what policies may look like over the course of the year. 454 00:20:42,440 --> 00:20:44,639 Speaker 2: That's for sure. The stock is up by one point 455 00:20:44,640 --> 00:20:48,600 Speaker 2: seven percent, as Bastian ads that revenue has flatlined, joining 456 00:20:48,640 --> 00:20:51,760 Speaker 2: us now to discuss as Sheila Coleu of Jeffrey's Sheila, 457 00:20:51,800 --> 00:20:55,040 Speaker 2: welcome to the program. If mister Bastian can't offer any guidance, 458 00:20:55,080 --> 00:20:55,320 Speaker 2: can you? 459 00:20:57,560 --> 00:20:58,560 Speaker 8: I don't think we can either. 460 00:20:58,600 --> 00:21:01,360 Speaker 9: We cut our estimates early your last week across the 461 00:21:01,520 --> 00:21:05,400 Speaker 9: entire airline landscape, assuming flat domestic pricing for the year. 462 00:21:05,880 --> 00:21:06,760 Speaker 8: What we're getting from. 463 00:21:06,640 --> 00:21:09,920 Speaker 9: Delta's suspended guidance clearly, and that's probably the best. 464 00:21:09,680 --> 00:21:13,800 Speaker 8: Strategic move from here, but it assumes something. 465 00:21:13,720 --> 00:21:15,880 Speaker 9: Worse than that for Q two in terms of flat 466 00:21:15,920 --> 00:21:20,600 Speaker 9: domestic pricing, and then a second half capacity is flat, 467 00:21:20,680 --> 00:21:24,600 Speaker 9: So not great news out of the US's largest carrier 468 00:21:24,640 --> 00:21:25,720 Speaker 9: in terms of what they're seeing. 469 00:21:26,160 --> 00:21:29,800 Speaker 2: Shalbe, You've talked about this repeatedly. The high income bracket 470 00:21:29,840 --> 00:21:31,960 Speaker 2: here in the United States holding up business for many 471 00:21:32,000 --> 00:21:36,000 Speaker 2: of these airlines Premium, Long cal Shaba. Are you seeing 472 00:21:36,160 --> 00:21:38,920 Speaker 2: building evidence that maybe we're seeing something we haven't seen 473 00:21:38,920 --> 00:21:41,680 Speaker 2: over the last five years, that they're starting to take 474 00:21:41,720 --> 00:21:42,320 Speaker 2: the hit here. 475 00:21:43,960 --> 00:21:47,160 Speaker 9: I think Premium and Atlantic are International are actually still 476 00:21:47,200 --> 00:21:48,800 Speaker 9: holding up. But we just got off the phone with 477 00:21:48,880 --> 00:21:53,119 Speaker 9: Dan Jenkie Delta CFO. It seems like the bookings visibility 478 00:21:53,119 --> 00:21:55,520 Speaker 9: there is decent. What you're seeing the contraction is is 479 00:21:55,520 --> 00:21:57,280 Speaker 9: in the main cabin, which is where we would see it, 480 00:21:57,480 --> 00:22:01,960 Speaker 9: but also notably corporate. Corporate really saw a move down 481 00:22:01,960 --> 00:22:06,359 Speaker 9: in February and March. Industries that were particularly hit we're industrials, 482 00:22:06,359 --> 00:22:11,199 Speaker 9: aerospace of course, and some other sectors, while financials and 483 00:22:11,240 --> 00:22:13,760 Speaker 9: tech held in there. It seems so corporate is also 484 00:22:13,840 --> 00:22:16,320 Speaker 9: taking a leg down. So corports are clamping up a 485 00:22:16,320 --> 00:22:20,439 Speaker 9: little bit. Whether it's the tightness in just you know, 486 00:22:20,560 --> 00:22:24,159 Speaker 9: cost cutting, or if it's the macro volatility that's causing 487 00:22:24,160 --> 00:22:25,240 Speaker 9: that is to be determined. 488 00:22:25,280 --> 00:22:27,400 Speaker 8: So that's where we're seeing the. 489 00:22:27,359 --> 00:22:30,760 Speaker 9: Premium hit is really within the corporate customer chrending down. 490 00:22:31,040 --> 00:22:33,919 Speaker 6: We are seeing some commentary from Ed Basti and the 491 00:22:33,960 --> 00:22:36,760 Speaker 6: CEO of Delta this in the Wall Street Journal. He 492 00:22:36,800 --> 00:22:39,640 Speaker 6: said he understands there's a role to play with tariffs 493 00:22:39,680 --> 00:22:41,960 Speaker 6: and trade policy. It's just hard when you're trying to 494 00:22:41,960 --> 00:22:43,920 Speaker 6: do them all at the same time. He also said, 495 00:22:44,200 --> 00:22:46,480 Speaker 6: I don't think we're in a recession. I think we're 496 00:22:46,480 --> 00:22:49,560 Speaker 6: in danger of talking ourselves into a recession. When you 497 00:22:49,640 --> 00:22:53,320 Speaker 6: talk to executives, particularly from airlines, is there a level 498 00:22:53,359 --> 00:22:56,840 Speaker 6: of frustration that the consumer does seem strong, willing to 499 00:22:56,880 --> 00:23:00,679 Speaker 6: accept even price increases, still looking for experience. Is at 500 00:23:00,720 --> 00:23:02,760 Speaker 6: the same time that there's a lot of gloom and 501 00:23:02,800 --> 00:23:05,919 Speaker 6: doom on Wall Street and a potential regime shift that 502 00:23:05,960 --> 00:23:07,359 Speaker 6: could just torpedo that. 503 00:23:09,640 --> 00:23:12,040 Speaker 9: It's interesting because Delta's telling us they saw it within 504 00:23:12,080 --> 00:23:14,359 Speaker 9: the consumer turned down really quickly, whether it was in 505 00:23:14,400 --> 00:23:17,160 Speaker 9: February and March, in the first five to seven days 506 00:23:17,200 --> 00:23:17,960 Speaker 9: of April. 507 00:23:18,840 --> 00:23:20,119 Speaker 8: I'm actually in Atlanta right now. 508 00:23:20,119 --> 00:23:22,680 Speaker 9: I'm at a trade show, an aerospace aftermarket trade show, 509 00:23:23,080 --> 00:23:26,120 Speaker 9: and the ten executives we met with yesterday were so 510 00:23:26,200 --> 00:23:29,600 Speaker 9: confident regarding tariffs. They don't think it'll have as much 511 00:23:29,640 --> 00:23:31,840 Speaker 9: demand destruction as people assume, and. 512 00:23:31,720 --> 00:23:33,960 Speaker 8: That pricing will actually be positive because. 513 00:23:33,680 --> 00:23:36,560 Speaker 9: They could pass it through to the end user, which 514 00:23:36,560 --> 00:23:39,239 Speaker 9: is of course the airline, which is of course the 515 00:23:39,280 --> 00:23:41,919 Speaker 9: consumer in the US. So I think we're seeing that 516 00:23:41,960 --> 00:23:45,680 Speaker 9: short cycle hit with Delta this morning, a massive change 517 00:23:45,680 --> 00:23:49,160 Speaker 9: with what they previously guided. They had guided a capacity 518 00:23:49,280 --> 00:23:52,760 Speaker 9: up or now it's flat, and pricing also taking a 519 00:23:52,800 --> 00:23:54,880 Speaker 9: swing down down two and a half to down six 520 00:23:54,920 --> 00:23:55,760 Speaker 9: and a half in their. 521 00:23:55,560 --> 00:23:56,720 Speaker 8: Forward outlook for Q two. 522 00:23:57,200 --> 00:24:00,560 Speaker 9: So we're seeing that major revenue cut only from a 523 00:24:00,600 --> 00:24:03,879 Speaker 9: capacity perspective, but from a price perspective, and the airline 524 00:24:03,960 --> 00:24:07,320 Speaker 9: is doing its best to stay populitable, show that it's 525 00:24:08,080 --> 00:24:10,480 Speaker 9: you know, it's positioned well for this, but it's relatively 526 00:24:10,520 --> 00:24:13,400 Speaker 9: well leverage. But they're only growing their net fleet less 527 00:24:13,440 --> 00:24:16,200 Speaker 9: than one percent, so taking into account bowing air with 528 00:24:16,320 --> 00:24:18,800 Speaker 9: deliveries and their retirements, that's less than one percent. So 529 00:24:18,800 --> 00:24:21,160 Speaker 9: they're clamping down on their costs as well. 530 00:24:21,240 --> 00:24:24,080 Speaker 6: This is a really fascinating dichotomy right now, Shila, because 531 00:24:24,080 --> 00:24:26,879 Speaker 6: on one hand, you have the airline saying es sensibly 532 00:24:27,280 --> 00:24:29,880 Speaker 6: they believe they have pricing power. They believe that they 533 00:24:29,880 --> 00:24:33,520 Speaker 6: can raise prices and that you could shrink potentially just 534 00:24:34,320 --> 00:24:37,040 Speaker 6: your flight schedule and keep prices where they are, go 535 00:24:37,119 --> 00:24:39,800 Speaker 6: higher and offset any kind of change you're searing something 536 00:24:39,840 --> 00:24:42,880 Speaker 6: so different from the likes of Walmart that want to invest. 537 00:24:42,560 --> 00:24:43,280 Speaker 4: In price i e. 538 00:24:43,560 --> 00:24:46,680 Speaker 6: Absorb some of the increase in prices. Is there some 539 00:24:46,720 --> 00:24:51,720 Speaker 6: sort of structural change that gives airlines a strategic advantage 540 00:24:51,760 --> 00:24:53,720 Speaker 6: to being able to have pricing power. 541 00:24:54,920 --> 00:24:59,199 Speaker 9: So the airlines are clearly saying pricing is stalling. Pricing 542 00:24:59,240 --> 00:25:02,280 Speaker 9: and capacity are stalling. The Aerospace Show imat is more 543 00:25:02,320 --> 00:25:07,200 Speaker 9: than manufacturers and the maintenance providers to the airlines. They're 544 00:25:07,240 --> 00:25:11,119 Speaker 9: still seeing that they have the ability to pass price through. 545 00:25:12,040 --> 00:25:13,600 Speaker 8: One is a shorter cycle by. 546 00:25:13,680 --> 00:25:16,439 Speaker 9: With an airline of consumer booking is maybe thirty to 547 00:25:16,560 --> 00:25:19,159 Speaker 9: ninety days, and that's where we're seeing the hit with Delta. 548 00:25:19,960 --> 00:25:24,040 Speaker 9: The Aerospace Show i'm at is probably thirty to. 549 00:25:23,800 --> 00:25:24,920 Speaker 8: One year bicycle. 550 00:25:25,240 --> 00:25:29,080 Speaker 9: So the shorter cycle is definitely seeing the market volatility 551 00:25:29,119 --> 00:25:32,040 Speaker 9: impact its demand and it's pricing Sheila. 552 00:25:32,119 --> 00:25:35,640 Speaker 1: Delta is a Virgin Atlantic partner on its North Atlantic routes. 553 00:25:35,720 --> 00:25:37,800 Speaker 1: We saw Virgin Atlantic pull back some of those routes, 554 00:25:37,880 --> 00:25:40,560 Speaker 1: especially when it comes to New York City, this major hub. 555 00:25:40,640 --> 00:25:41,080 Speaker 10: JFK. 556 00:25:41,240 --> 00:25:44,399 Speaker 1: Are you expecting more airlines to pull back some routes. 557 00:25:46,680 --> 00:25:49,200 Speaker 9: I think International is the reader we're going to watch 558 00:25:49,200 --> 00:25:52,320 Speaker 9: the most so to put it in perspective in terms 559 00:25:52,359 --> 00:25:55,960 Speaker 9: of domestic, domestic is very important. Delta had previously seven 560 00:25:56,040 --> 00:25:59,639 Speaker 9: thirty five of EPs. Every one point of domestic pricing 561 00:25:59,680 --> 00:26:03,760 Speaker 9: is about eighty five cents to EPs. Internationally, every one 562 00:26:03,760 --> 00:26:05,480 Speaker 9: point of pricing is maybe twenty cents. 563 00:26:05,600 --> 00:26:08,639 Speaker 8: Internationally is still holding up. But what we're seeing there 564 00:26:08,720 --> 00:26:09,680 Speaker 8: in the second. 565 00:26:09,320 --> 00:26:11,960 Speaker 9: Half and in Q two and in the second half 566 00:26:12,320 --> 00:26:16,080 Speaker 9: is actually a decent amount of capacity, whether it's Delta, 567 00:26:16,119 --> 00:26:19,840 Speaker 9: whether it's United, whether it's American, capacity is amid single 568 00:26:19,920 --> 00:26:21,800 Speaker 9: digits of four percent. So if you have a lot 569 00:26:21,800 --> 00:26:24,640 Speaker 9: of capacity not a lot of demand, what happens your 570 00:26:24,640 --> 00:26:27,560 Speaker 9: price gets cut. So Atlantic is still holding up strong 571 00:26:27,600 --> 00:26:31,359 Speaker 9: in Q two. They're fairly well booked into April. I 572 00:26:31,359 --> 00:26:34,880 Speaker 9: think ninety percent booked in April, sixty percent booked in May, 573 00:26:34,920 --> 00:26:37,720 Speaker 9: and forty percent in June. And that's system wide, So 574 00:26:37,760 --> 00:26:39,119 Speaker 9: internationally would be better than that. 575 00:26:39,200 --> 00:26:41,399 Speaker 8: So right now International is still holding up. 576 00:26:41,400 --> 00:26:43,960 Speaker 9: But again that's a longer sale cycle, probably ninety days 577 00:26:44,000 --> 00:26:46,400 Speaker 9: instead of thirty days for the domestic side. 578 00:26:46,560 --> 00:26:48,560 Speaker 2: Seva, I appreciate you time, thanks for jumping on busy 579 00:26:48,560 --> 00:26:49,400 Speaker 2: morning for you, I'm sure. 580 00:26:49,560 --> 00:27:01,679 Speaker 4: Shiva Kari of Jeffrey's outline of the morning. 581 00:27:01,760 --> 00:27:04,760 Speaker 2: So far, the tariffs go on overnight as expected, the 582 00:27:04,800 --> 00:27:08,520 Speaker 2: retaliation from China raising tariffs on US goods to eighty 583 00:27:08,920 --> 00:27:09,920 Speaker 2: four percent. 584 00:27:10,240 --> 00:27:11,919 Speaker 4: To discuss some place to say that joining US now 585 00:27:11,960 --> 00:27:13,000 Speaker 4: is Russia. Shama A. 586 00:27:13,119 --> 00:27:16,479 Speaker 2: Rockefeller International, Russia, welcome to the program, sir. We are 587 00:27:16,520 --> 00:27:19,280 Speaker 2: trying to work out what this Federal Reserve should do. 588 00:27:19,520 --> 00:27:22,480 Speaker 2: Should the policymakers be stepping in and providing support or 589 00:27:22,520 --> 00:27:25,000 Speaker 2: should they watch and wait to see how this place out. 590 00:27:26,160 --> 00:27:26,800 Speaker 3: Well, I don't think. 591 00:27:26,680 --> 00:27:28,399 Speaker 10: There's any case for the Fed to cut into a 592 00:27:28,440 --> 00:27:32,120 Speaker 10: streets given its dual mandages now, because as I wrote 593 00:27:32,160 --> 00:27:34,800 Speaker 10: in my ft OpEd this Monday, which is that the 594 00:27:34,840 --> 00:27:38,359 Speaker 10: Fed has missed its inflation target for five years in 595 00:27:38,400 --> 00:27:41,160 Speaker 10: a row, it will do so again this year and 596 00:27:41,200 --> 00:27:45,040 Speaker 10: the year after that, and possibly won't get to the 597 00:27:45,080 --> 00:27:47,240 Speaker 10: target now for the next couple of years, even if 598 00:27:47,240 --> 00:27:51,119 Speaker 10: it does nothing at this stage, and inflation is a 599 00:27:51,119 --> 00:27:55,359 Speaker 10: big concern for Americans, and the horizon consumer prices over 600 00:27:55,359 --> 00:27:57,840 Speaker 10: the last five to six years has been such that 601 00:27:57,920 --> 00:28:01,920 Speaker 10: it has offset the entire undershoot of the two percent 602 00:28:01,960 --> 00:28:04,399 Speaker 10: inflation target that we had last decade. So if you 603 00:28:04,480 --> 00:28:06,880 Speaker 10: go back to the year two thousand over the last 604 00:28:06,920 --> 00:28:09,600 Speaker 10: twenty five years. Now, what you will see is that 605 00:28:09,720 --> 00:28:15,239 Speaker 10: over that time period, consumer prices today are higher by 606 00:28:15,320 --> 00:28:18,159 Speaker 10: about sixteen percent than they would have been had the 607 00:28:18,200 --> 00:28:21,240 Speaker 10: FED been meeting its two percent inflation target over the 608 00:28:21,320 --> 00:28:24,720 Speaker 10: last twenty five years. So that's a serious miss on inflation, 609 00:28:24,840 --> 00:28:27,840 Speaker 10: and I think it's aware of that, and given the 610 00:28:27,840 --> 00:28:32,040 Speaker 10: fact that some infacient expectations are already elevated, to add 611 00:28:32,040 --> 00:28:34,439 Speaker 10: fuel to that fire would be a mistake. So I 612 00:28:34,440 --> 00:28:36,440 Speaker 10: think that the FED needs to be true to its 613 00:28:36,440 --> 00:28:39,680 Speaker 10: mandate and it needs to sort of at the very 614 00:28:39,760 --> 00:28:43,440 Speaker 10: least watch and so far there's been no evidence that 615 00:28:43,480 --> 00:28:45,200 Speaker 10: its policy has been overly restricted. 616 00:28:45,440 --> 00:28:47,840 Speaker 2: They push back that I've heard over the past week, 617 00:28:47,880 --> 00:28:49,760 Speaker 2: and I'd love your response to it goes a little 618 00:28:49,800 --> 00:28:52,880 Speaker 2: something like this, They should focus on the downside risk 619 00:28:52,960 --> 00:28:55,760 Speaker 2: to growth and not the upside risk to inflation because 620 00:28:55,800 --> 00:28:58,440 Speaker 2: anxiety around the labor market is so much higher, we 621 00:28:58,480 --> 00:29:00,920 Speaker 2: don't have sufficient tightness in the hyper market that would 622 00:29:00,960 --> 00:29:03,400 Speaker 2: drive those second round effects high wightes, etc. 623 00:29:03,720 --> 00:29:04,640 Speaker 4: What would you sind back. 624 00:29:04,520 --> 00:29:06,760 Speaker 10: To that, Well, you know, this has been the same 625 00:29:06,800 --> 00:29:08,760 Speaker 10: easy money crowd which has been you know, which is 626 00:29:08,800 --> 00:29:11,400 Speaker 10: always calling for lower interest rates, So I think that 627 00:29:11,400 --> 00:29:14,320 Speaker 10: that's been the real problem. One of the basic problems 628 00:29:14,320 --> 00:29:16,360 Speaker 10: of the US economy is that it's been fed on 629 00:29:16,400 --> 00:29:19,200 Speaker 10: a diet of easy money for far too long, whether 630 00:29:19,240 --> 00:29:22,840 Speaker 10: it's monetary policy or fiscal policy, and I think that's 631 00:29:22,840 --> 00:29:25,440 Speaker 10: coming back to bite the US. And what's happening today 632 00:29:25,840 --> 00:29:28,760 Speaker 10: is a demonstration of that, which is that I can't 633 00:29:28,760 --> 00:29:32,800 Speaker 10: remember seeing a day in my memory where on the 634 00:29:32,880 --> 00:29:36,720 Speaker 10: US markets all three major indicators are down, US docs, 635 00:29:36,840 --> 00:29:39,960 Speaker 10: US bonds, and the US dollar. So there's a real 636 00:29:40,040 --> 00:29:42,840 Speaker 10: loss of confidence happening here as far as the US 637 00:29:42,920 --> 00:29:46,440 Speaker 10: is concerned. This is almost like the kind of scene 638 00:29:46,480 --> 00:29:49,080 Speaker 10: that I see in emerging markets that you know, where 639 00:29:49,120 --> 00:29:52,680 Speaker 10: you see cross assets declining together like this, And in 640 00:29:52,760 --> 00:29:55,600 Speaker 10: emerging markets, I don't think any central bank would think 641 00:29:55,600 --> 00:29:57,840 Speaker 10: about cutting interest rates in such an environment. 642 00:29:58,960 --> 00:30:00,920 Speaker 6: Do you think that we're getting little ahead of ourselves 643 00:30:00,920 --> 00:30:02,600 Speaker 6: with trying to give a narrative to the move in 644 00:30:02,640 --> 00:30:05,400 Speaker 6: markets right now? Given that there are basis trades unwinding 645 00:30:05,400 --> 00:30:07,560 Speaker 6: and hedge funds that are deleveraging. 646 00:30:08,000 --> 00:30:10,760 Speaker 10: Well, it's still unprecedented. I agree that there's nothing that 647 00:30:10,840 --> 00:30:14,000 Speaker 10: sort of extraordinary going on. If you look at the 648 00:30:14,040 --> 00:30:16,160 Speaker 10: scenes we have seen in two thousand and eight that 649 00:30:16,280 --> 00:30:18,320 Speaker 10: kind of market panic. We are far from that, but 650 00:30:18,360 --> 00:30:20,560 Speaker 10: we don't want to get to that point. So I 651 00:30:20,560 --> 00:30:22,320 Speaker 10: think that the whole issue here is the fact that 652 00:30:22,720 --> 00:30:26,240 Speaker 10: let's acknowledge that we have seen a very unusual move 653 00:30:26,280 --> 00:30:30,200 Speaker 10: and acid prices, and that this accident in a way 654 00:30:30,240 --> 00:30:33,560 Speaker 10: was waiting to happen. As you know that at the 655 00:30:33,640 --> 00:30:35,440 Speaker 10: end of last year, I had sort of called this 656 00:30:35,520 --> 00:30:38,760 Speaker 10: the mother of all bubbles, this American exceptionalism trade where 657 00:30:38,800 --> 00:30:41,960 Speaker 10: everybody was flooding into the American market as if there 658 00:30:42,000 --> 00:30:43,920 Speaker 10: was no other market in the world to invest in. 659 00:30:44,240 --> 00:30:47,360 Speaker 10: Eighty percent of all equity market flows around the world 660 00:30:47,360 --> 00:30:50,960 Speaker 10: this decade went into just America. So it's this big 661 00:30:51,080 --> 00:30:52,240 Speaker 10: unwind taking place. 662 00:30:52,280 --> 00:30:53,320 Speaker 8: I think of that bubble. 663 00:30:54,040 --> 00:30:56,160 Speaker 10: Now, you can argue that it would have happened regardless 664 00:30:56,160 --> 00:31:01,160 Speaker 10: of Trump and Taris, but his moves up obviously precipitated this. 665 00:31:01,960 --> 00:31:05,040 Speaker 10: But as someone put it, that the air is coming 666 00:31:05,040 --> 00:31:07,120 Speaker 10: out of that balloon, but that air was put in 667 00:31:07,160 --> 00:31:09,920 Speaker 10: the balloon before that. And as I've argued in the past, 668 00:31:10,240 --> 00:31:14,040 Speaker 10: the combination of very easy monetary and fiscal policies is 669 00:31:14,080 --> 00:31:17,360 Speaker 10: what has got us into this place today, how much. 670 00:31:17,160 --> 00:31:18,200 Speaker 4: Further does it have to go? 671 00:31:18,240 --> 00:31:21,440 Speaker 6: Then if that's the theory, that yes, this is partly 672 00:31:21,480 --> 00:31:24,400 Speaker 6: because of what's going on right now with policy uncertainty 673 00:31:24,400 --> 00:31:26,720 Speaker 6: and the actual policies putting and being put in place, 674 00:31:26,960 --> 00:31:28,600 Speaker 6: but it also has to do with the build up 675 00:31:28,960 --> 00:31:31,479 Speaker 6: over so many years that you call a bubble. How 676 00:31:31,520 --> 00:31:33,720 Speaker 6: much further do we have to go to create a 677 00:31:33,800 --> 00:31:36,680 Speaker 6: level that you feel more comfortable investing in? 678 00:31:37,760 --> 00:31:41,240 Speaker 10: Well, I think that this marks a major regime shift, 679 00:31:41,240 --> 00:31:43,880 Speaker 10: which is that the US market had outperformed the rest 680 00:31:43,920 --> 00:31:46,640 Speaker 10: of the world for fifteen years, as you know, and 681 00:31:47,120 --> 00:31:49,160 Speaker 10: in the last couple of years that reached what we 682 00:31:49,240 --> 00:31:53,360 Speaker 10: call a parabolic stage where it just went completely vertical, 683 00:31:53,400 --> 00:31:56,560 Speaker 10: where US markets totally disconnected from the rest of the world. 684 00:31:56,600 --> 00:31:59,320 Speaker 10: They in fact was sucking capital out from the rest 685 00:31:59,320 --> 00:32:01,920 Speaker 10: of the world. I think that this has many years 686 00:32:01,960 --> 00:32:04,520 Speaker 10: to go, that what we're seeing today is the opening 687 00:32:04,560 --> 00:32:10,080 Speaker 10: act of this major trend reversal and capital flows. But 688 00:32:10,200 --> 00:32:12,800 Speaker 10: this is a multi year trend. You know that people 689 00:32:12,840 --> 00:32:15,520 Speaker 10: love to say that don't bet against America. The American 690 00:32:15,560 --> 00:32:18,600 Speaker 10: stock market eventually always comes back, and it's been a 691 00:32:18,600 --> 00:32:22,720 Speaker 10: great performer over very long stretches of time. All true, 692 00:32:23,000 --> 00:32:25,400 Speaker 10: But if you look at those very long stretches of time, 693 00:32:25,440 --> 00:32:27,880 Speaker 10: which go back to year nineteen hundred, when we have 694 00:32:28,040 --> 00:32:31,239 Speaker 10: data that the US stock market in six of the 695 00:32:31,280 --> 00:32:35,120 Speaker 10: past eleven decades has in fact underperformed the rest of 696 00:32:35,160 --> 00:32:38,160 Speaker 10: the world. And we've just had a fifteen year incredible 697 00:32:38,200 --> 00:32:41,560 Speaker 10: spell of US market outperformance with both the dollar doing 698 00:32:41,600 --> 00:32:44,760 Speaker 10: well and the US stock market doing well. I suspect 699 00:32:44,800 --> 00:32:47,200 Speaker 10: for at least the rest of the decade both the 700 00:32:47,280 --> 00:32:50,959 Speaker 10: dollar and the US stock market to significantly underperform the 701 00:32:50,960 --> 00:32:52,600 Speaker 10: rest of the world. So I think that this is 702 00:32:52,640 --> 00:32:56,400 Speaker 10: a regime shift precipitated by what Trump is doing, but 703 00:32:56,560 --> 00:32:57,800 Speaker 10: something which predates it. 704 00:32:58,080 --> 00:32:59,560 Speaker 1: In this regime shift, do you think we need to 705 00:32:59,560 --> 00:33:04,840 Speaker 1: start working about potentially Affirm blowing up like Melvin Capital 706 00:33:04,920 --> 00:33:08,440 Speaker 1: Management did in twenty twenty two, Well, I think, you know, there. 707 00:33:08,360 --> 00:33:10,720 Speaker 10: Is a lot of leverage out there which we only 708 00:33:10,760 --> 00:33:13,320 Speaker 10: know about when this happens. Like what are the marks 709 00:33:13,360 --> 00:33:16,080 Speaker 10: today for private credit for example, have they, you know, 710 00:33:16,120 --> 00:33:19,560 Speaker 10: started marking their assets down or not? Private equity? So 711 00:33:19,600 --> 00:33:21,400 Speaker 10: I think that there is a lot of follow through 712 00:33:21,720 --> 00:33:23,680 Speaker 10: action that we have to see. What we've seen so 713 00:33:23,720 --> 00:33:27,080 Speaker 10: far is only in the public markets. My concern is 714 00:33:27,120 --> 00:33:29,480 Speaker 10: that the longer this last, which I think it could, 715 00:33:29,760 --> 00:33:31,840 Speaker 10: then you have to sort of start marking down private 716 00:33:31,880 --> 00:33:34,120 Speaker 10: assets and then we have to see what really happens, 717 00:33:34,400 --> 00:33:37,280 Speaker 10: because that's where a lot of the build up in 718 00:33:37,360 --> 00:33:41,440 Speaker 10: excesses has taken place. So I think that yes, we 719 00:33:41,480 --> 00:33:43,440 Speaker 10: are going to find out where all the leverage is, 720 00:33:43,600 --> 00:33:45,240 Speaker 10: and that's what the fair should be doing now. It 721 00:33:45,280 --> 00:33:48,560 Speaker 10: should be out there looking at where will this stress 722 00:33:48,600 --> 00:33:51,760 Speaker 10: emerge of this big decline in public markets because so 723 00:33:51,880 --> 00:33:54,560 Speaker 10: much of the frauth and so much of the excesses 724 00:33:54,800 --> 00:33:58,880 Speaker 10: are lying in the private markets outside of the regular eye. 725 00:34:00,080 --> 00:34:03,200 Speaker 2: We've heard that this morning. Russia Shama of Rockefeller International, Russia. 726 00:34:03,240 --> 00:34:07,160 Speaker 2: Appreciate your time, sir. This is the Bloomberg Surveillance Podcast, 727 00:34:07,280 --> 00:34:10,880 Speaker 2: bringing you the best in markets, economics, and geo politics. 728 00:34:11,120 --> 00:34:13,600 Speaker 2: You can watch the show live on Bloomberg TV weekday 729 00:34:13,640 --> 00:34:16,880 Speaker 2: mornings from six am to nine am Eastern. Subscribe to 730 00:34:16,880 --> 00:34:20,120 Speaker 2: the podcast on Apple, Spotify or anywhere else you listen, 731 00:34:20,400 --> 00:34:23,000 Speaker 2: and as always on the Bloomberg Terminal and the Bloomberg 732 00:34:23,040 --> 00:34:23,600 Speaker 2: Business app.