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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: us live on YouTube.

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Speaker 2: Well, I'm going to go back to when you were

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Speaker 2: twenty five years old. You wrote it was a joke,

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Speaker 2: but it wasn't. It was a serious idea about time

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Speaker 2: and space and interstellar planets and all that. The final

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Speaker 2: sentence of Krugman at age twenty five.

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Speaker 3: Those of us working in this.

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Speaker 2: Field, I'm going to paraphrase of international economics and trade

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Speaker 2: are still a small band, but we know that the

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Speaker 2: force is with us, doctor Krugman.

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Speaker 3: Where is the force for morning?

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Speaker 4: Professor Boyofstein with a paper about interstellar trade?

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Speaker 3: So what the hell? Where is the force this morning

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Speaker 3: for this nation?

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Speaker 4: Oh boy, this is really really bad. I mean you

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Speaker 4: want to say, this is we're talking about, if you know,

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Speaker 4: assuming the Rose Garden, anything like what Trump announced in

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Speaker 4: the Rose Garden is actually going to be where we land.

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Speaker 4: We're talking about tariffs that are significantly higher than smooth

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Speaker 4: holy and of course starting from very low. So this

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Speaker 4: huge jump and tiff rates with a US economy that's

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Speaker 4: three times as open to international trade as it was

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Speaker 4: in nineteen thirty. So this makes smooth holy look like

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Speaker 4: a rounding error. And it's so that's really bad. And

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Speaker 4: it's also it's highly uncertain. Never had a situation where

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Speaker 4: really you have no idea but within you know, like

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Speaker 4: twenty points where the tariff average tarifrate's going to be

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Speaker 4: a few months from now. So this creates an impossible

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Speaker 4: environment for business. It's it's hard to imagine a worse

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Speaker 4: trade policy than what we're getting.

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Speaker 2: In the cacophany Paul Krugman, we have nations acting. Last

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Speaker 2: night at nine point fifteen, I picked up my phone

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Speaker 2: and there was China acting. China just says no. Trump

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Speaker 2: lives on negotiation, folks. Bloomberg's Tim O'Brien owns a high

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Speaker 2: ground on this. He lives on negotiation. John Bolton, writing

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Speaker 2: in The Telegraph, says he lives on negotiation. If the

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Speaker 2: Chinese don't negotiate, what happens to Paul Krugman's trade economy?

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Speaker 4: Oh, I mean at the starting point here again, is

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Speaker 4: that negotiate about what?

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Speaker 3: Now?

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Speaker 4: China you could conceivably have some China is not a

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Speaker 4: free trade economy, and you know, they might be able

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Speaker 4: to make some concessions, but they ain't gonna their their

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Speaker 4: back is up and they have a national pride and

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Speaker 4: their economy, by some measures, is as big as ours

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Speaker 4: or bigger. So you don't want to They're they're not

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Speaker 4: removing and the other players, I mean, think about the Europeans.

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Speaker 4: Europe had an average tariff of about one point seven

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Speaker 4: percent on US good has still about one point seven

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Speaker 4: percent on US goods. What can they give? What concessions

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Speaker 4: can they make? It's not as if Trump is you know,

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Speaker 4: is asking them to do something. It's asking them to

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Speaker 4: remedy some real sin. He's sort of made up a

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Speaker 4: story about how they must be doing something wrong, but

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Speaker 4: they aren't actually, and so they they even if he

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Speaker 4: wants concessions, they can't give them.

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Speaker 5: Professor, I think one of if we just step back

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Speaker 5: a little bit, one of the I think the basis

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Speaker 5: of the Trump administration tariff policy is that they're trying

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Speaker 5: to reorder the world economic order. Is there something fundamentally

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Speaker 5: broken about the world economic order that disadvantages the US?

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Speaker 4: Actually, no, all is said and done. It's yeah, the

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Speaker 4: US runs an overall trade deficit, but that's mostly because

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Speaker 4: you know, the balance of payments always balances if you

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Speaker 4: attract inflow, so foreign capital. Then the math says that

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Speaker 4: you have to have a trade deficit. That's the I

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Speaker 4: know mathmax has a progressive bias, but still that's what

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Speaker 4: the math says. And the US is an attractive place

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Speaker 4: to an invest or was until you know now, so

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Speaker 4: the idea that there's something fundamentally wrong just doesn't make sense.

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Speaker 3: And it's worse.

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Speaker 4: I mean that Trump Trump and his people think not

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Speaker 4: only that the US shouldn't run a trade deficit, but

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Speaker 4: that we shouldn't run a trade deficit with any country.

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Speaker 4: That everything should be bilateral balance trade, which is just crazy.

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Speaker 4: I mean, you know, if you think about people, if

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Speaker 4: you work, if you work for somebody else, well, you

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Speaker 4: run a surplus with that person because they pay you

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Speaker 4: and you probably don't spend much of your income on

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Speaker 4: their products. On the other hand, you run a bilateral

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Speaker 4: deficit with your supermarket because you buy from them and

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Speaker 4: they don't buy stuff from you. And so you know,

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Speaker 4: the same applies to country. So it's just crazy and

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Speaker 4: I don't know. I think all of this stuff about

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Speaker 4: remaking the international order is window dressing. It's the fundamental

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Speaker 4: thing is Trump wants TIFFs, and then everything else is

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Speaker 4: people Trump to explain why, you know, recconning explanations of

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Speaker 4: why he wants tariffs.

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Speaker 2: And Jason Furman in the Ft this morning, really writing

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Speaker 2: up this complete focus on getting tariffs in to go

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Speaker 2: back to the fifties, the thirties or maybe nineteen oh five.

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Speaker 2: We welcome Paul Krugman, of course at Iconic at Princeton University.

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Speaker 2: You know him from the New York Times. He just

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Speaker 2: went out the door. He has a substack. It's a value.

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Speaker 2: I got two substacks for you. I got to mention Paul,

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Speaker 2: Adam Twos is killing it out on substack. But Adam

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Speaker 2: Twos subscribe. Paul Krugman subscribe on.

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Speaker 3: Substack as well. We welcome all of you.

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Speaker 2: Across the nation on YouTube worldwide with the Laureate Paul Krugman.

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Speaker 5: Paul lotalization from an economic perspective, is that dying as

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Speaker 5: we see it?

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Speaker 4: Oh, I mean, well, I you know, the truth is

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Speaker 4: we don't know, which is part of the problem with

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Speaker 4: this enormous uncertainty. But yeah, I mean, we have built

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Speaker 4: up this very integrated world economy with all of these

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Speaker 4: you know, supply chains and so on, which cannot survive

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Speaker 4: a twenty three percent to you average US terafreate. So

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Speaker 4: this is going to really smart us up.

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Speaker 2: I think, Paul, that people are understanding the jump condition

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Speaker 2: and tariffs. I'm going to go back to Trump one.

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Speaker 2: You did a wonkish Paul. You should read the wonkish

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Speaker 2: Krubman in the Times. You'll age Paul did you did

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Speaker 2: like a wonkish trade. You got a chart and the

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Speaker 2: yx's is price of imports. On the X axis is

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Speaker 2: the volume of imports. Now with Trump too, that chart

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Speaker 2: is just simply just shattered. There's no other way to

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Speaker 2: put it. You have a welfare loss if we explode

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Speaker 2: the price of imports, if we have the volume of

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Speaker 2: imports decrease a lot slower real GDP, slower nominal, slower investment.

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Speaker 2: How big can that welfare loss be? And who listening

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Speaker 2: right now loses?

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Speaker 4: Okay? The yeah, I mean, the thing we're always to

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Speaker 4: realize is that, roughly speaking, we think that the damage

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Speaker 4: done by tariffs is not proportional to the tariff is

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Speaker 4: proportional to.

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Speaker 3: The square of the tariff.

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Speaker 4: So you know, a twenty percent tariff is something like

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Speaker 4: four times as bad as a ten percent tariff. Now

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Speaker 4: putting numbers to it, I mean, I long run, it's

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Speaker 4: finding the long run impact of these terraffs is probably look,

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Speaker 4: it's it's going to be worse than Brexit. So in

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Speaker 4: Brexit we tend to think it was three or four

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Speaker 4: percent of British GDP. Maybe, uh, this could easily be

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Speaker 4: more than that, though there's.

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Speaker 3: A limit to it.

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Speaker 4: Deep Uh, it's hard to get It's not you know,

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Speaker 4: in itself, it's it's a serious hit to the economy.

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Speaker 4: But the funny thing is in the short run it

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Speaker 4: can be worse. And the reason it can be worse

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Speaker 4: is the is the extreme uncertainty that we're creating. And

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Speaker 4: so you know, once we you know, even with these

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Speaker 4: high terraffs will settle down. Eventually business will find ways

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Speaker 4: to cope. Costs will be higher, GDP will be lower.

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Speaker 4: But that's you know, we'll make that transition. But right now,

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Speaker 4: if you I mean, I can only imagine that a

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Speaker 4: lot of manufacturing, you know, managers are if they aren't drinking,

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Speaker 4: they're more powerful them because they should be the the

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Speaker 4: Anything any move you make may turn out to be

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Speaker 4: distriss because God knows what the tariffs will be, what

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Speaker 4: time the investment matures.

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Speaker 2: Well, you just what you just heard there from Paul

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Speaker 2: Krugman Folks is absolutely critically. I want to translate it

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Speaker 2: a little bit. He mentions some math, the square of

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Speaker 2: the tariff. This goes back to littlely Newtonian physics. Think one, two, three,

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Speaker 2: four five, No, maybe exponential two four eight, sixteen thirty two.

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Speaker 2: That's an exaggeration, but you get the idea. Paul, let's

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Speaker 2: bring it right over to America. Are we going to

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Speaker 2: have a square the unemployment rate? Are we going to

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Speaker 2: see different labor metrics, including the four point x unemployment

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Speaker 2: rate explode higher.

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Speaker 4: Okay, I think we will, but that's not not in

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Speaker 4: the long rum. That's the thing tariffs. What is the

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Speaker 4: impact of tariffs on the unemployment rate under normal conditions?

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Speaker 4: N aswrisk not much. It makes what labor less efficient,

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Speaker 4: doesn't cause a doesn't cause a slump. It just means

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Speaker 4: that people do different things, they do worse things, but

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Speaker 4: they stay.

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Speaker 6: Employed, so that it's not really unemployment rate. It's it's

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Speaker 6: productivity that will suffer. It's it's real incomes that will

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Speaker 6: suffer in the long run. But we may very well

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Speaker 6: now I think better than even odds that we are

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Speaker 6: going to have a recession this year, which is not

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Speaker 6: the standard effective terriffs normally. If you ask me to

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Speaker 6: do tarrats cause recessions, I would say no.

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Speaker 4: The whole story about smooth Holly caused the Great Depression,

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Speaker 4: that's basically a wrong story. It's smooth Holly was a

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Speaker 4: bad thing, but not for that reason. But the uncertainty

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Speaker 4: which makes means that if you invest you should you

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Speaker 4: invest more in your Mexican component's plant well, not if

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Speaker 4: we're going to have twenty five percent tariffs on Mexico.

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Speaker 4: Should you invest in US production instead? Not if those

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Speaker 4: tariffs might not stay in place and you really wish

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Speaker 4: that you had invested in Mexico. So there's gonna be

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Speaker 4: a lot of just playing cash, sitting on the sidelines

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Speaker 4: while business is wait for similarity, which it doesn't seem

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Speaker 4: to be coming anytime soon.

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Speaker 5: Professor was just as recently as the beginning of the

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Speaker 5: year that Tom and I were having discussions with our

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Speaker 5: guests here in Bloomberg surveillance about US economic exceptionalism. Boy,

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Speaker 5: that seems quaint now is that still the case here?

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Speaker 5: How do you think about that visa the US and

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Speaker 5: the rest of the world.

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Speaker 4: Well, we were, I mean, if you wanted to kill

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Speaker 4: a US exceptionalism, this is kind of what you would do,

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Speaker 4: right the I mean, and that there's there's much more.

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Speaker 3: It's not just the terrorists.

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Speaker 4: But yeah, the US from about two thousand on, the

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Speaker 4: US had much faster productivity growth than other advanced countries.

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Speaker 4: We just outperformed. And we also have somewhat better demography

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Speaker 4: than other advanced countries. So we just had a much

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Speaker 4: better growth picture than anyone else in the advanced world.

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Speaker 4: And all of a sudden, uh, you know the uh,

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Speaker 4: we're disrupting our trade, although we're disrupting other people as well.

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Speaker 3: That's a bad thing. Should work.

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Speaker 4: Bear in mind that in the background, this isn't the

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Speaker 4: only radical departure in policy that the Trump administration is pursuing.

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Speaker 4: Look at what is happening to scientific research. Enormous cuts

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Speaker 4: in mass layoffs. I mean they're the CDC is laying

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Speaker 4: off medical scientists so fast that they're actually that samples

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Speaker 4: are being left in resers with nobody to look after them.

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Speaker 4: And since ultimately US technological progress relies a lot on

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Speaker 4: the spillovers from government research, we're actually crippling, you know,

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Speaker 4: make America not great again. I mean, this is really amazing,

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Speaker 4: Paul Krugman with.

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Speaker 2: As he continues with this salaureate. Of course, I can't

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Speaker 2: say enough. This is this moment you're in in America,

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Speaker 2: the questions you have in the living from the kitchen table.

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Speaker 2: This is what Krugman was we done years ago at

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Speaker 2: Yale and on to Princeton as well. Look to his

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Speaker 2: sub stack out. I can't say enough about it. I

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Speaker 2: really subscribe to that as a huge value. Add Paul Krugman,

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Speaker 2: I've got to go over and I guess this goes

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Speaker 2: Mondel and on the Jacob Frankel and Ken Rogoff and

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Speaker 2: the rest to the currency you studied under the guy

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Speaker 2: who invented modern foreign exchange, rudigerd Dornbish dorn Bush. We

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Speaker 2: lost him tragically years ago of cancer. What would Rudy

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Speaker 2: Dornbush say right now where Paul Krugman say about the

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Speaker 2: idea of the China's solution is to depreciate the renmn B.

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Speaker 4: Well, yeah, I mean, Rudy would have some choice phrases

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Speaker 4: that would be more colorful than anything I can come

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Speaker 4: up with. But yeah, I mean, this is a look

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Speaker 4: if one of the things we've done is we've just

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Speaker 4: place China as being the prime.

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Speaker 3: Bad actor in the world economy.

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Speaker 4: China has been a bad actor. They have run and

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Speaker 4: kept an undervalued currency.

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Speaker 3: They have failed.

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Speaker 4: You know, China has a problem, which is they don't

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Speaker 4: consume enough, they have excess saving, They're running out of

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Speaker 4: investment opportunities at home. They've tried to close that gap

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Speaker 4: to square that circle by running big trade surpluses, which

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Speaker 4: they can do because the Apple controlled and undervalue currency,

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Speaker 4: which you know, but the blowback from that has been

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Speaker 4: growing even you know, if Trump weren't there, if we

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Speaker 4: had a sane person as president of the United States,

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Speaker 4: that sane person would be taking a very hard line

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Speaker 4: on China because the Chinese are in fact not good,

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Speaker 4: They're not team players in the world economy, and the

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Speaker 4: Chinese are still trying to do that, which is insane

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Speaker 4: because it's the United States. Clearly, you know, it's not

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Speaker 4: going to be a market and the Europeans, the rest

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Speaker 4: of the world is not going to take their stuff either,

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Speaker 4: so they are not helping Paul.

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Speaker 2: One final question, and it's a fun question because the

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Speaker 2: Republicans love to go after you. There's a primal scream,

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Speaker 2: including a senator from Massachusetts, Elizabeth Warren and others Republicans

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Speaker 2: do something. You're at a breakfast coffee with Thune of

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Speaker 2: the Dakotas this morning in the Senate. What do you

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Speaker 2: tell John Thune to do?

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Speaker 3: Yeah?

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Speaker 4: I mean, look, all of this is happening because US

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Speaker 4: Congress seeded control over trade policy to the president. They

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Speaker 4: did it a long time ago, they did more than

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Speaker 4: fifty years ago. And because presidents were assumed to be

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Speaker 4: more interested in the international position of the United States

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Speaker 4: than individual congress people would be. Congress is gonna take

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Speaker 4: that back, would take and there's actually a lot of

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Speaker 4: bipartisan support for that. There is. I think people in

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Speaker 4: Congress they're not idiots, not all of them are idiots. Anyway,

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Speaker 4: they do realize that this is being that this is crazy,

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Speaker 4: and all they need to do really is restore. You

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Speaker 4: make trade policy, like the rest of policy, something that

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Speaker 4: you have the Congress has to vote on. There are

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Speaker 4: reasons why we didn't do that, but so I, you know,

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Speaker 4: a trum might be a change in legislation, but he h,

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Speaker 4: but he's uh. That would put him on the spot

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Speaker 4: and if necessary, you know.

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Speaker 3: Overrule him.

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Speaker 4: Just make this a well, you know, take take take

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Speaker 4: away an authority to do this crazy stuff.

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Speaker 3: Okay, Paul, we got to leave it at that.

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Speaker 2: Thank you for starting in morning with us, Paul swee

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Speaker 2: and and the whole team. Thank Paul Kruman for his effort.

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Speaker 2: Look to his sub stack, which is really lighten up.

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Speaker 2: I can't say enough about it. It's really quite it's

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Speaker 2: it's more heated than it was with The New York Times.

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Speaker 2: For the years of you that love and disagree with

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Speaker 2: Professor Krue.

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Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on Apple,

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Speaker 1: Karplay and Android Otto with the Bloomberg Business app, or

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Speaker 1: watch us live on YouTube.

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Speaker 3: John stolffus for.

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Speaker 2: This Now he's a o co with Oppenheimer and where

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Speaker 2: surely he could be with us. He's been a bull

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Speaker 2: that's nailed this over the last four or five, six,

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Speaker 2: eight years.

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Speaker 3: John, I believe you lowered your s.

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Speaker 2: And p call which was way out there somewhere, as

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Speaker 2: Linda Ronstad said, but if it was out there, John Stolfus,

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Speaker 2: are you still a bull as you cut back your view?

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Speaker 7: Yes, great to be on the show with you, Tom,

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Speaker 7: I have got to say we remained bullish. We just

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Speaker 7: had to trim the target because the depth of the

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Speaker 7: selling was such that, you know, we would have have

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Speaker 7: had to have about a thirty percent upside from the

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Speaker 7: bottom and instead of fifty nine to fifty down from

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Speaker 7: seventy one hundred is a year end target for the

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Speaker 7: S and P five hundred, and having reduced our earnings

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Speaker 7: projection from two seventy five to two sixty five, we

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Speaker 7: feel comfortable here right sizing expectations based on the damage

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Speaker 7: that has been done related to sentiment in certain pockets

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Speaker 7: that you know, it's we don't think it's just about

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Speaker 7: fear and greed. We think it's it's fear and greed

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Speaker 7: is always in the markets. But on top of that,

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Speaker 7: there's need to invest for serious purposes like retirement, kids,

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Speaker 7: education in retirement, all kinds of things like that, as

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Speaker 7: well as you have based on innovation in technology, we

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Speaker 7: believe where the water shed period on the timeline of

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Speaker 7: financial history here and manufacturing history with what AI is

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Speaker 7: eventually going to do, so we feel comfortable. Like John McLaughlin,

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Speaker 7: I think it was his second album. Our goal is

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Speaker 7: beyond where we are right now, but we're quite aware

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Speaker 7: of what's happening.

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Speaker 3: He's so sophisticated. I can't keep up now.

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Speaker 2: John McLoughlin had a scallop neck, like between the frets

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Speaker 2: of the neck. He had the woods scalloped out and

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Speaker 2: different things.

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Speaker 5: You go, hey, John, it's just I'd love to just

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Speaker 5: to get your perspective. You've been in the markets for decades.

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Speaker 5: What did you make of the of the selling over

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Speaker 5: the last several days here?

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Speaker 8: What did I make of the selling?

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Speaker 7: Yeah, it looked like the negative pitch Book. Generally speaking,

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Speaker 7: when something happens that creates a catalyst for bears, skeptics

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Speaker 7: and nervous investors to sell without FOMO in what is

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Speaker 7: likely a secular bull market, you get that kind of thing.

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Speaker 7: You bring out the negative pitch book, it gets negativity

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Speaker 7: to infinity is projected, the market gripped with fear. In

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Speaker 7: the trading community, a lot of people are looking, I

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Speaker 7: would think, based on the selling, probably looking for their

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Speaker 7: next vanity plate on their next trophy automobile related to

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Speaker 7: selling in this kind of a period, But for investors,

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Speaker 7: just as your prior guest said, there's the opportunity to

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Speaker 7: look for We've been saying it for a long time.

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Speaker 8: Babies that get tossed out with the bathwater. We don't

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Speaker 8: think it's a by the dip moment. We think right

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Speaker 8: now it's shopping list, you know.

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Speaker 7: We like what's been beaten up, the worst of the

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Speaker 7: qualities actors, INFOTAC, communications services, consumer discretionary. Yeah, let's keep shopping,

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Speaker 7: and then financials and industrials, which we think are pivoted

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Speaker 7: well for where we're headed once we get through this

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Speaker 7: very uncomfortable period with the tariffs. We're just simply priced

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Speaker 7: too high for the market to digest without some pretty

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Speaker 7: serious indigestions. It wasn't it. We don't think it was

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Speaker 7: a tantrum. We think it was a genuine protest, that

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Speaker 7: this was a bit munch. You know, it's tariff's one

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Speaker 7: oh one in the administration's previous one were one thing,

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Speaker 7: Tariff's one oh two during the Biden administration one thing.

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Speaker 3: But this was a tariffs four.

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Speaker 7: To oh one or maybe graduate studies based on the

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Speaker 7: fact that it's really been over a one hundred years

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Speaker 7: that we've lived this kind of proposition in tariffs.

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Speaker 3: There are anybody.

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Speaker 7: I don't think anybody is around who's alive, alive or

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Speaker 7: knows that they're alive, who remembers.

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Speaker 3: This is megs this kind of a period.

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Speaker 2: Is tech an opportunity here? I mean they were trading

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Speaker 2: our thirty eight thirty nine. I got Apple with a

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Speaker 2: P twenty five is twenty six ish? Is tech an opportunity?

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Speaker 7: John Stulfus, we have to think so, you know, we're

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Speaker 7: all on the upgrade cycle without naming the company.

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Speaker 8: I was in a big store where they sell technology yesterday.

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Speaker 3: John.

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Speaker 2: I know you don't do individual stacks, but you know

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Speaker 2: a lot of people are in these things.

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Speaker 3: Not to be tried about it.

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Speaker 2: There's some real losses taken out there. As we said

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Speaker 2: to Kim Dawson, are we still in a bull market?

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Speaker 3: I believe so, and I believe it.

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Speaker 8: It's related to that watershed period on the timeline of

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Speaker 8: of of manufacturing history and technologies history.

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Speaker 2: UH.

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Speaker 8: That revolutionizes things going forward, and that will bring its

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Speaker 8: own questions and agony at different points when we take

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Speaker 8: a look and see. We see the disruptions uh within industries,

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Speaker 8: whether it's in hiring or businesses that don't make don't

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Speaker 8: adapt well to the new world.

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Speaker 3: Uh.

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Speaker 8: That's a whole other story up ahead.

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Speaker 7: But overall, the market's going to be looking for what

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Speaker 7: what what builds UH earnings?

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Speaker 3: Both?

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Speaker 7: What where does? Where does revenue growth come from? That's

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Speaker 7: what that's what the market really cares about, and that's

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Speaker 7: what appeared to be very much in Dainger near term

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Speaker 7: on April second, when the tariffs were brought out, brought

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Speaker 7: into the showroom so to speak.

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Speaker 5: Hey John, what have you done with your SMP five

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Speaker 5: hundred estimates?

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Speaker 7: Yeah, with the S and P we went from two

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Speaker 7: seventy five earnings projection to two sixty five, so you know,

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Speaker 7: it's definitely a haircut on that. And then we went

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Speaker 7: from seventy one hundred as a price target year end

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Speaker 7: to fifty nine to fifty still looking for about so

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Speaker 7: we're looking for about seventeen percent upside from where.

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Speaker 8: We were on Friday, which is sort of parallel if

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Speaker 8: you think about it, to where we put our target

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Speaker 8: on December ninth for this year. Last year, we put

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Speaker 8: it in for this year and We were.

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Speaker 7: Looking for about seventeen percent upside from that level, which

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Speaker 7: was pre the peak of February. What was in February nineteenth,

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Speaker 7: So you know, we were looking at seventy one thinking

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Speaker 7: that was rather a conservative based out a year where

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Speaker 7: we'd seen a pair of years and around twenty three

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Speaker 7: percent respectively for twenty three and twenty four.

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Speaker 2: From where we are right now, that John Sulphus call

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Speaker 2: is up thirteen point eight percent. John Stulfus, a Oppenheiron Company.

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Speaker 2: Thank you, thank you, thank you.

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Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

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Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto

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00:24:22,800 --> 00:24:25,760
Speaker 1: with the Bloomberg Business app. You can also listen live

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00:24:25,840 --> 00:24:29,439
Speaker 1: on Amazon Alexa from our flagship New York station. Just

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00:24:29,480 --> 00:24:31,920
Speaker 1: say Alexa play Bloomberg eleven thirty.

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Speaker 3: She's never upset anyone.

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Speaker 2: In economics, Ellen Wall of the Atlantic Council joins us

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Speaker 2: right now, Ellen, what is Saudi Arabia or frankly, Exona, Texas?

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Speaker 2: What do they do with fifty nine dollars oil?

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Speaker 9: What do they do with fifty nine dollars? They sell

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Speaker 9: as much as they possibly can, because more they can

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Speaker 9: sell the more money they can make. Yeah, it'd be

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Speaker 9: great if it was higher, But at this point, I

437
00:24:57,000 --> 00:24:59,439
Speaker 9: think they're stuck with just trying to sell as much

438
00:24:59,480 --> 00:25:03,520
Speaker 9: as they can, and some countries like China will probably

439
00:25:04,359 --> 00:25:06,960
Speaker 9: see it, isn't it as a time to stock up?

440
00:25:07,520 --> 00:25:10,080
Speaker 3: Is there a break even price for ellen Wald? Paul's

441
00:25:10,160 --> 00:25:11,760
Speaker 3: ars Paul fifty fifty five?

442
00:25:11,840 --> 00:25:14,479
Speaker 2: I think Paul's working with fifty five dollars a barrel's

443
00:25:14,520 --> 00:25:15,000
Speaker 2: break even.

444
00:25:15,040 --> 00:25:16,960
Speaker 3: Where's ellen Wald's break even?

445
00:25:17,840 --> 00:25:20,280
Speaker 9: You know, it really depends. I mean their producers in

446
00:25:20,320 --> 00:25:23,240
Speaker 9: the US who's break even as much lower? Remember Saudi

447
00:25:23,240 --> 00:25:27,919
Speaker 9: Arabia's break even is about six dollars, So on six

448
00:25:27,960 --> 00:25:31,359
Speaker 9: break Saudi Arabian a Ramco is going to come out better.

449
00:25:31,440 --> 00:25:32,280
Speaker 9: Yeah it's about six.

450
00:25:32,680 --> 00:25:32,960
Speaker 4: Wow.

451
00:25:33,760 --> 00:25:36,000
Speaker 5: See I watched Landman Ellen, so I feel like I'm

452
00:25:36,040 --> 00:25:41,399
Speaker 5: an expert on all oil and gas. But where's the

453
00:25:41,560 --> 00:25:43,760
Speaker 5: US here? I mean, the US is now the largest

454
00:25:43,760 --> 00:25:47,159
Speaker 5: oil producer with thirteen million barrels per day? What do

455
00:25:47,160 --> 00:25:49,160
Speaker 5: you hear from the US producers here?

456
00:25:50,240 --> 00:25:50,480
Speaker 8: Yeah?

457
00:25:51,000 --> 00:25:53,520
Speaker 9: What we're hearing from the US producers is a lot

458
00:25:53,560 --> 00:25:57,040
Speaker 9: of uncertainty. All of this trade stuff is really throwing

459
00:25:57,080 --> 00:26:00,679
Speaker 9: them for a loop. They are very very concern especially

460
00:26:00,720 --> 00:26:04,560
Speaker 9: smaller producers. Remember, there are a lot of small producers

461
00:26:04,560 --> 00:26:07,040
Speaker 9: still in the United States and that accounts for a

462
00:26:07,080 --> 00:26:09,680
Speaker 9: lot of the oil produce. Yes, we have a lot

463
00:26:09,720 --> 00:26:12,760
Speaker 9: of large producers, but we're still really a country of

464
00:26:13,000 --> 00:26:16,960
Speaker 9: a lot of small oil producers, and you know, these

465
00:26:17,040 --> 00:26:20,640
Speaker 9: kind of fluctuations can really impact them. And the tariffs

466
00:26:20,640 --> 00:26:25,560
Speaker 9: are causing huge headaches when it comes to the steel

467
00:26:25,680 --> 00:26:27,960
Speaker 9: and the kinds of products they need to drill oil.

468
00:26:28,240 --> 00:26:31,480
Speaker 9: And while we're not seeing that impact production right now,

469
00:26:32,280 --> 00:26:34,800
Speaker 9: that that is going to come soon. We're going to

470
00:26:34,880 --> 00:26:39,200
Speaker 9: see companies making decisions to not complete well simply because

471
00:26:39,440 --> 00:26:42,560
Speaker 9: it's too expensive. The goods they need, the tubular goods

472
00:26:42,560 --> 00:26:46,040
Speaker 9: are just too expensive to make sense, and they will

473
00:26:46,119 --> 00:26:49,600
Speaker 9: leave that well, you know, kind of unfinished, waiting for

474
00:26:49,680 --> 00:26:51,960
Speaker 9: the price to come down for when it makes sense.

475
00:26:52,040 --> 00:26:55,639
Speaker 9: So I wouldn't be surprised if this continues, if we

476
00:26:55,680 --> 00:27:00,199
Speaker 9: do see production starting to trend lower, and I think

477
00:27:00,240 --> 00:27:02,960
Speaker 9: that will also be reflected in some of the new

478
00:27:03,760 --> 00:27:06,680
Speaker 9: EIA forecasts that we're going to see coming up.

479
00:27:07,000 --> 00:27:09,160
Speaker 5: So, Ellen, it's sixty dollars a barrow here. I mean,

480
00:27:09,160 --> 00:27:12,280
Speaker 5: it seems to me that you know that reflects concerns

481
00:27:12,280 --> 00:27:15,399
Speaker 5: about global demand going forward given some of these tariff

482
00:27:15,440 --> 00:27:21,080
Speaker 5: induced uncertainties in the marketplace. Does OPEK cut output the

483
00:27:21,200 --> 00:27:23,120
Speaker 5: US producers cut output?

484
00:27:24,840 --> 00:27:26,960
Speaker 9: The US producers are going to cut output if it

485
00:27:27,080 --> 00:27:30,720
Speaker 9: makes sense for them economically and financially. Opek, on the

486
00:27:30,760 --> 00:27:34,359
Speaker 9: other hand, can make that decision, uh, you know, for

487
00:27:35,119 --> 00:27:36,679
Speaker 9: I mean, I would say they mostly make it for

488
00:27:36,720 --> 00:27:39,959
Speaker 9: economic reasons, but they can decide as a group, you know,

489
00:27:40,040 --> 00:27:43,960
Speaker 9: either to halt their plan production increases. They've already gone

490
00:27:44,040 --> 00:27:47,280
Speaker 9: through with the one that started in April, which was

491
00:27:47,320 --> 00:27:49,960
Speaker 9: a very very minor increase. It's a very small amount

492
00:27:49,960 --> 00:27:52,200
Speaker 9: of additional oil on the market. But the idea is

493
00:27:52,240 --> 00:27:54,480
Speaker 9: that they're they're rolling, you know, they're board with this.

494
00:27:54,880 --> 00:27:58,000
Speaker 9: They can decide to pause that, and they they very

495
00:27:58,040 --> 00:28:00,800
Speaker 9: well do that, you know, next quarter, decide we're not

496
00:28:00,840 --> 00:28:04,040
Speaker 9: going to increase anymore until we see how this plays out.

497
00:28:04,160 --> 00:28:07,119
Speaker 2: Ellen Wald with a senior fellow Atlantic Council. She continues,

498
00:28:07,320 --> 00:28:11,080
Speaker 2: whether it's her book Saudi Ink is definitive, Ellen, I

499
00:28:11,119 --> 00:28:13,160
Speaker 2: need an update on this because Paul and I did

500
00:28:13,160 --> 00:28:15,680
Speaker 2: they turned this down for the trip to Vienna for Opek.

501
00:28:16,200 --> 00:28:20,800
Speaker 2: Is it Opek or is it Opek plus that's working

502
00:28:21,400 --> 00:28:23,119
Speaker 2: into twenty twenty six.

503
00:28:24,640 --> 00:28:28,800
Speaker 9: I see a continued Opek plus. You know, we've seen

504
00:28:28,840 --> 00:28:31,560
Speaker 9: a lot a lot of troubles in this group, a

505
00:28:31,600 --> 00:28:33,480
Speaker 9: lot of a lot of troubles in paradise. You know,

506
00:28:33,560 --> 00:28:36,159
Speaker 9: there's a time where Russia and Saudi Arabio most split,

507
00:28:36,720 --> 00:28:40,320
Speaker 9: where Iran problems with Iran threatening to to you know,

508
00:28:40,440 --> 00:28:42,640
Speaker 9: force the whole group apart. But I think we're going

509
00:28:42,720 --> 00:28:45,320
Speaker 9: to see it continued. I do think right now the

510
00:28:45,320 --> 00:28:49,960
Speaker 9: country to look at is actually Kazakhstan and willingness continue

511
00:28:50,280 --> 00:28:55,240
Speaker 9: to go along with any kinds of cuts or stays

512
00:28:55,280 --> 00:28:58,960
Speaker 9: in production increases. They really want to increase their production,

513
00:28:59,120 --> 00:29:02,480
Speaker 9: and so I think they're really maybe the troublemaker to keep.

514
00:29:02,320 --> 00:29:03,560
Speaker 4: An eye on Ellen.

515
00:29:03,560 --> 00:29:06,400
Speaker 5: How about Russia. I mean, if we are moving towards

516
00:29:06,600 --> 00:29:12,520
Speaker 5: some maybe level of peace in Ukraine, does Russia supply

517
00:29:12,840 --> 00:29:15,520
Speaker 5: of oil and natural gas? Does that find its way

518
00:29:15,640 --> 00:29:17,320
Speaker 5: back into the mainstream.

519
00:29:18,480 --> 00:29:20,960
Speaker 9: So the interesting thing is that there's still plenty of

520
00:29:21,200 --> 00:29:23,840
Speaker 9: of you know, Russian oil and Russian gas on the

521
00:29:23,880 --> 00:29:26,760
Speaker 9: market right now. The question is if there is some

522
00:29:26,880 --> 00:29:32,000
Speaker 9: kind of resolution and the price cap policy and and sanctions, uh,

523
00:29:32,040 --> 00:29:35,320
Speaker 9: and then that Russian oil which is being sold at

524
00:29:35,360 --> 00:29:39,280
Speaker 9: a discount because it is uh, you know, contraband or

525
00:29:39,320 --> 00:29:42,720
Speaker 9: sanctioned or under this this price cap policy. The Russians

526
00:29:42,760 --> 00:29:44,400
Speaker 9: are going to say, we're not going to sell it

527
00:29:44,440 --> 00:29:47,520
Speaker 9: for your your you know, discount at you know, from

528
00:29:47,560 --> 00:29:49,800
Speaker 9: the normal prices. We're we're put it back on the

529
00:29:49,800 --> 00:29:52,120
Speaker 9: market at regular prices. And so I think that we'll

530
00:29:52,160 --> 00:29:56,000
Speaker 9: actually push prices up because they're not going to take

531
00:29:56,200 --> 00:29:57,880
Speaker 9: you know, they're not going to accept these lower prices

532
00:29:57,920 --> 00:29:59,760
Speaker 9: for their oil. They're going to say we're in the

533
00:29:59,800 --> 00:30:00,520
Speaker 9: clear or now.

534
00:30:00,440 --> 00:30:01,479
Speaker 10: So you know, pay up.

535
00:30:02,080 --> 00:30:04,600
Speaker 5: So Ellen, give us a sense here, I mean, what's

536
00:30:04,640 --> 00:30:07,480
Speaker 5: the industry, how's the industry thinking about demand?

537
00:30:07,480 --> 00:30:07,640
Speaker 3: Here?

538
00:30:07,680 --> 00:30:10,640
Speaker 5: I'm guessing the oil industry, the energy industry in general

539
00:30:10,760 --> 00:30:13,120
Speaker 5: is like everybody else, we're just kind of floundering. You're

540
00:30:13,320 --> 00:30:17,239
Speaker 5: looking for some direction. Is a feeling that demand is

541
00:30:17,280 --> 00:30:19,040
Speaker 5: going to be soft going forward globally.

542
00:30:20,320 --> 00:30:21,040
Speaker 4: I do think.

543
00:30:20,880 --> 00:30:23,400
Speaker 9: That they feel like in the long run, in the

544
00:30:23,440 --> 00:30:26,840
Speaker 9: bigger picture, the demand picture looks good, but in the

545
00:30:26,920 --> 00:30:30,320
Speaker 9: short term there are some serious concerns given this kind

546
00:30:30,360 --> 00:30:33,600
Speaker 9: of shock to the whole global economic system, and that

547
00:30:33,840 --> 00:30:38,240
Speaker 9: it could push us into some kind of economic state

548
00:30:38,320 --> 00:30:41,520
Speaker 9: where demand is lower. You know, there's some interesting news

549
00:30:41,560 --> 00:30:45,440
Speaker 9: about whether the US is going to impose serious fees

550
00:30:46,120 --> 00:30:48,640
Speaker 9: at port of call for ships made in China. I

551
00:30:48,680 --> 00:30:50,800
Speaker 9: mean that that could have impacted the oil industry in

552
00:30:50,880 --> 00:30:53,680
Speaker 9: a pretty serious way. And so I think it's really

553
00:30:53,720 --> 00:30:57,360
Speaker 9: just this wait and see, don't make any decisions. You know,

554
00:30:57,440 --> 00:30:59,800
Speaker 9: we could be in there some real pain in the

555
00:30:59,800 --> 00:31:00,720
Speaker 9: short term.

556
00:31:00,760 --> 00:31:02,800
Speaker 3: Oh, thank you so much. We need a new book.

557
00:31:02,840 --> 00:31:05,720
Speaker 2: She's with the Atlantic Council, Saudi Yank is a jewel

558
00:31:05,800 --> 00:31:14,800
Speaker 2: Henriad and the Royal family of Saudi Arabia.

559
00:31:16,320 --> 00:31:20,200
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

560
00:31:20,240 --> 00:31:23,280
Speaker 1: starting at seven am Eastern on Apple, Coarplay, and Android

561
00:31:23,280 --> 00:31:26,320
Speaker 1: Auto with the Bloomberg Business app. You can also watch

562
00:31:26,360 --> 00:31:29,320
Speaker 1: us live every weekday on YouTube and always on the

563
00:31:29,320 --> 00:31:30,360
Speaker 1: Bloomberg Terminal.

564
00:31:30,480 --> 00:31:33,800
Speaker 2: I'm gonna cut to the chase. If Tom Hanks had

565
00:31:33,840 --> 00:31:36,520
Speaker 2: to make a war movie, he'd make it out of

566
00:31:36,600 --> 00:31:41,040
Speaker 2: John Thune's father. Thune in South Dakota, grew up in

567
00:31:41,080 --> 00:31:45,040
Speaker 2: a family his father was the distinguished Flying Cross like

568
00:31:45,160 --> 00:31:49,280
Speaker 2: the real deal in the Pacific. John Thune came you know,

569
00:31:49,320 --> 00:31:53,480
Speaker 2: the typical political life, star athlete where in God's Name,

570
00:31:53,760 --> 00:31:58,400
Speaker 2: Libby Cantrell, are the GOP and the good Senator of South.

571
00:31:58,200 --> 00:32:01,640
Speaker 11: Dakota relates to trade?

572
00:32:01,720 --> 00:32:03,080
Speaker 3: Yes, where are they?

573
00:32:03,160 --> 00:32:05,240
Speaker 11: Well, I think it? I mean well, first of all,

574
00:32:05,240 --> 00:32:08,080
Speaker 11: I think privately they are. There is a lot of pushback.

575
00:32:07,960 --> 00:32:08,480
Speaker 6: The White House.

576
00:32:10,160 --> 00:32:13,120
Speaker 11: However, Tom, I think it just underscores the fact that

577
00:32:13,120 --> 00:32:16,520
Speaker 11: Congress does not have a lot of levers here because they,

578
00:32:16,880 --> 00:32:22,480
Speaker 11: I mean they they intentionally bequeath delegated tariff authority to

579
00:32:22,520 --> 00:32:26,760
Speaker 11: the President various through various trade Acts nineteen sixty two,

580
00:32:26,880 --> 00:32:29,760
Speaker 11: the Trade Act of nineteen seventy four, AYEPA of nineteen

581
00:32:29,800 --> 00:32:30,360
Speaker 11: seventy seven.

582
00:32:30,360 --> 00:32:32,920
Speaker 3: So you're saying they can't go back to what they.

583
00:32:32,760 --> 00:32:36,960
Speaker 11: Had, Well, they can, but they would need a super majority.

584
00:32:36,960 --> 00:32:39,920
Speaker 11: They would need two thirds of each chamber in order

585
00:32:39,960 --> 00:32:42,280
Speaker 11: to override what would inevitably be a veto. So I

586
00:32:42,320 --> 00:32:47,840
Speaker 11: think there is a practical element here, practically one more question.

587
00:32:47,920 --> 00:32:49,920
Speaker 2: Sweeney's looking at me, like, Tom, can I get a

588
00:32:49,960 --> 00:32:52,920
Speaker 2: word in here? Let me cut to the chase. Did

589
00:32:53,000 --> 00:32:55,680
Speaker 2: Trump lose the GOP House in the Rose Garden?

590
00:32:57,080 --> 00:32:59,720
Speaker 11: Look, I know I don't think so. I mean, I

591
00:32:59,720 --> 00:33:03,000
Speaker 11: think this speaks to the fact that this party is

592
00:33:03,040 --> 00:33:06,120
Speaker 11: the party of Trump, and many folks in the House

593
00:33:06,240 --> 00:33:08,640
Speaker 11: have the President to thank for even being there in

594
00:33:08,680 --> 00:33:10,960
Speaker 11: the first place. And so this is why I think

595
00:33:10,960 --> 00:33:14,680
Speaker 11: there's been a real reluctance to push back in public. Again,

596
00:33:14,720 --> 00:33:17,760
Speaker 11: there is some private pushback, but again I think this

597
00:33:17,800 --> 00:33:21,280
Speaker 11: is a worldview that President Trump has had for forty years.

598
00:33:21,320 --> 00:33:24,200
Speaker 11: This is what we keep telling our clients, and he

599
00:33:24,320 --> 00:33:27,280
Speaker 11: ran on this. He believes he has a mandate to

600
00:33:27,440 --> 00:33:30,600
Speaker 11: fulfill this. He believes that there's a lot of unfinished

601
00:33:30,640 --> 00:33:34,120
Speaker 11: business from the first administration. And I think that the

602
00:33:34,920 --> 00:33:38,000
Speaker 11: market obviously wants to maybe see through this or hope

603
00:33:38,000 --> 00:33:41,000
Speaker 11: that there is something this will result in a different outcome.

604
00:33:41,280 --> 00:33:43,560
Speaker 11: But our view is teriff rates are going to be

605
00:33:43,600 --> 00:33:46,320
Speaker 11: going up and that will have a headwind on you know,

606
00:33:46,440 --> 00:33:50,040
Speaker 11: growth and likely have implications for inflation. To the degree

607
00:33:50,240 --> 00:33:52,840
Speaker 11: is going to depend on the stickiness of all this, obviously,

608
00:33:53,360 --> 00:33:56,400
Speaker 11: but I think there it is naive to think that

609
00:33:56,560 --> 00:33:59,920
Speaker 11: we are not going to see probably significantly higher terarrorf levels.

610
00:34:00,120 --> 00:34:02,520
Speaker 5: And President Trump has been very clear that he've used

611
00:34:02,520 --> 00:34:05,600
Speaker 5: the US trade deficit as the effective scorecard between the

612
00:34:05,680 --> 00:34:07,560
Speaker 5: US and the rest of the world, and the scorecard

613
00:34:07,600 --> 00:34:10,560
Speaker 5: shows a deficit of one trillion dollars. Is that the

614
00:34:10,640 --> 00:34:13,640
Speaker 5: right way to look at it? Is that a fair Yeah?

615
00:34:13,640 --> 00:34:16,080
Speaker 11: I mean this is what we what I tell our

616
00:34:16,120 --> 00:34:19,239
Speaker 11: traders as well. It is really not our kind of

617
00:34:19,320 --> 00:34:22,839
Speaker 11: role to editorialize or to judge whether this is good

618
00:34:22,880 --> 00:34:26,600
Speaker 11: economic policy or a bad economic policy. What we think

619
00:34:26,680 --> 00:34:28,560
Speaker 11: is in terms of providing off of for our clients

620
00:34:28,560 --> 00:34:30,240
Speaker 11: is what is likely to happen at what should happen.

621
00:34:30,600 --> 00:34:33,600
Speaker 11: So we may quibble about whether the trade deficit is

622
00:34:33,640 --> 00:34:36,440
Speaker 11: the right scorecard, is the right metric, but the president

623
00:34:36,480 --> 00:34:38,520
Speaker 11: is very focused on and it's not even the trade

624
00:34:38,560 --> 00:34:41,719
Speaker 11: deficit writ large, it is the goods trade deficit. So

625
00:34:42,080 --> 00:34:44,960
Speaker 11: it is very specific, and he has this very specific

626
00:34:45,000 --> 00:34:48,120
Speaker 11: metric for success. And again people may disagree with that.

627
00:34:48,120 --> 00:34:50,720
Speaker 11: That's fine, but like that is not going to change.

628
00:34:50,760 --> 00:34:52,560
Speaker 11: I think what is likely going to be the outcome,

629
00:34:52,680 --> 00:34:54,560
Speaker 11: which is he is going to be focused on that

630
00:34:54,640 --> 00:34:56,880
Speaker 11: as a metric of sort of future success.

631
00:34:56,920 --> 00:35:00,760
Speaker 5: And one could argue that to balance potentially those headwinds

632
00:35:00,760 --> 00:35:03,520
Speaker 5: that would result from higher tariffs. Uh, he and his

633
00:35:03,520 --> 00:35:08,520
Speaker 5: administration need a that tax policy to go through like quickly.

634
00:35:08,600 --> 00:35:11,160
Speaker 5: Is that something? How do you guys handicap this?

635
00:35:11,360 --> 00:35:11,560
Speaker 4: Yeah?

636
00:35:11,560 --> 00:35:13,759
Speaker 11: So I do think that is going to be a

637
00:35:13,800 --> 00:35:16,720
Speaker 11: big pivot and a big sort of shift in focus,

638
00:35:16,760 --> 00:35:20,400
Speaker 11: if you will. It already has been obviously, the House

639
00:35:20,480 --> 00:35:23,080
Speaker 11: and the Senate are kind of working through the machinations

640
00:35:23,080 --> 00:35:25,719
Speaker 11: of the very kind of tedious legislative process. I will

641
00:35:25,760 --> 00:35:28,520
Speaker 11: not underestimate Trump's bullypull. But here though, in terms of

642
00:35:28,560 --> 00:35:31,080
Speaker 11: getting this through, I think what you're looking at is,

643
00:35:31,200 --> 00:35:33,839
Speaker 11: you know, there are these different budget resolutions that sort

644
00:35:33,880 --> 00:35:36,960
Speaker 11: of set up for the broader tax bill. They're quite different.

645
00:35:37,320 --> 00:35:39,360
Speaker 11: But I think at the end of the day, Trump

646
00:35:39,400 --> 00:35:41,600
Speaker 11: will get what he wants in terms of the tax bill.

647
00:35:41,680 --> 00:35:42,560
Speaker 11: That is where the GOP is.

648
00:35:42,680 --> 00:35:44,880
Speaker 2: Why mcguinnis was with us yesterday or the day before.

649
00:35:44,880 --> 00:35:47,840
Speaker 2: I'm sorry, it's blurfolks. And the basic idea is Libby

650
00:35:47,880 --> 00:35:50,640
Speaker 2: Cantrell says they're just going to overlay more debt on

651
00:35:50,640 --> 00:35:51,240
Speaker 2: the deficit.

652
00:35:52,320 --> 00:35:54,160
Speaker 3: The deficit. Can't remember what it is?

653
00:35:54,239 --> 00:35:56,959
Speaker 11: Yeah, yes, oply the deficit on the definite than the debt.

654
00:35:57,040 --> 00:35:57,320
Speaker 10: Yes.

655
00:35:57,680 --> 00:35:59,720
Speaker 11: I mean, look, but I think I mean a couple

656
00:35:59,719 --> 00:36:04,120
Speaker 11: of things is that tariffs are do generate revenue, and

657
00:36:04,200 --> 00:36:07,640
Speaker 11: so if they are the sort of maximalist approach on tariffs,

658
00:36:07,680 --> 00:36:11,560
Speaker 11: there could be actually pretty significant revenue coming into the treasury. Coffers. Now,

659
00:36:11,800 --> 00:36:13,759
Speaker 11: I don't think that's going to go down to pay

660
00:36:13,760 --> 00:36:15,640
Speaker 11: down debt, go to pay down debt. I think that

661
00:36:15,760 --> 00:36:18,880
Speaker 11: is literally going to go to pay for more task cuts.

662
00:36:19,080 --> 00:36:21,799
Speaker 11: But that can in terms of growth, like balance out

663
00:36:22,120 --> 00:36:23,920
Speaker 11: some of these sort of cross currents you know that

664
00:36:23,920 --> 00:36:28,359
Speaker 11: we've been we've been talking about with our with our clients.

665
00:36:26,320 --> 00:36:31,399
Speaker 5: So the folks that speak for him are talking about

666
00:36:31,440 --> 00:36:33,719
Speaker 5: the number of countries that are lining up to negotiate

667
00:36:33,760 --> 00:36:37,600
Speaker 5: deals with the US. Is that something that you guys

668
00:36:37,680 --> 00:36:39,759
Speaker 5: think will be successful? I mean, are we going to

669
00:36:39,800 --> 00:36:43,680
Speaker 5: get a lowering of some of the expectations for tariffs

670
00:36:43,760 --> 00:36:45,359
Speaker 5: or should we just kind of layer in a base

671
00:36:45,480 --> 00:36:46,560
Speaker 5: level and go from there.

672
00:36:46,600 --> 00:36:49,520
Speaker 11: Well, so I think you know, my view is that

673
00:36:50,080 --> 00:36:53,200
Speaker 11: sort of the destination here at a minimum, is that

674
00:36:53,239 --> 00:36:56,319
Speaker 11: we see a universal ten percent tariff, that we see

675
00:36:56,360 --> 00:36:59,440
Speaker 11: sectoral tariffs on chips and pharma and autos and what

676
00:36:59,560 --> 00:37:02,520
Speaker 11: have you, and then we see these elevated tariffs sunshine.

677
00:37:02,560 --> 00:37:04,960
Speaker 2: So when you say that to your managers quickly here,

678
00:37:05,120 --> 00:37:07,560
Speaker 2: when you say that to your managers, how do they respond?

679
00:37:07,719 --> 00:37:11,759
Speaker 11: They say, equity, Yeah, headwind to growth and maybe a

680
00:37:11,760 --> 00:37:13,920
Speaker 11: little bit of upper pressure on inflation. But we think

681
00:37:13,960 --> 00:37:15,600
Speaker 11: this is more of a growth story than it is.

682
00:37:17,880 --> 00:37:18,960
Speaker 3: I got to make some news here.

683
00:37:20,680 --> 00:37:22,440
Speaker 11: I am actually not trying to make news.

684
00:37:23,120 --> 00:37:26,319
Speaker 2: So is Popco talking about an inflation vector? Can they

685
00:37:26,320 --> 00:37:28,800
Speaker 2: actually turn it around down the road to a lower

686
00:37:28,880 --> 00:37:30,200
Speaker 2: growth disinflation area.

687
00:37:30,239 --> 00:37:32,040
Speaker 11: Well, and I think the question, well, I think this

688
00:37:32,120 --> 00:37:35,279
Speaker 11: is and again not to not to not commit here,

689
00:37:35,360 --> 00:37:36,960
Speaker 11: but I do think this is going to want that

690
00:37:37,040 --> 00:37:39,840
Speaker 11: this could be an an increase in the price level.

691
00:37:39,920 --> 00:37:42,920
Speaker 11: One time increase I think obviously depends on what happens

692
00:37:42,920 --> 00:37:47,000
Speaker 11: to inflation expectations, inflation expectations. Inflation obviously has been high,

693
00:37:47,080 --> 00:37:50,600
Speaker 11: so this could feed into increase inflation expectations.

694
00:37:50,640 --> 00:37:51,800
Speaker 9: But we really do think.

695
00:37:51,640 --> 00:37:53,440
Speaker 11: The story here is on the growth side and then

696
00:37:53,600 --> 00:37:54,880
Speaker 11: than the inflation side.

697
00:37:55,520 --> 00:37:57,560
Speaker 2: I must I mean, I mean, you know, I'm seeing

698
00:37:57,600 --> 00:38:01,799
Speaker 2: a few people model negative nominal g dep like back

699
00:38:01,800 --> 00:38:03,200
Speaker 2: to England nineteen thirties.

700
00:38:03,360 --> 00:38:05,480
Speaker 11: Yeah, I don't think we're that far. Again, you do

701
00:38:05,600 --> 00:38:07,600
Speaker 11: have these cross currents in terms of policy. If you're

702
00:38:07,640 --> 00:38:10,360
Speaker 11: just looking at tariffs alone, it looks very bad. But

703
00:38:10,400 --> 00:38:12,880
Speaker 11: if you're actually you know, layering in some of the

704
00:38:12,920 --> 00:38:15,880
Speaker 11: tax cuts, tax policy certainty and all of that and

705
00:38:15,920 --> 00:38:17,240
Speaker 11: maybe a little bit more of a coming.

706
00:38:17,200 --> 00:38:19,239
Speaker 3: Whim Cantrell, thanks so much. I don't agree with that,

707
00:38:19,280 --> 00:38:25,120
Speaker 3: and you said, thanks, thank you so much. With pim Co,

708
00:38:25,320 --> 00:38:28,240
Speaker 3: we'll see what the Republicans do in the house.

709
00:38:28,600 --> 00:38:32,480
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday

710
00:38:32,520 --> 00:38:35,560
Speaker 1: starting at seven am Eastern on Apple Corplay and Android

711
00:38:35,560 --> 00:38:38,600
Speaker 1: Auto with the Bloomberg Business Up. You can also listen

712
00:38:38,680 --> 00:38:41,919
Speaker 1: live on Amazon Alexa from our flagship New York station,

713
00:38:42,480 --> 00:38:45,120
Speaker 1: Just say Alexa Play Bloomberg eleven thirty.

714
00:38:45,280 --> 00:38:49,239
Speaker 5: James Steele, chief Commodities Analysts at HSBC Securities USA Joints,

715
00:38:49,239 --> 00:38:52,799
Speaker 5: is here in our Bloomberg Interactive Brokers studio. James, you know,

716
00:38:52,880 --> 00:38:56,480
Speaker 5: I see gold here up another fifty seven dollars today,

717
00:38:56,480 --> 00:39:00,440
Speaker 5: three thirty one dollars an ounce here. Is it too

718
00:39:00,480 --> 00:39:03,440
Speaker 5: far too fast for gold here? Or is this a

719
00:39:03,520 --> 00:39:04,480
Speaker 5: rational gold market?

720
00:39:04,480 --> 00:39:04,879
Speaker 10: Do you think?

721
00:39:05,840 --> 00:39:05,960
Speaker 4: Well?

722
00:39:05,960 --> 00:39:07,880
Speaker 10: I think you've got to look at what happened in

723
00:39:07,920 --> 00:39:11,840
Speaker 10: the last few days, and we had a big decline

724
00:39:11,880 --> 00:39:15,640
Speaker 10: in gold in league with stock market declines, and I

725
00:39:15,640 --> 00:39:19,479
Speaker 10: think it's easy to ascribe that to gold not being

726
00:39:19,480 --> 00:39:23,480
Speaker 10: a safe haven or lacking safe haven as an asset.

727
00:39:23,760 --> 00:39:27,240
Speaker 10: But actually the opposite is the case, because what happened,

728
00:39:27,640 --> 00:39:31,600
Speaker 10: and this happens with periodic stock declines, is that you

729
00:39:31,719 --> 00:39:35,640
Speaker 10: get gold liquidation by those who are already long, and

730
00:39:35,760 --> 00:39:40,839
Speaker 10: gold therefore fulfills its role as a quality asset. Now,

731
00:39:41,960 --> 00:39:45,560
Speaker 10: when the smoke clears a bit, typically after a stock

732
00:39:45,600 --> 00:39:48,560
Speaker 10: market decline, it depends on how long the decline goes

733
00:39:48,600 --> 00:39:51,680
Speaker 10: on for, but usually after a few days, the smoke

734
00:39:51,760 --> 00:39:55,200
Speaker 10: begins to clear and gold stabilizes and you get a

735
00:39:55,239 --> 00:39:57,080
Speaker 10: safe haven demand coming back.

736
00:39:57,320 --> 00:40:01,200
Speaker 2: So you know, formire morals like us, you know, closest

737
00:40:01,280 --> 00:40:03,600
Speaker 2: I come to gold as you know gold and olive oil.

738
00:40:04,040 --> 00:40:08,800
Speaker 2: The answer is Beijing's on the phone to wear and

739
00:40:08,920 --> 00:40:12,160
Speaker 2: says sell forty seven bars of gold. Is that what

740
00:40:12,239 --> 00:40:13,520
Speaker 2: happened the last couple of days.

741
00:40:15,160 --> 00:40:19,080
Speaker 10: No, it wasn't so much from I think Asia, as

742
00:40:19,120 --> 00:40:23,080
Speaker 10: it was those that had well. Some of it certainly was,

743
00:40:23,320 --> 00:40:28,520
Speaker 10: but it wasn't centrally planned. These are asset managers, portfolio

744
00:40:28,600 --> 00:40:31,400
Speaker 10: managers and others etf folders.

745
00:40:31,600 --> 00:40:32,760
Speaker 3: So it's not central banks.

746
00:40:32,840 --> 00:40:36,239
Speaker 10: No, no, no, no, not at all. This was not

747
00:40:36,800 --> 00:40:40,640
Speaker 10: orchestrated on a central government level. This was people who

748
00:40:40,840 --> 00:40:43,960
Speaker 10: for a couple of years now have been accumulating gold

749
00:40:44,120 --> 00:40:50,280
Speaker 10: or longer as a portfolio diversifier and in need when

750
00:40:50,400 --> 00:40:54,320
Speaker 10: you need to cash your insurance policy in you liquidate

751
00:40:54,360 --> 00:40:55,960
Speaker 10: a little bit. But that but that seems to be

752
00:40:56,000 --> 00:40:57,200
Speaker 10: coming to an end today.

753
00:40:57,320 --> 00:41:00,680
Speaker 5: How do you get a sense of value of gold?

754
00:41:00,880 --> 00:41:01,640
Speaker 5: Relative value?

755
00:41:01,640 --> 00:41:02,239
Speaker 6: How do you think about?

756
00:41:02,760 --> 00:41:05,080
Speaker 5: You wake up saying, point, gold feels expensive here today.

757
00:41:05,120 --> 00:41:07,120
Speaker 5: I'm like me as a stock analyst. I see my

758
00:41:07,160 --> 00:41:09,840
Speaker 5: pe ratio and I can look at that versus the market,

759
00:41:10,000 --> 00:41:10,640
Speaker 5: versus history.

760
00:41:11,040 --> 00:41:11,880
Speaker 3: How of gold.

761
00:41:12,239 --> 00:41:15,880
Speaker 10: Yes, it's not unfortunately, well I suppose fortunately because it

762
00:41:15,920 --> 00:41:18,960
Speaker 10: keeps me in a job. Right that It's not as

763
00:41:19,000 --> 00:41:23,120
Speaker 10: straightforward as with equities. It's also not as straightforward as

764
00:41:23,160 --> 00:41:26,839
Speaker 10: other commodities, where you know, for copper, or for or

765
00:41:26,880 --> 00:41:29,640
Speaker 10: for metals or for grains, you can look at cost

766
00:41:29,680 --> 00:41:33,879
Speaker 10: of production. You can look at day's inventory. My friend

767
00:41:33,960 --> 00:41:39,440
Speaker 10: Javier Blass will tell you about days in consumption for

768
00:41:39,440 --> 00:41:42,160
Speaker 10: for for for for for oil. None of these things

769
00:41:42,200 --> 00:41:45,880
Speaker 10: apply to gold, and that's because gold is part currency

770
00:41:46,239 --> 00:41:51,600
Speaker 10: and part commodity. Certainly, fund supply demand balances are important.

771
00:41:51,880 --> 00:41:53,640
Speaker 10: But if you were to look at, for example, the

772
00:41:53,680 --> 00:41:57,040
Speaker 10: cost of production, that would not give you necessarily a

773
00:41:57,080 --> 00:42:00,600
Speaker 10: clue as to as to where gold is going. You

774
00:42:00,760 --> 00:42:04,240
Speaker 10: have to be sensitive not only to the underlying fundamentals

775
00:42:04,320 --> 00:42:08,000
Speaker 10: on a supply demand basis, but also on the geopolitical

776
00:42:08,200 --> 00:42:11,799
Speaker 10: end and the financial market moves. That's what this is

777
00:42:11,800 --> 00:42:15,520
Speaker 10: what makes gold so interesting and frankly unique.

778
00:42:15,640 --> 00:42:17,520
Speaker 2: James Steele with us, so they just be see he's

779
00:42:17,560 --> 00:42:21,280
Speaker 2: been so helpful to Bloomberg Surveillance with perspective on GOLDI

780
00:42:21,360 --> 00:42:23,800
Speaker 2: welcome all of you on your commute this morning across

781
00:42:23,840 --> 00:42:27,680
Speaker 2: the nation. Good morning Mexico, Good morning Canada, Good evening

782
00:42:27,719 --> 00:42:30,160
Speaker 2: on the Pacific rim of course out on YouTube, building

783
00:42:30,200 --> 00:42:33,120
Speaker 2: every day on Bloomberg Podcast. Really thank you for the

784
00:42:33,200 --> 00:42:37,040
Speaker 2: kind comments out on YouTube, particularly the heated comments about

785
00:42:37,080 --> 00:42:40,560
Speaker 2: some of our guests like Stephen Merrit and Paul Krugwinzo.

786
00:42:40,680 --> 00:42:42,359
Speaker 3: Never any negative comments.

787
00:42:42,080 --> 00:42:44,800
Speaker 2: About James Steele and never seen them, Okay, on the

788
00:42:44,840 --> 00:42:49,000
Speaker 2: Bloomberg I went log Nixon. I took gold back to

789
00:42:49,080 --> 00:42:51,640
Speaker 2: thirty five dollars, an ounce, big leg up.

790
00:42:51,680 --> 00:42:52,280
Speaker 3: In the eighties.

791
00:42:52,320 --> 00:42:54,600
Speaker 2: I remembered I could only shave like once a week,

792
00:42:55,080 --> 00:42:57,200
Speaker 2: and then there was a malaise from the eighties to

793
00:42:57,280 --> 00:43:04,160
Speaker 2: two thousand and then basically other moonshot this pullback in gold.

794
00:43:04,440 --> 00:43:06,960
Speaker 2: Is it a blip on the map, or is that

795
00:43:07,080 --> 00:43:09,080
Speaker 2: fear out there that this is the beginning of the

796
00:43:09,160 --> 00:43:10,240
Speaker 2: taming of gold.

797
00:43:11,239 --> 00:43:13,320
Speaker 10: I wouldn't quite so far as to say it's a blip.

798
00:43:13,800 --> 00:43:17,080
Speaker 10: We have a range this year, our forecast range is

799
00:43:17,120 --> 00:43:21,120
Speaker 10: two eight hundred dollars to three three hundred and fifty dollars,

800
00:43:21,480 --> 00:43:26,600
Speaker 10: and we think that's a reasonable level. That's a reasonable

801
00:43:26,719 --> 00:43:29,160
Speaker 10: range to look at, because if one was to go

802
00:43:29,280 --> 00:43:33,080
Speaker 10: closer to the twenty eight hundred dollars level, I suspect

803
00:43:33,120 --> 00:43:36,360
Speaker 10: that we would get official sector buying, that central bank buying,

804
00:43:37,000 --> 00:43:40,080
Speaker 10: and possibly sovereign wealth fund buying as well, coming back

805
00:43:40,120 --> 00:43:41,680
Speaker 10: in in a bigger way.

806
00:43:41,760 --> 00:43:45,839
Speaker 3: But does Norwegian the Norse Sovereign Wealth Fund? Do they

807
00:43:45,880 --> 00:43:46,680
Speaker 3: own a lot of gold.

808
00:43:47,880 --> 00:43:51,719
Speaker 10: I'm not privy to their gold holdings. But what we

809
00:43:51,840 --> 00:43:53,440
Speaker 10: have noted ever since two.

810
00:43:53,280 --> 00:43:56,600
Speaker 3: Lives here he knows, he knows.

811
00:43:56,680 --> 00:44:01,720
Speaker 10: But what we are we we are aware that since

812
00:44:01,760 --> 00:44:05,640
Speaker 10: twenty twenty two, the fourth quarter, we've seen an extraordinary

813
00:44:05,719 --> 00:44:09,680
Speaker 10: jump in an official sector demand for gold. And that

814
00:44:09,800 --> 00:44:12,360
Speaker 10: year alone, if you look at it and compared to

815
00:44:12,400 --> 00:44:15,480
Speaker 10: mine production, one out of every three ounces of gold

816
00:44:15,560 --> 00:44:17,400
Speaker 10: that came out of a mine went into a Central

817
00:44:17,400 --> 00:44:17,920
Speaker 10: Bank vault.

818
00:44:18,080 --> 00:44:18,400
Speaker 3: Radio.

819
00:44:18,440 --> 00:44:22,120
Speaker 2: You're not getting justice here. YouTube can tell James Steele

820
00:44:22,160 --> 00:44:23,080
Speaker 2: looks like he's out of.

821
00:44:23,000 --> 00:44:25,400
Speaker 3: A Bond movie exactly. I mean he does. He's the

822
00:44:25,440 --> 00:44:27,799
Speaker 3: guy that knows where the gold is. Gold that gold

823
00:44:27,840 --> 00:44:31,200
Speaker 3: finger like the you know, it's like Daniel Craigan all that.

824
00:44:31,640 --> 00:44:33,880
Speaker 5: I'll get another cre So all right, So gold of

825
00:44:34,000 --> 00:44:37,560
Speaker 5: fifteen percent year to date sewer up five percent? Is

826
00:44:37,600 --> 00:44:41,160
Speaker 5: that surprising you as this chief reld of the gold.

827
00:44:41,200 --> 00:44:43,480
Speaker 10: It does not surprise me. And the reason for this

828
00:44:43,680 --> 00:44:47,319
Speaker 10: is that six percent of gold demand is industrial and

829
00:44:47,360 --> 00:44:50,000
Speaker 10: fifty eight percent of silver demand is industrial.

830
00:44:50,120 --> 00:44:51,640
Speaker 3: Okay. So although it is.

831
00:44:51,600 --> 00:44:55,360
Speaker 10: A precious metal, it is inextricably linked to the industrial

832
00:44:55,400 --> 00:45:01,400
Speaker 10: cycle and tariffs, and they decline in forecast, decline in

833
00:45:01,480 --> 00:45:05,839
Speaker 10: trade weakness which we've seen before the tiers were put on.

834
00:45:06,200 --> 00:45:10,960
Speaker 10: An industrial production is reducing some industrial demand for silver.

835
00:45:11,080 --> 00:45:14,160
Speaker 10: With the big exception of photo of all take. So

836
00:45:14,200 --> 00:45:18,439
Speaker 10: it doesn't surprise solar power okay, okay, okay, And so

837
00:45:18,719 --> 00:45:24,520
Speaker 10: it doesn't look from Tiffany, Yes, it doesn't surprise me

838
00:45:24,600 --> 00:45:29,120
Speaker 10: that silver is down. The gold silver ratio has widened out,

839
00:45:29,680 --> 00:45:32,120
Speaker 10: which I think will lead to some buying for silver.

840
00:45:32,440 --> 00:45:36,359
Speaker 10: But fundamentally it's it's it's fundamentally weaker competitor gold.

841
00:45:36,440 --> 00:45:39,400
Speaker 2: We're up to forty two listeners this morning, missus keene listen.

842
00:45:39,520 --> 00:45:43,080
Speaker 2: Oh there you go with James Steele of HSBC. She

843
00:45:43,200 --> 00:45:46,080
Speaker 2: knows she has her Bloomberg terminal at home. Yes, folks,

844
00:45:46,080 --> 00:45:48,879
Speaker 2: she knows how to log on and find out where

845
00:45:48,920 --> 00:45:53,680
Speaker 2: I am. Okay, So gold has down six point from

846
00:45:53,760 --> 00:45:57,240
Speaker 2: the peak. Does the price of gold and jewelry stores

847
00:45:57,280 --> 00:45:57,760
Speaker 2: go down?

848
00:45:57,880 --> 00:46:01,799
Speaker 10: She as all depending upon where in the world you are.

849
00:46:03,040 --> 00:46:04,319
Speaker 3: In Dubai it goes down.

850
00:46:04,880 --> 00:46:08,879
Speaker 10: Yes, in nine In non no ECD countries you will

851
00:46:08,920 --> 00:46:13,800
Speaker 10: tend to find much greater price elisticity because the margin

852
00:46:14,440 --> 00:46:19,000
Speaker 10: is much lower. And so therefore people in souks and

853
00:46:19,400 --> 00:46:24,759
Speaker 10: bazaars and jeweler shops cannot afford cannot afford to to

854
00:46:25,560 --> 00:46:29,160
Speaker 10: not to adjust their prices. You have a higher markup

855
00:46:29,480 --> 00:46:34,239
Speaker 10: in the West, which effectively allows you to absorb this

856
00:46:34,719 --> 00:46:35,560
Speaker 10: more one way or the other.

857
00:46:35,760 --> 00:46:38,399
Speaker 2: I love busting his chips. It takes so much fun.

858
00:46:38,560 --> 00:46:40,239
Speaker 2: I know it's not your remit, but I'm going to

859
00:46:40,320 --> 00:46:43,840
Speaker 2: go there. What does a trade work mean for broken

860
00:46:43,920 --> 00:46:47,839
Speaker 2: hill properties? What does it mean for falcon Bridge, live

861
00:46:47,840 --> 00:46:48,959
Speaker 2: in the Yukon life.

862
00:46:49,080 --> 00:46:52,560
Speaker 3: What does it mean for the romance of miners or.

863
00:46:52,520 --> 00:46:57,040
Speaker 2: Oil dolls, people doing manly things with manly wrenches?

864
00:46:57,440 --> 00:46:58,160
Speaker 3: What does it mean?

865
00:46:58,400 --> 00:47:00,680
Speaker 10: And it's and it is a hard business too, and

866
00:47:02,080 --> 00:47:06,480
Speaker 10: they operate in quite unbelievable circumstances. That's one of the

867
00:47:06,480 --> 00:47:09,840
Speaker 10: things about increasing production in gold is being done in

868
00:47:10,200 --> 00:47:14,920
Speaker 10: increasingly inhospitable places. Because we've already looked. The low hanging

869
00:47:14,960 --> 00:47:19,200
Speaker 10: fruit has already been picked. But so far tariffs have

870
00:47:19,320 --> 00:47:20,520
Speaker 10: not impacted bullion.

871
00:47:20,880 --> 00:47:23,200
Speaker 3: Will there be a terrified gold I.

872
00:47:23,160 --> 00:47:26,719
Speaker 10: Mean, I suspect not, but I'm not privy to what

873
00:47:26,760 --> 00:47:30,279
Speaker 10: could happen. So far so far, sir, And we know

874
00:47:30,320 --> 00:47:32,640
Speaker 10: that because of the way the exchange for physicals have

875
00:47:32,680 --> 00:47:33,480
Speaker 10: been trading.

876
00:47:33,320 --> 00:47:36,040
Speaker 2: On behalf of all of Bloomberg. We're sorry that you

877
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Speaker 2: had to wait for Havi Bluss to get there.

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Speaker 10: He is I've known him for years. He's a scholar

879
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Speaker 10: when it comes to petroleum shaves.

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Speaker 3: You thank you so much. Will just be seen.

881
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Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify

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00:47:54,800 --> 00:47:58,600
Speaker 1: and anywhere else you get your podcasts. Listen live each

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00:47:58,600 --> 00:48:02,560
Speaker 1: weekday seven to ten am Eastern on bloomberg dot com,

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00:48:02,600 --> 00:48:06,400
Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app.

885
00:48:06,680 --> 00:48:09,800
Speaker 1: You can also watch us live every weekday on YouTube

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00:48:10,120 --> 00:48:12,120
Speaker 1: and always on the Bloomberg terminal