WEBVTT - Traders Search for Safety Amid Tariff Uncertainty 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App, 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:26.920 us live on YouTube. 0:00:27.000 --> 0:00:28.520 Well, I'm going to go back to when you were 0:00:28.600 --> 0:00:32.680 twenty five years old. You wrote it was a joke, 0:00:32.800 --> 0:00:35.320 but it wasn't. It was a serious idea about time 0:00:35.360 --> 0:00:39.200 and space and interstellar planets and all that. The final 0:00:39.320 --> 0:00:42.040 sentence of Krugman at age twenty five. 0:00:42.880 --> 0:00:44.600 Those of us working in this. 0:00:44.640 --> 0:00:48.800 Field, I'm going to paraphrase of international economics and trade 0:00:49.360 --> 0:00:52.519 are still a small band, but we know that the 0:00:52.600 --> 0:00:55.600 force is with us, doctor Krugman. 0:00:55.840 --> 0:00:57.520 Where is the force for morning? 0:00:57.600 --> 0:01:01.640 Professor Boyofstein with a paper about interstellar trade? 0:01:01.680 --> 0:01:04.760 So what the hell? Where is the force this morning 0:01:04.840 --> 0:01:05.559 for this nation? 0:01:06.920 --> 0:01:11.400 Oh boy, this is really really bad. I mean you 0:01:11.520 --> 0:01:17.360 want to say, this is we're talking about, if you know, 0:01:17.480 --> 0:01:20.440 assuming the Rose Garden, anything like what Trump announced in 0:01:20.480 --> 0:01:23.280 the Rose Garden is actually going to be where we land. 0:01:23.959 --> 0:01:28.160 We're talking about tariffs that are significantly higher than smooth 0:01:28.160 --> 0:01:30.960 holy and of course starting from very low. So this 0:01:31.160 --> 0:01:34.520 huge jump and tiff rates with a US economy that's 0:01:34.560 --> 0:01:36.880 three times as open to international trade as it was 0:01:36.880 --> 0:01:39.600 in nineteen thirty. So this makes smooth holy look like 0:01:39.600 --> 0:01:44.720 a rounding error. And it's so that's really bad. And 0:01:44.959 --> 0:01:50.680 it's also it's highly uncertain. Never had a situation where 0:01:50.920 --> 0:01:54.080 really you have no idea but within you know, like 0:01:54.160 --> 0:01:57.200 twenty points where the tariff average tarifrate's going to be 0:01:57.960 --> 0:02:01.040 a few months from now. So this creates an impossible 0:02:01.120 --> 0:02:05.400 environment for business. It's it's hard to imagine a worse 0:02:05.440 --> 0:02:07.120 trade policy than what we're getting. 0:02:07.000 --> 0:02:12.160 In the cacophany Paul Krugman, we have nations acting. Last 0:02:12.200 --> 0:02:14.320 night at nine point fifteen, I picked up my phone 0:02:14.320 --> 0:02:18.920 and there was China acting. China just says no. Trump 0:02:19.400 --> 0:02:23.480 lives on negotiation, folks. Bloomberg's Tim O'Brien owns a high 0:02:23.560 --> 0:02:27.680 ground on this. He lives on negotiation. John Bolton, writing 0:02:27.680 --> 0:02:31.120 in The Telegraph, says he lives on negotiation. If the 0:02:31.240 --> 0:02:36.079 Chinese don't negotiate, what happens to Paul Krugman's trade economy? 0:02:37.320 --> 0:02:41.200 Oh, I mean at the starting point here again, is 0:02:41.240 --> 0:02:42.959 that negotiate about what? 0:02:43.639 --> 0:02:43.799 Now? 0:02:43.919 --> 0:02:49.680 China you could conceivably have some China is not a 0:02:49.720 --> 0:02:52.399 free trade economy, and you know, they might be able 0:02:52.400 --> 0:02:55.760 to make some concessions, but they ain't gonna their their 0:02:56.200 --> 0:02:58.320 back is up and they have a national pride and 0:02:58.360 --> 0:03:01.000 their economy, by some measures, is as big as ours 0:03:01.480 --> 0:03:04.200 or bigger. So you don't want to They're they're not 0:03:04.320 --> 0:03:08.000 removing and the other players, I mean, think about the Europeans. 0:03:09.320 --> 0:03:13.000 Europe had an average tariff of about one point seven 0:03:13.080 --> 0:03:16.839 percent on US good has still about one point seven 0:03:16.840 --> 0:03:20.000 percent on US goods. What can they give? What concessions 0:03:20.000 --> 0:03:23.000 can they make? It's not as if Trump is you know, 0:03:23.160 --> 0:03:26.480 is asking them to do something. It's asking them to 0:03:26.520 --> 0:03:29.720 remedy some real sin. He's sort of made up a 0:03:29.760 --> 0:03:32.800 story about how they must be doing something wrong, but 0:03:32.919 --> 0:03:35.720 they aren't actually, and so they they even if he 0:03:35.760 --> 0:03:37.840 wants concessions, they can't give them. 0:03:38.240 --> 0:03:40.320 Professor, I think one of if we just step back 0:03:40.360 --> 0:03:42.800 a little bit, one of the I think the basis 0:03:42.920 --> 0:03:47.840 of the Trump administration tariff policy is that they're trying 0:03:47.840 --> 0:03:53.440 to reorder the world economic order. Is there something fundamentally 0:03:53.480 --> 0:03:57.720 broken about the world economic order that disadvantages the US? 0:03:59.000 --> 0:04:02.040 Actually, no, all is said and done. It's yeah, the 0:04:02.120 --> 0:04:05.720 US runs an overall trade deficit, but that's mostly because 0:04:07.080 --> 0:04:09.000 you know, the balance of payments always balances if you 0:04:09.040 --> 0:04:12.240 attract inflow, so foreign capital. Then the math says that 0:04:12.320 --> 0:04:15.160 you have to have a trade deficit. That's the I 0:04:15.200 --> 0:04:18.640 know mathmax has a progressive bias, but still that's what 0:04:18.680 --> 0:04:21.640 the math says. And the US is an attractive place 0:04:21.640 --> 0:04:25.800 to an invest or was until you know now, so 0:04:26.880 --> 0:04:30.159 the idea that there's something fundamentally wrong just doesn't make sense. 0:04:30.640 --> 0:04:31.200 And it's worse. 0:04:31.279 --> 0:04:35.280 I mean that Trump Trump and his people think not 0:04:35.320 --> 0:04:38.040 only that the US shouldn't run a trade deficit, but 0:04:38.040 --> 0:04:40.960 that we shouldn't run a trade deficit with any country. 0:04:41.000 --> 0:04:45.000 That everything should be bilateral balance trade, which is just crazy. 0:04:45.120 --> 0:04:48.760 I mean, you know, if you think about people, if 0:04:48.800 --> 0:04:52.440 you work, if you work for somebody else, well, you 0:04:52.560 --> 0:04:56.600 run a surplus with that person because they pay you 0:04:56.680 --> 0:04:58.560 and you probably don't spend much of your income on 0:04:58.600 --> 0:05:02.000 their products. On the other hand, you run a bilateral 0:05:02.040 --> 0:05:04.919 deficit with your supermarket because you buy from them and 0:05:04.960 --> 0:05:07.440 they don't buy stuff from you. And so you know, 0:05:07.480 --> 0:05:10.520 the same applies to country. So it's just crazy and 0:05:11.520 --> 0:05:14.560 I don't know. I think all of this stuff about 0:05:14.600 --> 0:05:17.960 remaking the international order is window dressing. It's the fundamental 0:05:17.960 --> 0:05:20.640 thing is Trump wants TIFFs, and then everything else is 0:05:20.680 --> 0:05:25.840 people Trump to explain why, you know, recconning explanations of 0:05:25.880 --> 0:05:27.200 why he wants tariffs. 0:05:27.000 --> 0:05:29.799 And Jason Furman in the Ft this morning, really writing 0:05:29.880 --> 0:05:33.279 up this complete focus on getting tariffs in to go 0:05:33.400 --> 0:05:37.080 back to the fifties, the thirties or maybe nineteen oh five. 0:05:37.360 --> 0:05:41.640 We welcome Paul Krugman, of course at Iconic at Princeton University. 0:05:41.920 --> 0:05:44.160 You know him from the New York Times. He just 0:05:44.200 --> 0:05:47.680 went out the door. He has a substack. It's a value. 0:05:48.279 --> 0:05:51.160 I got two substacks for you. I got to mention Paul, 0:05:51.240 --> 0:05:54.719 Adam Twos is killing it out on substack. But Adam 0:05:54.800 --> 0:05:58.840 Twos subscribe. Paul Krugman subscribe on. 0:05:58.800 --> 0:06:00.880 Substack as well. We welcome all of you. 0:06:00.800 --> 0:06:04.799 Across the nation on YouTube worldwide with the Laureate Paul Krugman. 0:06:05.279 --> 0:06:11.040 Paul lotalization from an economic perspective, is that dying as 0:06:11.040 --> 0:06:12.040 we see it? 0:06:13.560 --> 0:06:21.400 Oh, I mean, well, I you know, the truth is 0:06:21.760 --> 0:06:23.480 we don't know, which is part of the problem with 0:06:23.600 --> 0:06:27.880 this enormous uncertainty. But yeah, I mean, we have built 0:06:27.960 --> 0:06:32.799 up this very integrated world economy with all of these 0:06:33.480 --> 0:06:36.680 you know, supply chains and so on, which cannot survive 0:06:38.680 --> 0:06:42.480 a twenty three percent to you average US terafreate. So 0:06:42.920 --> 0:06:45.080 this is going to really smart us up. 0:06:46.040 --> 0:06:48.600 I think, Paul, that people are understanding the jump condition 0:06:48.720 --> 0:06:50.880 and tariffs. I'm going to go back to Trump one. 0:06:51.320 --> 0:06:53.760 You did a wonkish Paul. You should read the wonkish 0:06:53.839 --> 0:06:57.320 Krubman in the Times. You'll age Paul did you did 0:06:57.440 --> 0:07:00.159 like a wonkish trade. You got a chart and the 0:07:00.320 --> 0:07:04.560 yx's is price of imports. On the X axis is 0:07:04.600 --> 0:07:10.280 the volume of imports. Now with Trump too, that chart 0:07:10.880 --> 0:07:14.480 is just simply just shattered. There's no other way to 0:07:14.520 --> 0:07:18.680 put it. You have a welfare loss if we explode 0:07:18.680 --> 0:07:21.720 the price of imports, if we have the volume of 0:07:21.800 --> 0:07:27.360 imports decrease a lot slower real GDP, slower nominal, slower investment. 0:07:27.800 --> 0:07:31.840 How big can that welfare loss be? And who listening 0:07:31.920 --> 0:07:33.040 right now loses? 0:07:34.280 --> 0:07:39.120 Okay? The yeah, I mean, the thing we're always to 0:07:39.160 --> 0:07:45.120 realize is that, roughly speaking, we think that the damage 0:07:45.160 --> 0:07:48.560 done by tariffs is not proportional to the tariff is 0:07:48.600 --> 0:07:49.280 proportional to. 0:07:49.240 --> 0:07:50.280 The square of the tariff. 0:07:50.880 --> 0:07:53.920 So you know, a twenty percent tariff is something like 0:07:53.960 --> 0:07:57.520 four times as bad as a ten percent tariff. Now 0:07:57.720 --> 0:08:00.840 putting numbers to it, I mean, I long run, it's 0:08:01.040 --> 0:08:05.040 finding the long run impact of these terraffs is probably look, 0:08:05.040 --> 0:08:07.960 it's it's going to be worse than Brexit. So in 0:08:08.040 --> 0:08:09.960 Brexit we tend to think it was three or four 0:08:10.000 --> 0:08:13.600 percent of British GDP. Maybe, uh, this could easily be 0:08:13.640 --> 0:08:14.600 more than that, though there's. 0:08:14.480 --> 0:08:15.040 A limit to it. 0:08:15.160 --> 0:08:18.960 Deep Uh, it's hard to get It's not you know, 0:08:19.040 --> 0:08:23.360 in itself, it's it's a serious hit to the economy. 0:08:23.640 --> 0:08:25.360 But the funny thing is in the short run it 0:08:25.360 --> 0:08:28.000 can be worse. And the reason it can be worse 0:08:28.320 --> 0:08:32.040 is the is the extreme uncertainty that we're creating. And 0:08:32.080 --> 0:08:33.920 so you know, once we you know, even with these 0:08:33.960 --> 0:08:37.559 high terraffs will settle down. Eventually business will find ways 0:08:37.600 --> 0:08:40.360 to cope. Costs will be higher, GDP will be lower. 0:08:40.679 --> 0:08:45.840 But that's you know, we'll make that transition. But right now, 0:08:46.559 --> 0:08:49.400 if you I mean, I can only imagine that a 0:08:49.400 --> 0:08:55.360 lot of manufacturing, you know, managers are if they aren't drinking, 0:08:55.480 --> 0:08:59.320 they're more powerful them because they should be the the 0:09:00.040 --> 0:09:02.640 Anything any move you make may turn out to be 0:09:02.679 --> 0:09:05.959 distriss because God knows what the tariffs will be, what 0:09:06.240 --> 0:09:08.080 time the investment matures. 0:09:08.160 --> 0:09:10.480 Well, you just what you just heard there from Paul 0:09:10.559 --> 0:09:13.320 Krugman Folks is absolutely critically. I want to translate it 0:09:13.320 --> 0:09:16.680 a little bit. He mentions some math, the square of 0:09:16.760 --> 0:09:21.800 the tariff. This goes back to littlely Newtonian physics. Think one, two, three, 0:09:22.200 --> 0:09:28.840 four five, No, maybe exponential two four eight, sixteen thirty two. 0:09:29.040 --> 0:09:32.160 That's an exaggeration, but you get the idea. Paul, let's 0:09:32.200 --> 0:09:34.839 bring it right over to America. Are we going to 0:09:34.920 --> 0:09:37.800 have a square the unemployment rate? Are we going to 0:09:37.880 --> 0:09:42.640 see different labor metrics, including the four point x unemployment 0:09:42.760 --> 0:09:44.480 rate explode higher. 0:09:45.360 --> 0:09:47.800 Okay, I think we will, but that's not not in 0:09:47.800 --> 0:09:50.840 the long rum. That's the thing tariffs. What is the 0:09:50.840 --> 0:09:55.559 impact of tariffs on the unemployment rate under normal conditions? 0:09:55.840 --> 0:09:59.240 N aswrisk not much. It makes what labor less efficient, 0:10:00.120 --> 0:10:04.240 doesn't cause a doesn't cause a slump. It just means 0:10:04.240 --> 0:10:07.000 that people do different things, they do worse things, but 0:10:07.040 --> 0:10:08.480 they stay. 0:10:08.240 --> 0:10:13.320 Employed, so that it's not really unemployment rate. It's it's 0:10:13.360 --> 0:10:16.760 productivity that will suffer. It's it's real incomes that will 0:10:16.800 --> 0:10:20.280 suffer in the long run. But we may very well 0:10:20.360 --> 0:10:22.200 now I think better than even odds that we are 0:10:22.200 --> 0:10:25.280 going to have a recession this year, which is not 0:10:25.520 --> 0:10:28.480 the standard effective terriffs normally. If you ask me to 0:10:28.480 --> 0:10:30.160 do tarrats cause recessions, I would say no. 0:10:30.440 --> 0:10:33.320 The whole story about smooth Holly caused the Great Depression, 0:10:33.400 --> 0:10:36.240 that's basically a wrong story. It's smooth Holly was a 0:10:36.280 --> 0:10:41.000 bad thing, but not for that reason. But the uncertainty 0:10:41.120 --> 0:10:45.360 which makes means that if you invest you should you 0:10:45.400 --> 0:10:50.160 invest more in your Mexican component's plant well, not if 0:10:50.200 --> 0:10:52.360 we're going to have twenty five percent tariffs on Mexico. 0:10:52.760 --> 0:10:57.360 Should you invest in US production instead? Not if those 0:10:57.400 --> 0:11:00.640 tariffs might not stay in place and you really wish 0:11:00.679 --> 0:11:02.599 that you had invested in Mexico. So there's gonna be 0:11:02.640 --> 0:11:06.760 a lot of just playing cash, sitting on the sidelines 0:11:06.800 --> 0:11:09.240 while business is wait for similarity, which it doesn't seem 0:11:09.240 --> 0:11:10.320 to be coming anytime soon. 0:11:11.000 --> 0:11:13.760 Professor was just as recently as the beginning of the 0:11:13.840 --> 0:11:16.360 year that Tom and I were having discussions with our 0:11:16.400 --> 0:11:21.960 guests here in Bloomberg surveillance about US economic exceptionalism. Boy, 0:11:22.040 --> 0:11:25.400 that seems quaint now is that still the case here? 0:11:25.679 --> 0:11:27.439 How do you think about that visa the US and 0:11:27.440 --> 0:11:28.120 the rest of the world. 0:11:28.960 --> 0:11:32.040 Well, we were, I mean, if you wanted to kill 0:11:32.040 --> 0:11:34.200 a US exceptionalism, this is kind of what you would do, 0:11:34.320 --> 0:11:38.679 right the I mean, and that there's there's much more. 0:11:38.679 --> 0:11:39.800 It's not just the terrorists. 0:11:39.800 --> 0:11:43.720 But yeah, the US from about two thousand on, the 0:11:43.840 --> 0:11:47.360 US had much faster productivity growth than other advanced countries. 0:11:47.760 --> 0:11:52.480 We just outperformed. And we also have somewhat better demography 0:11:52.520 --> 0:11:54.440 than other advanced countries. So we just had a much 0:11:54.440 --> 0:11:57.920 better growth picture than anyone else in the advanced world. 0:11:58.480 --> 0:12:04.679 And all of a sudden, uh, you know the uh, 0:12:05.240 --> 0:12:08.480 we're disrupting our trade, although we're disrupting other people as well. 0:12:08.480 --> 0:12:11.000 That's a bad thing. Should work. 0:12:11.040 --> 0:12:13.000 Bear in mind that in the background, this isn't the 0:12:13.000 --> 0:12:17.320 only radical departure in policy that the Trump administration is pursuing. 0:12:17.679 --> 0:12:22.840 Look at what is happening to scientific research. Enormous cuts 0:12:23.040 --> 0:12:27.640 in mass layoffs. I mean they're the CDC is laying 0:12:27.679 --> 0:12:33.000 off medical scientists so fast that they're actually that samples 0:12:33.000 --> 0:12:36.360 are being left in resers with nobody to look after them. 0:12:36.760 --> 0:12:42.800 And since ultimately US technological progress relies a lot on 0:12:42.840 --> 0:12:47.400 the spillovers from government research, we're actually crippling, you know, 0:12:47.960 --> 0:12:50.720 make America not great again. I mean, this is really amazing, 0:12:51.240 --> 0:12:51.960 Paul Krugman with. 0:12:52.080 --> 0:12:55.040 As he continues with this salaureate. Of course, I can't 0:12:55.040 --> 0:12:57.880 say enough. This is this moment you're in in America, 0:12:58.000 --> 0:13:01.160 the questions you have in the living from the kitchen table. 0:13:01.280 --> 0:13:04.520 This is what Krugman was we done years ago at 0:13:04.600 --> 0:13:07.480 Yale and on to Princeton as well. Look to his 0:13:07.640 --> 0:13:11.559 sub stack out. I can't say enough about it. I 0:13:11.840 --> 0:13:16.000 really subscribe to that as a huge value. Add Paul Krugman, 0:13:16.160 --> 0:13:18.440 I've got to go over and I guess this goes 0:13:18.559 --> 0:13:22.040 Mondel and on the Jacob Frankel and Ken Rogoff and 0:13:22.120 --> 0:13:26.520 the rest to the currency you studied under the guy 0:13:26.600 --> 0:13:31.960 who invented modern foreign exchange, rudigerd Dornbish dorn Bush. We 0:13:32.040 --> 0:13:36.960 lost him tragically years ago of cancer. What would Rudy 0:13:37.000 --> 0:13:40.600 Dornbush say right now where Paul Krugman say about the 0:13:40.600 --> 0:13:45.840 idea of the China's solution is to depreciate the renmn B. 0:13:47.160 --> 0:13:50.199 Well, yeah, I mean, Rudy would have some choice phrases 0:13:50.200 --> 0:13:52.080 that would be more colorful than anything I can come 0:13:52.160 --> 0:13:56.960 up with. But yeah, I mean, this is a look 0:13:57.040 --> 0:13:59.880 if one of the things we've done is we've just 0:14:00.040 --> 0:14:02.040 place China as being the prime. 0:14:01.880 --> 0:14:03.400 Bad actor in the world economy. 0:14:03.840 --> 0:14:06.040 China has been a bad actor. They have run and 0:14:07.240 --> 0:14:08.720 kept an undervalued currency. 0:14:09.240 --> 0:14:11.319 They have failed. 0:14:11.760 --> 0:14:13.800 You know, China has a problem, which is they don't 0:14:14.040 --> 0:14:18.160 consume enough, they have excess saving, They're running out of 0:14:18.200 --> 0:14:23.000 investment opportunities at home. They've tried to close that gap 0:14:23.080 --> 0:14:26.320 to square that circle by running big trade surpluses, which 0:14:26.320 --> 0:14:29.200 they can do because the Apple controlled and undervalue currency, 0:14:30.000 --> 0:14:32.120 which you know, but the blowback from that has been 0:14:32.160 --> 0:14:35.880 growing even you know, if Trump weren't there, if we 0:14:36.000 --> 0:14:38.880 had a sane person as president of the United States, 0:14:38.880 --> 0:14:42.800 that sane person would be taking a very hard line 0:14:42.800 --> 0:14:44.920 on China because the Chinese are in fact not good, 0:14:45.560 --> 0:14:49.400 They're not team players in the world economy, and the 0:14:49.480 --> 0:14:51.680 Chinese are still trying to do that, which is insane 0:14:51.680 --> 0:14:54.000 because it's the United States. Clearly, you know, it's not 0:14:54.080 --> 0:14:56.320 going to be a market and the Europeans, the rest 0:14:56.320 --> 0:14:58.080 of the world is not going to take their stuff either, 0:14:58.280 --> 0:15:00.720 so they are not helping Paul. 0:15:00.760 --> 0:15:04.760 One final question, and it's a fun question because the 0:15:04.960 --> 0:15:09.000 Republicans love to go after you. There's a primal scream, 0:15:09.120 --> 0:15:14.280 including a senator from Massachusetts, Elizabeth Warren and others Republicans 0:15:15.000 --> 0:15:18.760 do something. You're at a breakfast coffee with Thune of 0:15:18.800 --> 0:15:22.160 the Dakotas this morning in the Senate. What do you 0:15:22.280 --> 0:15:24.440 tell John Thune to do? 0:15:26.160 --> 0:15:26.480 Yeah? 0:15:26.600 --> 0:15:31.760 I mean, look, all of this is happening because US 0:15:32.720 --> 0:15:36.560 Congress seeded control over trade policy to the president. They 0:15:36.640 --> 0:15:38.800 did it a long time ago, they did more than 0:15:38.800 --> 0:15:42.400 fifty years ago. And because presidents were assumed to be 0:15:42.560 --> 0:15:46.720 more interested in the international position of the United States 0:15:46.760 --> 0:15:51.760 than individual congress people would be. Congress is gonna take 0:15:51.760 --> 0:15:54.600 that back, would take and there's actually a lot of 0:15:54.640 --> 0:15:57.360 bipartisan support for that. There is. I think people in 0:15:57.400 --> 0:15:59.920 Congress they're not idiots, not all of them are idiots. Anyway, 0:16:00.160 --> 0:16:03.200 they do realize that this is being that this is crazy, 0:16:03.840 --> 0:16:08.600 and all they need to do really is restore. You 0:16:08.720 --> 0:16:11.960 make trade policy, like the rest of policy, something that 0:16:12.000 --> 0:16:14.200 you have the Congress has to vote on. There are 0:16:14.240 --> 0:16:18.480 reasons why we didn't do that, but so I, you know, 0:16:18.720 --> 0:16:24.480 a trum might be a change in legislation, but he h, 0:16:26.160 --> 0:16:31.720 but he's uh. That would put him on the spot 0:16:31.800 --> 0:16:33.200 and if necessary, you know. 0:16:33.240 --> 0:16:34.000 Overrule him. 0:16:34.240 --> 0:16:37.840 Just make this a well, you know, take take take 0:16:37.840 --> 0:16:39.680 away an authority to do this crazy stuff. 0:16:39.680 --> 0:16:41.240 Okay, Paul, we got to leave it at that. 0:16:41.400 --> 0:16:43.800 Thank you for starting in morning with us, Paul swee 0:16:44.360 --> 0:16:46.840 and and the whole team. Thank Paul Kruman for his effort. 0:16:46.880 --> 0:16:49.840 Look to his sub stack, which is really lighten up. 0:16:50.080 --> 0:16:52.360 I can't say enough about it. It's really quite it's 0:16:52.440 --> 0:16:55.240 it's more heated than it was with The New York Times. 0:16:55.240 --> 0:16:58.080 For the years of you that love and disagree with 0:16:58.280 --> 0:16:59.920 Professor Krue. 0:17:05.480 --> 0:17:09.080 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:17:09.119 --> 0:17:12.680 weekday afternoons from seven to ten am Eastern. Listen on Apple, 0:17:12.720 --> 0:17:16.040 Karplay and Android Otto with the Bloomberg Business app, or 0:17:16.200 --> 0:17:17.680 watch us live on YouTube. 0:17:17.840 --> 0:17:18.720 John stolffus for. 0:17:18.800 --> 0:17:21.719 This Now he's a o co with Oppenheimer and where 0:17:21.760 --> 0:17:23.560 surely he could be with us. He's been a bull 0:17:23.600 --> 0:17:26.640 that's nailed this over the last four or five, six, 0:17:26.760 --> 0:17:27.560 eight years. 0:17:27.960 --> 0:17:30.880 John, I believe you lowered your s. 0:17:30.880 --> 0:17:34.840 And p call which was way out there somewhere, as 0:17:34.920 --> 0:17:38.760 Linda Ronstad said, but if it was out there, John Stolfus, 0:17:38.920 --> 0:17:42.040 are you still a bull as you cut back your view? 0:17:43.400 --> 0:17:46.600 Yes, great to be on the show with you, Tom, 0:17:46.960 --> 0:17:50.080 I have got to say we remained bullish. We just 0:17:50.160 --> 0:17:52.840 had to trim the target because the depth of the 0:17:53.560 --> 0:17:57.199 selling was such that, you know, we would have have 0:17:57.400 --> 0:17:59.879 had to have about a thirty percent upside from the 0:18:00.040 --> 0:18:03.320 bottom and instead of fifty nine to fifty down from 0:18:03.400 --> 0:18:05.760 seventy one hundred is a year end target for the 0:18:05.840 --> 0:18:08.880 S and P five hundred, and having reduced our earnings 0:18:08.920 --> 0:18:12.639 projection from two seventy five to two sixty five, we 0:18:12.680 --> 0:18:18.760 feel comfortable here right sizing expectations based on the damage 0:18:18.800 --> 0:18:23.000 that has been done related to sentiment in certain pockets 0:18:23.000 --> 0:18:25.840 that you know, it's we don't think it's just about 0:18:25.880 --> 0:18:29.000 fear and greed. We think it's it's fear and greed 0:18:29.040 --> 0:18:31.400 is always in the markets. But on top of that, 0:18:31.440 --> 0:18:36.119 there's need to invest for serious purposes like retirement, kids, 0:18:36.240 --> 0:18:40.080 education in retirement, all kinds of things like that, as 0:18:40.119 --> 0:18:44.440 well as you have based on innovation in technology, we 0:18:45.160 --> 0:18:48.879 believe where the water shed period on the timeline of 0:18:49.720 --> 0:18:54.439 financial history here and manufacturing history with what AI is 0:18:54.480 --> 0:18:58.600 eventually going to do, so we feel comfortable. Like John McLaughlin, 0:18:59.359 --> 0:19:01.639 I think it was his second album. Our goal is 0:19:01.680 --> 0:19:04.400 beyond where we are right now, but we're quite aware 0:19:04.400 --> 0:19:05.160 of what's happening. 0:19:05.640 --> 0:19:08.160 He's so sophisticated. I can't keep up now. 0:19:08.280 --> 0:19:11.639 John McLoughlin had a scallop neck, like between the frets 0:19:11.640 --> 0:19:15.639 of the neck. He had the woods scalloped out and 0:19:15.760 --> 0:19:16.680 different things. 0:19:16.720 --> 0:19:20.080 You go, hey, John, it's just I'd love to just 0:19:20.119 --> 0:19:22.760 to get your perspective. You've been in the markets for decades. 0:19:23.119 --> 0:19:25.480 What did you make of the of the selling over 0:19:25.480 --> 0:19:27.280 the last several days here? 0:19:28.760 --> 0:19:30.119 What did I make of the selling? 0:19:30.400 --> 0:19:35.320 Yeah, it looked like the negative pitch Book. Generally speaking, 0:19:35.400 --> 0:19:40.640 when something happens that creates a catalyst for bears, skeptics 0:19:40.680 --> 0:19:44.720 and nervous investors to sell without FOMO in what is 0:19:45.000 --> 0:19:48.320 likely a secular bull market, you get that kind of thing. 0:19:48.440 --> 0:19:53.560 You bring out the negative pitch book, it gets negativity 0:19:53.680 --> 0:19:58.800 to infinity is projected, the market gripped with fear. In 0:19:58.840 --> 0:20:02.080 the trading community, a lot of people are looking, I 0:20:02.119 --> 0:20:05.600 would think, based on the selling, probably looking for their 0:20:05.640 --> 0:20:10.080 next vanity plate on their next trophy automobile related to 0:20:11.480 --> 0:20:15.360 selling in this kind of a period, But for investors, 0:20:15.440 --> 0:20:18.560 just as your prior guest said, there's the opportunity to 0:20:18.960 --> 0:20:21.280 look for We've been saying it for a long time. 0:20:21.359 --> 0:20:24.200 Babies that get tossed out with the bathwater. We don't 0:20:24.200 --> 0:20:26.920 think it's a by the dip moment. We think right 0:20:26.960 --> 0:20:30.959 now it's shopping list, you know. 0:20:31.000 --> 0:20:33.040 We like what's been beaten up, the worst of the 0:20:33.119 --> 0:20:40.760 qualities actors, INFOTAC, communications services, consumer discretionary. Yeah, let's keep shopping, 0:20:41.600 --> 0:20:45.480 and then financials and industrials, which we think are pivoted 0:20:45.560 --> 0:20:48.480 well for where we're headed once we get through this 0:20:48.840 --> 0:20:53.160 very uncomfortable period with the tariffs. We're just simply priced 0:20:53.160 --> 0:20:56.919 too high for the market to digest without some pretty 0:20:56.920 --> 0:20:59.359 serious indigestions. It wasn't it. We don't think it was 0:20:59.400 --> 0:21:03.000 a tantrum. We think it was a genuine protest, that 0:21:03.160 --> 0:21:05.960 this was a bit munch. You know, it's tariff's one 0:21:06.000 --> 0:21:10.640 oh one in the administration's previous one were one thing, 0:21:10.840 --> 0:21:14.040 Tariff's one oh two during the Biden administration one thing. 0:21:14.320 --> 0:21:16.040 But this was a tariffs four. 0:21:15.920 --> 0:21:18.719 To oh one or maybe graduate studies based on the 0:21:18.720 --> 0:21:21.280 fact that it's really been over a one hundred years 0:21:21.320 --> 0:21:24.240 that we've lived this kind of proposition in tariffs. 0:21:24.800 --> 0:21:25.520 There are anybody. 0:21:25.720 --> 0:21:29.119 I don't think anybody is around who's alive, alive or 0:21:29.200 --> 0:21:32.040 knows that they're alive, who remembers. 0:21:31.600 --> 0:21:34.280 This is megs this kind of a period. 0:21:35.160 --> 0:21:37.879 Is tech an opportunity here? I mean they were trading 0:21:38.000 --> 0:21:40.639 our thirty eight thirty nine. I got Apple with a 0:21:40.680 --> 0:21:44.400 P twenty five is twenty six ish? Is tech an opportunity? 0:21:44.480 --> 0:21:49.240 John Stulfus, we have to think so, you know, we're 0:21:49.320 --> 0:21:53.040 all on the upgrade cycle without naming the company. 0:21:53.119 --> 0:21:57.080 I was in a big store where they sell technology yesterday. 0:21:57.400 --> 0:21:57.640 John. 0:21:57.680 --> 0:22:00.159 I know you don't do individual stacks, but you know 0:22:00.160 --> 0:22:01.880 a lot of people are in these things. 0:22:02.400 --> 0:22:03.600 Not to be tried about it. 0:22:03.640 --> 0:22:06.920 There's some real losses taken out there. As we said 0:22:06.960 --> 0:22:09.800 to Kim Dawson, are we still in a bull market? 0:22:10.840 --> 0:22:13.040 I believe so, and I believe it. 0:22:13.040 --> 0:22:17.119 It's related to that watershed period on the timeline of 0:22:17.400 --> 0:22:22.480 of of manufacturing history and technologies history. 0:22:22.880 --> 0:22:23.000 UH. 0:22:23.160 --> 0:22:27.000 That revolutionizes things going forward, and that will bring its 0:22:27.040 --> 0:22:31.920 own questions and agony at different points when we take 0:22:31.960 --> 0:22:36.119 a look and see. We see the disruptions uh within industries, 0:22:36.160 --> 0:22:39.840 whether it's in hiring or businesses that don't make don't 0:22:39.840 --> 0:22:41.520 adapt well to the new world. 0:22:42.040 --> 0:22:42.320 Uh. 0:22:42.359 --> 0:22:44.280 That's a whole other story up ahead. 0:22:44.359 --> 0:22:48.520 But overall, the market's going to be looking for what 0:22:48.520 --> 0:22:51.040 what what builds UH earnings? 0:22:51.080 --> 0:22:51.359 Both? 0:22:51.440 --> 0:22:55.160 What where does? Where does revenue growth come from? That's 0:22:55.200 --> 0:22:57.640 what that's what the market really cares about, and that's 0:22:57.680 --> 0:23:01.680 what appeared to be very much in Dainger near term 0:23:02.280 --> 0:23:05.320