WEBVTT - Bloomberg Surveillance TV: November 18, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.320 Terminal and the Bloomberg Business App. Amanda liner with black 0:00:37.400 --> 0:00:39.839 Rocks saying uncertainty around the path of monetary policy in 0:00:39.880 --> 0:00:43.200 twenty twenty five is alevated. While not our current base case, 0:00:43.240 --> 0:00:47.760 a reacceleration of inflationary pressures materializing from potential fiscal and 0:00:47.920 --> 0:00:51.280 or trade related policies following the US selection could cause 0:00:51.320 --> 0:00:54.520 the Fed's terminal rate to land higher. Amanda joins us 0:00:54.520 --> 0:00:56.040 now for more. Amanda, good morning, it's good to see 0:00:56.080 --> 0:00:57.280 you morning. Thank you for having This was only a 0:00:57.320 --> 0:00:59.000 few months ago we were talking about a FED getting 0:00:59.000 --> 0:01:00.840 ahead of the curve to winsl the labor market, and 0:01:00.840 --> 0:01:03.680 maybe they needed to get accommodative. And now we're back 0:01:03.680 --> 0:01:05.720 to a word that you use in your work, which 0:01:05.760 --> 0:01:08.360 is normalizing, except normal might be a whole lot closer 0:01:08.360 --> 0:01:10.280 to where we are than we thought a month ago. 0:01:10.360 --> 0:01:13.000 Right, And I think that distinction between normalizing and easing 0:01:13.120 --> 0:01:15.520 is really important. We would not be surprised for the 0:01:15.520 --> 0:01:19.080 Fed Fund's terminal rate to land somewhere around four, but again, 0:01:19.120 --> 0:01:21.120 the drivers of that are really important. If that is 0:01:21.160 --> 0:01:23.479 because growth is holding up really well, that is something 0:01:23.480 --> 0:01:25.560 that the credit market can really digest. If that is 0:01:25.600 --> 0:01:28.360 because inflation is reaccelerating and there's a lot yet to 0:01:28.400 --> 0:01:30.679 be seen on the policies that are coming down the pike, 0:01:30.840 --> 0:01:33.520 we have some clarity, but the path is very wide 0:01:33.520 --> 0:01:35.640 in terms of potential outcomes. That would be a much 0:01:35.680 --> 0:01:38.240 less supportive outcome for credit, especially if it's coupled with 0:01:38.400 --> 0:01:40.720 slower growth. I think the bigger risk for corporate credit 0:01:40.880 --> 0:01:43.240 is what we're characterizing as a disorderly sell off and 0:01:43.280 --> 0:01:45.920 treasury yields. If we have a gradual backup in treasury 0:01:45.959 --> 0:01:49.440 yields again because of good growth, that is actually a 0:01:49.440 --> 0:01:51.760 tailwind for credit because it brings in yield based buying. 0:01:51.800 --> 0:01:53.760 If it's disorderly, feel spooky. 0:01:54.400 --> 0:01:55.600 Then it's coming. 0:01:55.360 --> 0:01:57.520 Back to the fall of twenty twenty three when I 0:01:57.560 --> 0:01:59.120 think that one gives investors some pause. 0:01:59.240 --> 0:02:01.400 Can you define this so ly and how olderly things 0:02:01.440 --> 0:02:02.440 are at the moment. 0:02:02.240 --> 0:02:05.360 When we chat with market participants, that four point sixty 0:02:05.440 --> 0:02:08.800 level is really the area which they become concerned. I 0:02:08.800 --> 0:02:10.840 think if you start to see the velocity of that 0:02:10.960 --> 0:02:14.480 backup really be swift. So I'm talking about gaps of 0:02:14.639 --> 0:02:17.640 fifteen twenty basis points in a day for a consecutive 0:02:17.680 --> 0:02:21.760 period of time, and again not driven by positive growth surprises, 0:02:22.120 --> 0:02:25.959 but more driven by some downside risks on the policy 0:02:26.040 --> 0:02:28.720 side or on or upside risks on the inflation side. 0:02:28.840 --> 0:02:30.680 That's I think where we would start to be a 0:02:30.720 --> 0:02:33.200 bit concerned, because then if you're a yield based investor, 0:02:33.600 --> 0:02:35.920 you may think you may come to the conclusion that 0:02:35.919 --> 0:02:38.240 it just waits to deploy capital into corporate credit, and 0:02:38.280 --> 0:02:40.760 that yield based demand has been incredibly strong in the 0:02:40.760 --> 0:02:43.320 context of all of this kind of path dependency. As 0:02:43.360 --> 0:02:46.000 you know, credit spreads have made new cycle tights, and 0:02:46.040 --> 0:02:48.600 so that spread of that tug of war between spreads 0:02:48.639 --> 0:02:50.240 and yields is very much still in place. 0:02:50.360 --> 0:02:53.440 John asked the key question, right, what caustitutes disorderly move 0:02:53.520 --> 0:02:55.520 in yields at a time where fifteen to twenty basis 0:02:55.520 --> 0:02:58.440 point moves are something we have seen. This isn't abnormal, 0:02:58.480 --> 0:02:59.960 and there's a question of whether they have to see 0:03:00.240 --> 0:03:02.480 for a longer period of time. I mean, let's say 0:03:03.480 --> 0:03:06.399 Howard Lutnik gets chosen as Treasury Secretary and people view 0:03:06.440 --> 0:03:09.639 this as really an endorsement of stronger tariffs at the 0:03:09.720 --> 0:03:11.959 outset before some of the other tax cuts or other 0:03:12.240 --> 0:03:16.360 pro growth types of implementations. Do you foresee that type 0:03:16.400 --> 0:03:18.799 of disorderly move in treasure yields. 0:03:18.520 --> 0:03:20.760 That sequencing really does matter, I think, leaving some of 0:03:20.800 --> 0:03:22.959 the candidates to the side, if you have a situation 0:03:23.000 --> 0:03:27.720 where you have upward pressure on inflation, and I think 0:03:27.919 --> 0:03:30.440 what really concerns us is not so much the targeted 0:03:30.440 --> 0:03:33.800 tariffs but the across the board tariffs that could spike retaliation, 0:03:33.919 --> 0:03:36.160 because then you're moving from a discussion of the one 0:03:36.200 --> 0:03:39.760 time price level of argument that's been floated, which I'm 0:03:39.800 --> 0:03:43.720 not necessarily sure I agree with is not that disruptive 0:03:43.760 --> 0:03:45.760 to the market, But if you have kind of retaliatory 0:03:45.840 --> 0:03:48.960 tariffs back and forth, then you actually have pressures feeding 0:03:48.960 --> 0:03:50.720 on themselves on the inflationary front, and I think it 0:03:50.720 --> 0:03:54.240 becomes much less certain. We kind of take a step 0:03:54.240 --> 0:03:55.960 back and say, Okay, well, where do we go from here. 0:03:56.240 --> 0:03:59.080 We like building and floating rate exposure to portfolios. We 0:03:59.160 --> 0:04:02.320 like financials. They would not be exposed to the same 0:04:02.360 --> 0:04:05.920 degree on tariffs because they're more of a services based sector. 0:04:06.160 --> 0:04:10.880 We like domestic facing companies actually, so ironically and somewhat counterintuitively, 0:04:10.920 --> 0:04:13.160 that may bode better for high yield and leverage loans 0:04:13.200 --> 0:04:15.200 because they tend to be more US focused as opposed 0:04:15.240 --> 0:04:19.599 to multinationals. So, and financials are really important. Financials are 0:04:19.800 --> 0:04:22.799 thirty three percent of the IG index, and they're still 0:04:22.839 --> 0:04:25.159 trading wide to non financials, and so if we think 0:04:25.200 --> 0:04:27.680 that they can tighten, that can actually pull index level 0:04:27.680 --> 0:04:29.080 spreads even tighter than where they are now. 0:04:29.120 --> 0:04:31.880 There's a larger question, and John and Amory we're focusing 0:04:31.920 --> 0:04:34.760 on this last week about at a certain point, if 0:04:34.800 --> 0:04:37.279 you see the companies out there as being a pretty 0:04:37.279 --> 0:04:40.160 good shape from the US and continuing to be so, 0:04:40.800 --> 0:04:43.159 could you see spreads and narrow to such degrees and 0:04:43.240 --> 0:04:47.520 even investment grade companies trade within treasury yields. 0:04:47.600 --> 0:04:50.040 Yeah, so I think you had a conversation last week 0:04:50.080 --> 0:04:51.600 on this with Brian Weinstein. 0:04:51.279 --> 0:04:51.960 Which I thought was great. 0:04:52.600 --> 0:04:55.240 Look, I think there is scope for spreads to move tighter. 0:04:55.720 --> 0:04:59.400 I do not see a world we're on masks. Triple 0:04:59.400 --> 0:05:01.800 B corporates are trading tight to the sovereign, but you 0:05:01.839 --> 0:05:03.840 do have some double A and a few triple A 0:05:03.920 --> 0:05:06.080 companies still left outstanding in the corporate credits sphere that 0:05:06.120 --> 0:05:08.360 are trading really close. I mean the spreads to treasuries 0:05:08.360 --> 0:05:10.120 are in the single digits for some of those bonds 0:05:10.120 --> 0:05:12.320 at the moment, depending on where they're priced to. I 0:05:12.320 --> 0:05:15.480 think the net net here of everything is that corporate 0:05:15.480 --> 0:05:17.679 credit is in a pretty good place. It all boils 0:05:17.680 --> 0:05:20.760 down to growth. If we have a supportive growth backdrop, 0:05:20.800 --> 0:05:23.760 I would say manageable terror for risk, and then I 0:05:23.760 --> 0:05:26.919 would say the continuation of yield based support plus some 0:05:26.920 --> 0:05:29.760 favorable technicals. That's a recipe where credit can stay in 0:05:29.800 --> 0:05:32.320 its current tight range or even move slightly tighter. I 0:05:32.360 --> 0:05:36.919 think waiting for a significant catalyst for spread widening in 0:05:37.000 --> 0:05:41.400 credit would really involve a combination of persistent upward pressure 0:05:41.440 --> 0:05:44.400 on inflation, a slowdown in growth, and again that disorderly 0:05:44.400 --> 0:05:46.560 sell off, which it does feel like the volatility of 0:05:46.560 --> 0:05:48.800 the bond market has been elevated relative to what we've 0:05:48.800 --> 0:05:50.000 been used to in past cycles. 0:05:50.080 --> 0:05:50.560 But I think it. 0:05:51.040 --> 0:05:53.080 Would really be that kind of four to sixty range 0:05:53.080 --> 0:05:55.520 where folks get concerned up to the five percent range 0:05:55.560 --> 0:05:56.480 that would catch our attention. 0:05:56.560 --> 0:05:58.599 Man, I'm just talking about this disorderly bond sell off. 0:05:58.600 --> 0:06:01.599 I'm thinking about how disorderly treasury pick has come to be. 0:06:01.680 --> 0:06:03.440 And if you talk about the real impact of terrorists. 0:06:03.480 --> 0:06:06.240 What I'm hearing from source that Peter Navarro is really 0:06:06.279 --> 0:06:10.400 in the mix this trade skeptic at ANYC And Howard Latink, 0:06:10.400 --> 0:06:12.040 who's come on and talked about the fact that you 0:06:12.040 --> 0:06:14.080 should use tariffs, is more of a yes man to 0:06:14.160 --> 0:06:17.279 Donald Trump. The real tariff man would be someone like 0:06:17.440 --> 0:06:20.760 Robert Leittheiser, who already worked for him. What would a Lightheiser, 0:06:20.800 --> 0:06:24.479 a Treasury, Peter Navarro, a NEC mean for this bond market. 0:06:24.520 --> 0:06:27.760 Well, again, leaving the specific individuals aside, I think the 0:06:28.120 --> 0:06:30.520 issue that we have to come to grips with is 0:06:30.800 --> 0:06:33.800 what does this mean for kind of upward ongoing upward 0:06:33.800 --> 0:06:36.919 pressure on inflation? And really the worst case scenario for 0:06:37.000 --> 0:06:40.680 credit is kind of an across the board tariff that 0:06:40.800 --> 0:06:43.840 is also coupled with retaliatory tariffs that provides kind of 0:06:44.080 --> 0:06:47.359 upward pressure on inflation that corporates can't manage, right And 0:06:47.400 --> 0:06:49.680 I think that's the key, is that if corporates are 0:06:49.760 --> 0:06:54.320 feeling that they have significant cost input pressures that they 0:06:54.360 --> 0:06:56.600 are not able to manage through, then you get to 0:06:56.640 --> 0:06:59.960 this situation where right now corporates have just been hoarding late, 0:07:00.200 --> 0:07:02.400 hoarding labor and they haven't been laying off. If you 0:07:02.440 --> 0:07:04.200 get to a point where corporates need to use the 0:07:04.279 --> 0:07:07.160 layoff tool to protect their margins, that's where I think 0:07:07.160 --> 0:07:09.080 we really start to get concerned, because that's when you 0:07:09.120 --> 0:07:12.120 could have the weakness and the consumer extend beyond the 0:07:12.160 --> 0:07:13.080 lower income segment. 0:07:13.280 --> 0:07:15.280 Is the fact that the transition when it comes to 0:07:15.320 --> 0:07:18.400 the top post for financial markets already seems chaotic and 0:07:18.440 --> 0:07:20.760 it is messy. Based off every phone call I had 0:07:20.760 --> 0:07:23.040 over the weekend, is that already a market negative? 0:07:23.080 --> 0:07:24.880 I don't think so. I think what we're really bracing 0:07:24.920 --> 0:07:26.720 for is for this to play out over the next 0:07:26.720 --> 0:07:28.760 couple of months. I mean, even heading into the election, 0:07:29.040 --> 0:07:32.080 we were not expecting ultimate clarity. Once we knew the 0:07:32.120 --> 0:07:35.000 outcome of the White House, the Senate, and the House. 0:07:35.080 --> 0:07:36.760 We know that this is I mean, you've been saying 0:07:36.800 --> 0:07:40.080 it personnelis policy, right, So we've been watching for these appointments. 0:07:40.080 --> 0:07:42.239 I think we're expecting this to be a longer term trend. 0:07:42.600 --> 0:07:44.400 The FED has even said as much that they're not 0:07:44.520 --> 0:07:48.160 even reacting to policies once they're implemented. They're actually more 0:07:48.160 --> 0:07:50.720 poised to react to policies once you see the economic impact, 0:07:50.720 --> 0:07:52.600 which will take some time. So I think this is 0:07:52.600 --> 0:07:54.680 going to be a drawn out event, actually into twenty 0:07:54.720 --> 0:07:55.160 twenty five. 0:07:55.240 --> 0:07:57.000 That's I'm glad that you brought the FED into this 0:07:57.320 --> 0:07:59.280 because that's been the other big shift over the past 0:07:59.280 --> 0:08:02.360 week is rhetoric out of FED officials has been talking 0:08:02.400 --> 0:08:05.440 about how they can afford to wait, they don't have 0:08:05.480 --> 0:08:07.600 to cut rates as quickly. How much is that a 0:08:07.640 --> 0:08:09.800 game changer on certain levels that there isn't the same 0:08:09.880 --> 0:08:12.960 kind of Duvish bias that there might have been, say 0:08:12.960 --> 0:08:13.640 a couple weeks ago. 0:08:13.680 --> 0:08:15.440 So I was a little surprised at the market action 0:08:15.520 --> 0:08:17.360 last week because a lot of what Chapal said he 0:08:17.480 --> 0:08:20.000 also said during the November seventh press conference in terms 0:08:20.040 --> 0:08:21.880 of we may slow at the pace, We're not in 0:08:21.920 --> 0:08:24.200 a rush. I think our base case is really that 0:08:24.240 --> 0:08:25.960 there will be a cut in December, a twenty five 0:08:25.960 --> 0:08:28.240 basis point cut in December, as you noted, though at 0:08:28.240 --> 0:08:31.000 the start the path becomes much more tricky into twenty 0:08:31.040 --> 0:08:33.079 twenty five. It all boils down, though, Lisa, to kind 0:08:33.080 --> 0:08:35.199 of what you're alluding to, which if they're not cutting 0:08:35.240 --> 0:08:38.440 because growth is above trend, which we still are tracking 0:08:38.480 --> 0:08:41.160 above trend, that is a backdrop that corporate credit and 0:08:41.200 --> 0:08:43.800 I think risk assets broadly can manage if they are 0:08:43.800 --> 0:08:46.920 not cutting because they are concerned to Emory's point about 0:08:47.000 --> 0:08:50.760 upward pressure on inflation or disruptions and supply chains, that 0:08:50.800 --> 0:08:53.720 sort of thing that would cause inflationary pressures. That's another issue. 0:08:53.720 --> 0:08:58.040 But they are also focused on growth. I think it's 0:08:58.080 --> 0:09:01.640 not a foregune conclusion that tariffs could cause them to 0:09:02.640 --> 0:09:06.000 not cut or even hike, because there could be a 0:09:06.000 --> 0:09:07.120 growth impact that they're. 0:09:06.880 --> 0:09:09.200 Focused on us. We could see some major changes. Amander, 0:09:09.320 --> 0:09:11.080 is good to see you appreciate your time, Amanda landam 0:09:11.120 --> 0:09:22.440 there a plank rop? So here's the lake says this 0:09:22.520 --> 0:09:24.800 morning the eyes of Wall Street on a battle Royale 0:09:24.840 --> 0:09:27.160 playing gout in Palm Beach, Florida. The race to become 0:09:27.160 --> 0:09:30.280 the next Treasury Secretary between Scott Besson and Howard Lutnik 0:09:30.280 --> 0:09:33.120 reaching burning point over the weekend. President elect Donald Trump 0:09:33.200 --> 0:09:36.199 said to be losing patients with infighting, leaving staff to 0:09:36.240 --> 0:09:39.680 widen their search. Alternatives now including apolloist Mark Robin and 0:09:39.720 --> 0:09:42.480 former Thaed Governor Kevin Walsh. Henry of Trace of Vada 0:09:42.520 --> 0:09:44.439 Partners joined us now for more so, Henrietta, the big 0:09:44.520 --> 0:09:46.120 question where is this one going? 0:09:47.440 --> 0:09:50.520 Well, I think the most important decision really is about 0:09:50.559 --> 0:09:53.439 what happens with Robert Leiheiser. As you guys have been mentioning, 0:09:54.000 --> 0:09:57.880 I think there's very limited amounts that the Treasury sear 0:09:58.000 --> 0:09:59.960 Jerry is going to do in terms of writing tax 0:10:00.040 --> 0:10:02.360 built with Congress. This isn't the first time around when 0:10:02.400 --> 0:10:04.439 we're crafting it out of thin air. That tax bill 0:10:04.520 --> 0:10:05.959 is going to be written by the Said of Finance 0:10:06.000 --> 0:10:08.400 Committee staff, that Chairman of Mike Crapo and the House 0:10:08.480 --> 0:10:10.480 Place and Means Committee and their staff, and the Treasury 0:10:10.480 --> 0:10:12.760 Secretary is going to be influential to the street. But 0:10:12.800 --> 0:10:15.480 in terms of these massive pieces of legislation, it's terriffs 0:10:15.559 --> 0:10:18.559 and taxes, And I'm really more concentrated on where Bob 0:10:18.640 --> 0:10:22.280 Lightheiser is going to go than whether it's Scott Bessant 0:10:22.360 --> 0:10:23.800 or somebody else at Treasury right now. 0:10:23.640 --> 0:10:27.000 Well, Henrietta, according to my sources, Robert Leithheiser is still 0:10:27.000 --> 0:10:28.960 in the mix as well as Senator Haggerty. When it 0:10:29.000 --> 0:10:31.200 comes to Treasury. What would a Robert Litthheiser at the 0:10:31.200 --> 0:10:32.160 helm of Treasury mean? 0:10:32.960 --> 0:10:35.160 You know what I'm wondering is whether he's going to 0:10:35.200 --> 0:10:38.200 do something in the trades are Universe. That seems to 0:10:38.200 --> 0:10:41.400 be the main theme of the Trump cabinet picked so far, 0:10:41.800 --> 0:10:45.360 whether it's the Government Efficiency Initiative, which has sort of 0:10:45.559 --> 0:10:49.880 an Efficiencies Are Crypto zar, or Bob Litthheiser in a 0:10:49.960 --> 0:10:52.240 role that's more like a tradezar. He doesn't even need 0:10:52.280 --> 0:10:54.600 to be at Treasury. I think it's pretty unlikely that 0:10:54.600 --> 0:10:57.600 he would land at Treasury. I think the President elect 0:10:57.640 --> 0:11:00.440 is enjoying this process of having a big fight for 0:11:00.480 --> 0:11:03.360 the transition. We definitely saw this last time around as well, 0:11:03.400 --> 0:11:04.920 so I don't think it should come as a surprise. 0:11:05.280 --> 0:11:08.120 But sort of a ROVINGSAR that has authority over USTR, 0:11:08.400 --> 0:11:10.599 the Department of Commerce and Treasury is going to be 0:11:10.679 --> 0:11:13.280 much more important, in my opinion than Treasure Secretary itself. 0:11:13.400 --> 0:11:15.960 When you read the tea leaves though, and you see 0:11:16.000 --> 0:11:19.280 that potentially, and sources are telling me that the team 0:11:19.400 --> 0:11:22.200 is trying to maybe give this off ramp to Howard Lutnik, 0:11:22.320 --> 0:11:28.000 offer him a fancy, first world class ambassadorship potentially, then 0:11:28.040 --> 0:11:30.120 that would lead the way for either Scott Besson to 0:11:30.160 --> 0:11:33.080 come up and get the NOD or they're going to 0:11:33.160 --> 0:11:36.000 expand the search because this is just becoming a little 0:11:36.000 --> 0:11:38.240 bit too messy between these two men. How do you 0:11:38.280 --> 0:11:40.760 read the tea leaves right now? And do you think 0:11:40.760 --> 0:11:42.400 there's going to be a timeline when we can get 0:11:42.400 --> 0:11:42.880 this NOD? 0:11:43.920 --> 0:11:46.920 Yeah, I think the Trump transition folks and people that 0:11:46.920 --> 0:11:49.320 I've spoken to who are working with them, they're trying 0:11:49.360 --> 0:11:52.320 to get as many names as possible. Specifically, we know 0:11:52.360 --> 0:11:54.880 that they're trying to get CEOs, somebody with it comes 0:11:54.880 --> 0:11:56.880 with quite a bit of stature to come and fill 0:11:56.880 --> 0:11:58.839 that role. Already, they have not been able to find 0:11:58.920 --> 0:12:01.520 that particular human and yet and so we're still in 0:12:01.559 --> 0:12:05.800 the realm of the Scott Bessett Howard Lutnick component. I 0:12:05.800 --> 0:12:08.480 think best probably for the most part has been out 0:12:08.520 --> 0:12:11.400 on the street the most meeting with you know, being 0:12:11.520 --> 0:12:16.160 bulch racket hedge banks and hedge funds talking about a 0:12:16.280 --> 0:12:19.600 very sort of slow, phased in five percent a month 0:12:19.760 --> 0:12:22.680 increase entire freights. Those are the kind of things that 0:12:22.720 --> 0:12:24.760 I think, when the details come out, will spook folks. 0:12:25.240 --> 0:12:27.360 When it comes to the transition, you know, the president 0:12:27.400 --> 0:12:30.240 elect has actually moved very quickly. I would expect the 0:12:30.240 --> 0:12:32.880 Treasury secretary to be somebody that's confirmed within the first 0:12:32.920 --> 0:12:35.520 two weeks, let's say, in January. So they want to 0:12:35.520 --> 0:12:37.959 get somebody that's actually able to get through, not a 0:12:38.040 --> 0:12:40.360 Matt Gates like candidate who's going to run into some 0:12:40.400 --> 0:12:42.040 serious ethical problems. 0:12:41.640 --> 0:12:43.600 Right when it comes to the Senate, obviously we think 0:12:43.640 --> 0:12:46.720 maybe the Treasury post could sail through. But you said 0:12:46.720 --> 0:12:50.080 the President elect was moving quickly, Why is it taking 0:12:50.160 --> 0:12:52.680 him so long when it comes to Treasury. This is 0:12:52.760 --> 0:12:55.280 one area we's not moving quickly, even though he ran 0:12:55.320 --> 0:12:56.920 on economic agenda. 0:12:57.360 --> 0:12:59.960 Right and there's not just a clear loyalist that he's 0:13:00.080 --> 0:13:02.599 planning to place. Some of the others, whether it's a 0:13:02.679 --> 0:13:05.199 Tulsa Gabbard or an r K Junior roadvertally on the 0:13:05.240 --> 0:13:08.280 campaign trail in this situation, the folks that would have 0:13:08.400 --> 0:13:10.520 been in that role have already said that they do 0:13:10.600 --> 0:13:13.280 not want to take on the position. When you hear 0:13:13.360 --> 0:13:17.440 things like, you know, going through the ethics component and 0:13:17.520 --> 0:13:20.440 the background check is preclusive, which I believe Scott Besson 0:13:20.520 --> 0:13:22.280 said a couple of weeks ago, it gives you an 0:13:22.360 --> 0:13:24.680 understanding of just how difficult it is to make the 0:13:24.720 --> 0:13:28.320 decision for these folks to go through the ringer with 0:13:28.520 --> 0:13:32.760 the FBI, with background checks, with the you know, disarming 0:13:32.800 --> 0:13:36.000 of their funds, and really understanding where that needs to 0:13:36.000 --> 0:13:38.119 go is. I think there's a lot of personal decisions 0:13:38.120 --> 0:13:40.600 that go into Treasury and this role that are maybe 0:13:40.600 --> 0:13:43.400 a little bit higher bar than the attorney general pick, 0:13:43.440 --> 0:13:44.440 for example, dry. 0:13:44.480 --> 0:13:45.960 Eda, How much do you see this as a test 0:13:46.000 --> 0:13:49.240 almost of how important the market response will be to 0:13:49.280 --> 0:13:51.280 Trump policies is sort of the ultimate check. 0:13:52.160 --> 0:13:54.240 Well, I think the street is very hearkened by the 0:13:54.240 --> 0:13:56.000 fact that they feel like they're playing a role in this. 0:13:56.080 --> 0:13:58.439 I mean, every single meeting I go to, investors think 0:13:58.480 --> 0:14:00.800 that the stock market, whether it's going for down, has 0:14:00.840 --> 0:14:04.679 the real leache on the president. I don't think that 0:14:04.679 --> 0:14:07.880 that's true. Just to put it bluntly, but it's definitely 0:14:07.920 --> 0:14:10.720 a view on the street that they have a say 0:14:11.080 --> 0:14:14.319 in what the Trump administration does and specifically how Donald 0:14:14.320 --> 0:14:17.400 Trump responds. So they're very optimistic, for example, in the 0:14:17.400 --> 0:14:21.440 bond markets that should his tax bill and tariffs go 0:14:21.520 --> 0:14:24.600 into effect in the same year. My expectation tariffs will 0:14:24.640 --> 0:14:26.560 go on in the first four or five months, and 0:14:26.640 --> 0:14:30.120 the tax bill be passed in December July at the earliest, 0:14:30.160 --> 0:14:32.960 you're going to get these massive both inflationary and deficit 0:14:33.000 --> 0:14:35.480 finance pictures. And what I hear often is the bond 0:14:35.480 --> 0:14:37.800 market's going to send a message and stop that. That's 0:14:37.840 --> 0:14:41.080 just not the way that DC typically works. They are 0:14:41.160 --> 0:14:44.080 much more concentrated on quarter over quter GDP growth on 0:14:44.120 --> 0:14:47.440 employment rates. The President elect has tweeted quite a bit 0:14:47.440 --> 0:14:50.480 about the stock market, but that's never led him to 0:14:50.560 --> 0:14:53.240 not impose tariffs. As we all remember from twenty eighteen 0:14:53.280 --> 0:14:54.240 to twenty nineteen. 0:14:54.040 --> 0:14:56.120 That said Henrieta, We did hear from Mike Johnson House 0:14:56.120 --> 0:14:57.880 speaker that there was going to be some sort of 0:14:57.880 --> 0:15:01.040 offset to any tax cuts. We heard from french Hill 0:15:01.360 --> 0:15:03.280 when he was on with US a couple of weeks 0:15:03.280 --> 0:15:05.760 ago that he's really going to be careful about not 0:15:05.800 --> 0:15:09.080 necessarily expanding the budget too much. Why do you think 0:15:09.240 --> 0:15:11.640 that ultimately that the market does not play the role 0:15:11.680 --> 0:15:12.480 that it thinks it does. 0:15:13.680 --> 0:15:14.000 Well. 0:15:14.480 --> 0:15:17.480 First of all, it's not what Congress is watching you. 0:15:17.640 --> 0:15:19.720 A tax bill is in existence for four or five, 0:15:19.800 --> 0:15:22.560 six years seven in the case of the last package, 0:15:22.640 --> 0:15:25.120 that's not, you know, designed to boost the market on 0:15:25.160 --> 0:15:28.040 a day over day basis. President elect Trump is going 0:15:28.080 --> 0:15:29.800 to be at the very beginning of his term, which 0:15:29.800 --> 0:15:32.680 is four years, not every single day matters. It's just 0:15:32.680 --> 0:15:37.640 sort of a fundamental misunderstanding of how DC watches the 0:15:37.840 --> 0:15:40.760 US economy. I'm the stock market in general, and while 0:15:40.760 --> 0:15:43.800 I think President elects Trump tweets about it, as I mentioned, 0:15:43.880 --> 0:15:46.920 it's very different than writing and crafting legislative policy that 0:15:47.000 --> 0:15:49.760 will increase the deficit by at least two trillion dollars 0:15:49.800 --> 0:15:52.520 next year, whether the bond market responds or not, that's 0:15:52.520 --> 0:15:54.320 what it's going to take. That's what it costs. So 0:15:54.360 --> 0:15:57.240 when you talk about the Government Efficiency Initiative, what I 0:15:57.360 --> 0:16:00.600 hear as a former budget staffer is really exactly the 0:16:00.680 --> 0:16:03.080 wish list that we get from an administration. On the 0:16:03.080 --> 0:16:05.200 first Monday in February. You get the budget every year. 0:16:05.200 --> 0:16:07.080 It's very optimistic and wishful thinking. 0:16:07.240 --> 0:16:08.360 It includes a lot of. 0:16:08.240 --> 0:16:11.200 Offsets to offset the cost of the spending that you 0:16:11.240 --> 0:16:13.280 want to roll out, but ultimately very little of that 0:16:13.320 --> 0:16:15.840 actually gets effectuated. So when I hear the President and 0:16:15.920 --> 0:16:19.200 Elon Musk and Beckmrmaswam we talk about government efficiency, what 0:16:19.280 --> 0:16:20.880 I hear is this is the thing that we'd like 0:16:20.920 --> 0:16:24.160 to do in a perfect world. It will not actually happen, 0:16:24.640 --> 0:16:27.600 but it's part of the conversation that's necessary to mitigate 0:16:27.640 --> 0:16:30.760 the appearance of deficit increases on the magnitude of two 0:16:30.800 --> 0:16:33.360 trillion dollars, if not more, just to pass the existing 0:16:33.400 --> 0:16:33.800 tax rate. 0:16:34.040 --> 0:16:36.840 We'll see Henrietta. It's good to see you, Henritta Trace 0:16:36.880 --> 0:16:49.720 their a Vada partners. So here's the latest. Big retailers, 0:16:49.760 --> 0:16:52.840 including Target and Walmart, recording garnings this week ahead of 0:16:52.880 --> 0:16:55.800 a shortened holiday shopping season. K Max Shane of Goldman 0:16:55.880 --> 0:16:59.000 Sanks writing, Target customer is our residient, you're on a budget, 0:16:59.200 --> 0:17:03.040 while Walmart is opposition to continue driving solid earnings. Kate, 0:17:03.080 --> 0:17:05.160 join just now for more. Kate, welcome to the program. 0:17:05.200 --> 0:17:07.120 I want to talk about trade. Just to begin with 0:17:07.480 --> 0:17:10.720 how battle hardened are these companies from the trade war 0:17:11.040 --> 0:17:13.320 of a few years ago, and how well prepared are 0:17:13.320 --> 0:17:14.240 they for more the same? 0:17:15.800 --> 0:17:19.639 Yes, I think frankly, the more discretionary goods you have 0:17:19.840 --> 0:17:23.800 and more that you're importing from Asia, the harder it 0:17:23.920 --> 0:17:28.480 is to manage. And so specifically to Target and Walmart, 0:17:28.680 --> 0:17:34.800 about a third of what Target cells is domestically sourced, 0:17:34.880 --> 0:17:37.680 so not subject to tariffs, and for Walmart it's about 0:17:37.680 --> 0:17:41.720 two thirds of what they source is domestically produced and 0:17:41.800 --> 0:17:44.520 not exposed to tariffs, So there is still quite a 0:17:44.520 --> 0:17:47.639 bit there in terms of exposure. The last time we 0:17:47.680 --> 0:17:52.120 did see tariffs happen, both Walmart and Target did take 0:17:52.160 --> 0:17:55.840 prices up. Frankly, most retailers did, and that's probably what 0:17:55.880 --> 0:17:57.960 will happen this go around as well. 0:17:58.119 --> 0:18:00.480 Kate, I have to ask, especially ahead of Walm coming 0:18:00.520 --> 0:18:04.560 out tomorrow with earnings, is Walmart still a retail company. 0:18:05.359 --> 0:18:08.399 It's a good question. Yes, it absolutely is. But I 0:18:08.400 --> 0:18:11.160 think a lot of success that they have seen more 0:18:11.200 --> 0:18:13.800 recently has been with what they call their second P 0:18:13.880 --> 0:18:17.160 and L, or their alternative revenue streams, which is them 0:18:17.200 --> 0:18:20.920 building out a media business, a fulfillment business, their marketplace 0:18:21.119 --> 0:18:24.840 data ventures and they describe it as an ecosystem all 0:18:24.880 --> 0:18:28.440 in which to better serve the customer with. But there 0:18:28.480 --> 0:18:30.560 certainly is a lot more tech and a lot more 0:18:30.600 --> 0:18:33.920 to understand from an e commerce tech standpoint than there's 0:18:33.920 --> 0:18:34.679 ever been before. 0:18:34.840 --> 0:18:36.440 The reason why I ask Kate is because we also 0:18:36.480 --> 0:18:38.560