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Speaker 2: Let me give pause the hardcovers ninety nine douts. Okay,
Speaker 2: that's the way Peter Trueberitz rolls, he said, the London
Speaker 2: School of Economics definitive at LBJ in Texas, and of
Speaker 2: course with the Phalans Center at lc Peter, you're the
Speaker 2: first name I asked for. With all that we've seen
Speaker 2: this morning, where are we in a month? How does
Speaker 2: mister Putin respond to what we witnessed in the last
Speaker 2: seventy two hours.
Speaker 3: It's great to be with you. I can't believe they're
Speaker 3: charge in ninety nine bucks for that book. But in
Speaker 3: any event, you know, I think Putin is a pretty
Speaker 3: happy camper right now, especially after everything that unfolded last week,
Speaker 3: and of course, you know, in particular following the fiasco
Speaker 3: in the Oval office between Trump and and Zelenski. I
Speaker 3: think what has been underscored here for anybody that didn't
Speaker 3: really realize it is that Donald Trump doesn't have Kiev's back,
Speaker 3: and that has thrown everything into I don't know, like
Speaker 3: fast motion. I mean, what has happened in Europe, in
Speaker 3: London over the weekend has just been kind of as
Speaker 3: they try to figure out some kind of way to
Speaker 3: write reship.
Speaker 2: Okay, in your book Geopolitics and Democracy, Oxford University Press,
Speaker 2: you have a perfect phrase for this moment that all
Speaker 2: of our listeners and viewers feel, and that is reaping
Speaker 2: the whirlwind? Can the traditional processes the trueber Ritz is
Speaker 2: lectured on for decades, The Chathamhouse has talked about see
Speaker 2: a fire and all the rest. Peter can reaping this whirlwind?
Speaker 2: Can those traditional processes work or do we need something new?
Speaker 3: It's a great question, Tom, I mean, I would say
Speaker 3: right now the standard kinds of checks and balances are
Speaker 3: not in play. So the most obvious one when you
Speaker 3: think domestically, is Congress serving as a check on the
Speaker 3: president and so forth. To me, I think one of
Speaker 3: the most interesting parts of the developments in the Trump
Speaker 3: administration in Trump two point zero is the way that
Speaker 3: his cabinet positions have been filled. He is essentially structured.
Speaker 3: It's in such a way that everything is coming out
Speaker 3: of the Oval Office and there is no opportunity for
Speaker 3: any check or blocking coalition to emerge among his cabinet officials.
Speaker 3: Where are his generals? There's nothing horizontal there. And I
Speaker 3: will say internationally, I mean it seems to me with
Speaker 3: respect to the Allies, he's just got them on the run.
Speaker 3: I mean, he is leveraging America's market, and he is
Speaker 3: leveraging America's power to extract concessions. And what makes it
Speaker 3: very difficult, I think, from whether it's from Canada to
Speaker 3: the UK, to France to Germany, is they don't know
Speaker 3: where this will stop, and so there's no obvious kind
Speaker 3: of break there. The one place he's certain to get
Speaker 3: pushback is from Beijing.
Speaker 4: So are you surprised, Peter that there hasn't been any
Speaker 4: pushback from saying, oh, I don't know Congress on some
Speaker 4: of these policy pronouncements or what happened in you have
Speaker 4: the office last week.
Speaker 3: I'm disappointed. I'm not surprised, but i'm personally, you know,
Speaker 3: when I look at this and think about it in
Speaker 3: terms of what's good for the United States over the
Speaker 3: long haul, over the horizon, you know, I'm disappointed. By it,
Speaker 3: but I'm not surprised. I'm not surprised for at least
Speaker 3: two reasons. One is Donald Trump owns the Republican Party,
Speaker 3: and they're just people that are too afraid of stepping
Speaker 3: out of line. And I think that that for a
Speaker 3: lot of people, they think that the system can that is,
Speaker 3: the international system can, you know, basically suffer a fair
Speaker 3: amount of I don't know what you want to call it,
Speaker 3: like damage. So yeah, okay, so they imposes tariffs and
Speaker 3: the tariff rates overall go up, the world won't come
Speaker 3: to an end. I mean, it seems to me that
Speaker 3: even you know, big names on Wall Street like Jamie
Speaker 3: Diamond have gotten themselves to that point so that they're
Speaker 3: prepared to see some kind of slippage from the traditional
Speaker 3: rules based order that Republican and Democratic presidents alike agreed to.
Speaker 2: Our Conversation of the Day with Peter Truutz we continue
Speaker 2: he's professor at the London School of Economics, barely defines
Speaker 2: his contribution to civics in America with his building of
Speaker 2: all the politics of the LBJ School at Texas as well.
Speaker 4: Paul So Peter, we saw over the weekend, UK Prime
Speaker 4: Minister cure Starmer talk about forging a coalition of the
Speaker 4: willing to secure Ukraine? Is that even tell to us
Speaker 4: about that? How do you think about that?
Speaker 3: Yeah, Paul, it's good question. I mean, it's possible, but
Speaker 3: if anything, it's anything but a given, I would say,
Speaker 3: And that's because any coalition that does emerge is likely
Speaker 3: to be a coalition of the unwilling, not rather than
Speaker 3: the willing. I mean, the crux of the problem here
Speaker 3: is that European leaders do not want to put boots
Speaker 3: on the ground as part of a peacekeeping force within
Speaker 3: Ukraine without a US security backstop in the form of
Speaker 3: you know, aircraft, anti missile batteries, intelligence data, satellite info.
Speaker 3: And Trump has basically thus far been unwilling to at
Speaker 3: least publicly commit to such a backstop. And I think,
Speaker 3: I mean, the other news item that's getting no attention
Speaker 3: today is he's got a meeting with the Mark Rubio
Speaker 3: and hetcof you know about what the response is going
Speaker 3: to be, and it seems like you know, the choices
Speaker 3: are between canceling or suspending. That's positive.
Speaker 2: I got to interrupt here, and this is this is
Speaker 2: totally unfair to you and not the way surveillance rules.
Speaker 2: But everyone's thinking about it, whatever they're politics, should the
Speaker 2: Secretary of State resign?
Speaker 3: So my view, and I've said this and I'm on
Speaker 3: the record, I believe he won't last very long. So
Speaker 3: and that's because it's pretty clear anybody that was watching
Speaker 3: on Friday or watched the Saturday Night Lives boof of
Speaker 3: It realizes that Marco Rubio is very uncomfortable, is basically
Speaker 3: pivoting one hundred and eighty degrees from things that he
Speaker 3: said about the war Putin's War in Ukraine two years ago,
Speaker 3: you know. And so the question is can he carry
Speaker 3: the brief and you know, you know or not? To me,
Speaker 3: he seems like he's not a particularly relevant player in
Speaker 3: the administration.
Speaker 2: Years ago, folks, you had to walk around campus if
Speaker 2: you wanted to be a girl magnet, you had to
Speaker 2: walk around with a black and white cover book Reagan's
Speaker 2: Legacy in a World Transformed and Young Troubowitz, Elliot Cohen's
Speaker 2: in the book, Paul Kanger, others Young Troubowitz is in there.
Speaker 2: The Balancer, Ronald Reagan, Party politics and US Grand Strategy.
Speaker 2: You're in a classroom right now, and that's smart. Alec
Speaker 2: Paul Sweeney's in the back row, half asleep, and he
Speaker 2: raises his hand, Professor, and he says, what's after Trump?
Speaker 2: Do you see a permanence to this Republican effort of
Speaker 2: the President of the United States, or do you look
Speaker 2: at Donald Trump as a one off?
Speaker 3: I think the answer here is that it's possible. Look,
Speaker 3: States is very divided. We all know that, and not
Speaker 3: everybody agrees with this. If you look at the polling
Speaker 3: and so forth, the country is divided on so many
Speaker 3: of these questions. So it's quite possible that two years
Speaker 3: from now, you know, Trump, the Republicans lose the Congress,
Speaker 3: everything grinds to a halt, and a Democrat comes back
Speaker 3: in four years from now and tries to change things.
Speaker 3: But imagine this from the standpoint, this is the kind
Speaker 3: of thing I hear over here as an Americans talking
Speaker 3: to Europeans and so forth. What kind of credibility I mean,
Speaker 3: if this can happen, if it can happen, you know,
Speaker 3: if it can happen under Donald Trump, can happen at
Speaker 3: this point, and it happened four years ago, it could
Speaker 3: happen again. And I think these things have a kind
Speaker 3: of they're sticky, and it's hard to just turn things back.
Speaker 3: So I think what is happening is, you know, we're
Speaker 3: seeing parts the rules based order that has been in
Speaker 3: place more or less for eighty years. It's fraying, it's unraveling,
Speaker 3: and we're going to head into different territory.
Speaker 2: It seems to me.
Speaker 4: Peter, you're a professor of international relations at the London
Speaker 4: School of Economics. You're an American in London. How do
Speaker 4: our European allies, who have been our allies since World
Speaker 4: War Two? How do they perceive what's going on now?
Speaker 4: How concerned are they that eighty years of I guess
Speaker 4: relations and policy and strategies seem to be you know,
Speaker 4: kind of at risk here.
Speaker 3: Yeah, they're freaked out. I mean, look big, they have
Speaker 3: a war on their doorstep. You know, this is not
Speaker 3: the first time. Let me just say too, this is
Speaker 3: not the first time that an American president has put,
Speaker 3: if you will, the screws to Europe over security. Richard
Speaker 3: Nixon shut you know, tried to shake down America's allies
Speaker 3: back in the nineteen seventies. You Tom, you'll remember this,
Speaker 3: when he threatened to slash American troop presence there if
Speaker 3: they didn't start spending more on defense. But the difference
Speaker 3: between then and today is there wasn't an active war
Speaker 3: on Europe's doorsteps. So this really has their attention. But
Speaker 3: the question, you know Europe, is that the EU does
Speaker 3: not make a decision on a dime and like turn
Speaker 3: on a dime. So and they have trouble coming up
Speaker 3: with They've had trouble always coming up with coherent foreign policy,
Speaker 3: a security. I remember the day, not obviously they're going
Speaker 3: to get there.
Speaker 2: I remember the day de Goaale wouldn't let American jets
Speaker 2: fly over France on their way to somewhere to bomb somebody.
Speaker 2: One final question, Professor trueber it's a good friend of
Speaker 2: the show. Robert Hormant's, with all of his public service,
Speaker 2: wrote a book ten years ago, The Price of Liberty,
Speaker 2: Paying for America's Wars. Harmant's grand theory out of Tufts
Speaker 2: is simple. If your fiscal house is an order, you
Speaker 2: can't get it done. Russia's fiscal house is not an order.
Speaker 2: Europe's fiscal house is not an order. Decidedly, America's fiscal
Speaker 2: house is not an order. How does that play out?
Speaker 3: I think the US has much more running room than
Speaker 3: the other two that you mentioned, and so you know,
Speaker 3: I mean the implication of what you're saying is that
Speaker 3: everybody will Each of these countries has an incentive to retrench.
Speaker 3: The problem here is some of Putin. If he sees
Speaker 3: the United States pulling back in Europe, that's exactly what
Speaker 3: he wants. He wants to be able to divide Europe
Speaker 3: from the United States. This is did not start with Putin.
Speaker 3: This was the old Soviet strategy as well. It's been
Speaker 3: Russian policy for a very long time. So he will
Speaker 3: double down if he sees that goal in site deficit
Speaker 3: or no deficit.
Speaker 2: I think thank you so much for the time. Peter
Speaker 2: Trubwitz at LC just definitive with an American political thought
Speaker 2: thinking forward the new effort. I can't say enough about it.
Speaker 2: Two arded some pages geopolitics and democracy from Trubwitz out
Speaker 2: of Oxford. Thank you so much.
Speaker 1: This morning, you're listening to the Bloomberg Surveillance Podcast. Catch
Speaker 1: us live weekday afternoons from seven to ten am Eastern
Speaker 1: Listen on Apple, Karplay and Android Otto with the Bloomberg
Speaker 1: Business app, or watch us live on YouTube.
Speaker 2: Joining us now Jack Divine with us. He's fond of
Speaker 2: the ARCA group, and as we had the other day
Speaker 2: with micknlloy, this is people that actually know what they're
Speaker 2: talking about. Jack Divine, thank you so much with your
Speaker 2: work at the Central Intelligence Agency. If I, as a
Speaker 2: hack say, do we tell diligence about what the Kremlin's thinking?
Speaker 2: Discuss that, do we know what's going on? Do we
Speaker 2: know what's going on in Moscow? Or do we know
Speaker 2: what's going on in Beijing?
Speaker 5: He always asked me tough questions. I hope so was
Speaker 5: the first answer. I think the key word in your
Speaker 5: question is thinking. There is I think the intelligence community
Speaker 5: knows where the armies are positioned, and the battlefield strategy
Speaker 5: and the latest weapons. Thinking has always been the toughest channel,
Speaker 5: the toughest, not the crack And sometimes we've been extraordinarily
Speaker 5: good at knowing what's going on, and other times not
Speaker 5: so well. So I'm hopeful that we are keeping up
Speaker 5: with the tradition, but I'm not betting on it.
Speaker 4: Hey, Jack, what did you make with a little bit
Speaker 4: of hindsight here? What do you make of what happened
Speaker 4: in the White House with the President of Zelensky and
Speaker 4: President Trump and Vice President in advance last week.
Speaker 5: I think a lot of hundreds have been covering this,
Speaker 5: and from various I mean, I think if I stood back,
Speaker 5: I would say, first of all, this is a moment
Speaker 5: in time. This is not the endgame, right, and everyone's
Speaker 5: focused on the pieces here and at some point I'd
Speaker 5: like to go beyond that. But I think this is
Speaker 5: a question of people coming to the table not having
Speaker 5: primed the pump sufficiently to have the right time to discussion.
Speaker 5: And I think Zelinsky was arriving at the table with
Speaker 5: a list, his wish list, right, and putin sitting over
Speaker 5: at Moscow with a wish list. What they're not getting
Speaker 5: is the negotiations haven't really quite started. That starts when
Speaker 5: everybody agrees that they're going to be negotiation. So I
Speaker 5: think they jumped the gun here, and I think there
Speaker 5: was a lot of rievances and build up anxiety in
Speaker 5: the room across the broad spectrum. Obviously it wasn't the
Speaker 5: best start, but I think we moved. I think we're
Speaker 5: going to move quickly beyond that, because there's inevitability about
Speaker 5: where we end up.
Speaker 4: In my view, Jack, we've all kind of grown up
Speaker 4: here in this post World War two environment where there's
Speaker 4: a certain set of real relationships and policies. Is President
Speaker 4: Trump fundamentally changing those long held positions by the East
Speaker 4: and the.
Speaker 5: West we're looking at in the Trump administration is not
Speaker 5: a minor shift. I mean, I think everything, every aspect
Speaker 5: of moderate modern life and relationships is being put to
Speaker 5: put to a test, right, And the question is do
Speaker 5: we come out of it better at the end. But
Speaker 5: the one thing I'm absolutely convinced of is that we're
Speaker 5: entering this We're really entering the century now, this is
Speaker 5: really the beginning of the twenty first century. I think
Speaker 5: President Trump is the engine of major changes and relationships
Speaker 5: and evaluations. And so I think everything is on the table,
Speaker 5: and I think people are saying it sometimes we don't
Speaker 5: listen well, but you know, the administrations, everything's on the table.
Speaker 5: So I think when the deck is reshuffled. However, let's
Speaker 5: me just say that I think our alliance is our
Speaker 5: alliance is our enemy or our enemies. But how you
Speaker 5: handle it and where you go is the process of
Speaker 5: being worked out. And in the process when you have
Speaker 5: that type of change, this pain.
Speaker 2: I look, Jack divine people at risk here, and part
Speaker 2: of the risk is the you know the cinema of
Speaker 2: Tom Hanks and the idea of a Berlin Wall or
Speaker 2: some form of divide an iron curtain, as we know
Speaker 2: from our ute. And the answer is, are we redeveloping
Speaker 2: with an isolationist America some form of new iron curtain.
Speaker 5: I don't think that's the trust. I think people are
Speaker 5: misreading what I think is happening. I think what we're
Speaker 5: looking at here is a negotiation to bring a war
Speaker 5: to an end where both parties really need to do that.
Speaker 5: I've been saying on your show for a couple of years.
Speaker 5: Once you get this stale meat, the cessation of firing,
Speaker 5: and then you get the some deal. You know too
Speaker 5: many people are thinking that Putin's holding really strong cards.
Speaker 5: He has nuclear weapons, but is the prospect of amusing
Speaker 5: it a very very emote. This is the word is
Speaker 5: not going well for every party, So how is it
Speaker 5: going to be reshuffled? And I think part of it
Speaker 5: will mean actually a lessening of friction if the deal,
Speaker 5: the art of the deal is executed is I think
Speaker 5: it may.
Speaker 2: Be out of time. We got to get Jackson again,
Speaker 2: Thank you so much, really really appreciate it. With the
Speaker 2: ARC and group, just love having him and I got
Speaker 2: about eight more questions, but you know we can't do it.
Speaker 4: Yeah, he's seen it all time.
Speaker 2: We'll have Jack Divine with his work at the CIA
Speaker 2: on again. Just incredible experience.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto
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Speaker 1: say Alexa Play Bloomberg eleven thirty joining us.
Speaker 2: Saw Lori, Kelvissina, Piet you had a corner this Morne,
Speaker 2: you had a total bart some sameel done. We have
Speaker 2: to have Kelvacina. Why don't you bring her in? I
Speaker 2: have to You mean it was before I'd had my
Speaker 2: first tang and you were going nuts. We have to
Speaker 2: have Calvicina.
Speaker 4: Now we got it, bring her out? How good is that?
Speaker 4: From the lawn at Charlottesville, Virginia. Lorie calvecein ahead of
Speaker 4: US Equity Strategy RBC Capital Markets, Lorii are you We've
Speaker 4: had We had a little bit of a draw down,
Speaker 4: as Tom would say, I kind of called a sell
Speaker 4: off back in the day. But the kids called a
Speaker 4: draw down you know, three four five percent over you know,
Speaker 4: the first part of the year. What did you make
Speaker 4: of that? And kind of how do you feel about
Speaker 4: just the market levels right here?
Speaker 6: Sure, so thanks for having me on as always, And look,
Speaker 6: this has been a big point of discussion over the
Speaker 6: last few weeks. Our view has been that the market's
Speaker 6: overdue for a five to ten percent draw down from peak,
Speaker 6: and that is you know, I know that sounds scary, right,
Speaker 6: but we have done a whole bunch of those since
Speaker 6: twenty twenty two, and that's pretty much what a garden
Speaker 6: variety pullback has been in the post twenty twenty two era.
Speaker 6: If you think about sort of about our lows last week,
Speaker 6: we weren't even quite down five percent. And I was joking,
Speaker 6: you know, when I was talking to investors last week,
Speaker 6: the dip that we had felt a whole lot worse
Speaker 6: than it was in terms of the price action. We've
Speaker 6: started to see anxiety come back, you know, I think
Speaker 6: tariffs were finally starting to see people question the idea
Speaker 6: of whether or not they're actually a negotiation tactic. That
Speaker 6: was a big shift last week, and that helped push
Speaker 6: us to that kind of you know, four percent plus
Speaker 6: ish draw down level.
Speaker 7: But look, you know, our base case.
Speaker 6: Has been that we could get to sixty six hundred
Speaker 6: on the SMP at the end of the year with
Speaker 6: at least one of those five to ten percent drawdowns.
Speaker 6: We never thought it was going to be an easy path.
Speaker 6: But I will tell you, you know, Paul, as we've
Speaker 6: been talking to investors about if that doesn't hold, what's next.
Speaker 6: You know, we do think the risks of a growth
Speaker 6: scare a fourteen to twenty percent draw down, similar to
Speaker 6: what we saw in twenty ten, twenty eleven, twenty fifteen, sixteen,
Speaker 6: and twenty eighteen when markets were fearful of a recession
Speaker 6: or a systemic issue that didn't end up quite happening.
Speaker 6: You know, we sort of got the fear, but we
Speaker 6: didn't get the event. We think those risks are starting
Speaker 6: to grow again. It's not in my base case, but
Speaker 6: if we're being intellectually honest with people, we think the
Speaker 6: risk of something worse than a ten percent draw down
Speaker 6: is starting to move up a little.
Speaker 4: I mean, you know, folks out there, if you ever
Speaker 4: get an opportunity to get a meeting with Lori Cavalsina,
Speaker 4: take it because some really really good stuff. I'm looking
Speaker 4: at your chart book here, lots of good pictures. I
Speaker 4: like pictures because they help me understand things. But I
Speaker 4: kind of feel like earnings are as important as they've
Speaker 4: been for an equity market as they've been for a
Speaker 4: long time, because I don't think the Federal Reserve Laurie's
Speaker 4: going to do a lot for me this year. How
Speaker 4: do you feel about earnings?
Speaker 6: You know I'm the same way, Paul. I don't think
Speaker 6: we're going to get multiple expansion. I do think that
Speaker 6: the earnings growth outlook makes sense based on the information
Speaker 6: we have at the moment, but things could change, and
Speaker 6: I will tell you, as we've gone through and looked
Speaker 6: at what companies are saying about tariffs in particular, they
Speaker 6: really didn't start to have detailed discussions until after February first,
Speaker 6: the first deadline on Mexico and in Canada that passed.
Speaker 6: And if you look at what companies have said since then,
Speaker 6: some of them are starting to bake some tariff impacts
Speaker 6: into their guidance, but others are saying even some that
Speaker 6: have acknowledged it would be a significant hit to them
Speaker 6: haven't baked it into the numbers yet either. So we're
Speaker 6: sitting at two seventy one. You know, that's a healthy
Speaker 6: growth rate, but we do see some pressures on that
Speaker 6: starting to emerge. And you've seen the earning's expectations on
Speaker 6: the bottom up consensus drift lower a few bucks as
Speaker 6: this reporting season has gone on.
Speaker 2: In our morning commute, Lori Kelvisina RBC Capital Markets on YouTube.
Speaker 2: Subscribe to Bloomberg Podcasts. Dazzled by the international reach there.
Speaker 2: Thank you so much across the evening Pacific rim the
Speaker 2: afternoon Europe for your attention to Bloomberg Surveillance and to
Speaker 2: Laurie Calvesina, Laurie, if I say to you we're in
Speaker 2: a bull market, and I say to you, corporations adapt,
Speaker 2: how will they adapt forward given the political noise.
Speaker 6: It's an interesting question, Tom, because we haven't really seen
Speaker 6: a big spate of downward guidance or upward guidance. I
Speaker 6: don't think companies know where to put the bar right now.
Speaker 6: And you know, we we sort of looked as we
Speaker 6: went through one week to the next in reporting season,
Speaker 6: it started out very optimistic, and that optimism really started
Speaker 6: to get eclipsed by uncertainty. And I wouldn't say there's
Speaker 6: pessimism among corporates. The conference boards CEO surveys certainly told
Speaker 6: us they're still feeling better than they were last fall.
Speaker 6: We don't really know from that survey how they compare
Speaker 6: now versus January. But you know, one thing that came
Speaker 6: to mind as we were talking to investors last week
Speaker 6: was going back to that twenty fifteen twenty sixteen in
Speaker 6: industrial recession where we had resilient consumers and then we
Speaker 6: had more pessimism in the corporate sector, especially that industrial
Speaker 6: and energy part of the economy, and it was just
Speaker 6: sort of an asynchronous business cycle. We had a bit
Speaker 6: of a market you know, pullback, but we we didn't
Speaker 6: really ever come close, you know, to kind of the
Speaker 6: recession capital our territory.
Speaker 7: And so as we've watched some of these.
Speaker 6: Consumer sentiment surveys slide and we've seen the contrast with
Speaker 6: the CEO levels of confidence have stayed much more resilient.
Speaker 6: You know, one point of conversation came off, well, maybe
Speaker 6: we're going to do something like the flip of that
Speaker 6: right where we have some consumer pressure but the corporate
Speaker 6: sector stays resilient. I'm not saying that's where we're headed necessarily,
Speaker 6: but it's one, you know, kind of idea and thought
Speaker 6: that started to emerge.
Speaker 4: Laurie, I know. And I'm just going through your slide
Speaker 4: deck and wow, one hundred and fifty pages. I'm on
Speaker 4: page four refreshing.
Speaker 7: I'm sorry, I'm sorry, it gets too long.
Speaker 2: Francis Donald does not do one hundred and fifty page decks.
Speaker 4: Yeah, it's like a six I'm plowing through it. You
Speaker 4: have a year end twenty twenty five s and p.
Speaker 4: Five hundred barecase of five thousand, seven hundred and seventy five?
Speaker 4: What would get you there? What would push it down?
Speaker 7: So we put that back.
Speaker 6: We put that out back in November, and we have
Speaker 6: refreshed the math around that, and there are a couple
Speaker 6: of ways that we could get there. One of them
Speaker 6: is not really worrisome to me right now. We have
Speaker 6: done some modeling on evaluation work. If we got ten
Speaker 6: year treasury yields up to five percent move up in inflation,
Speaker 6: that you know, when we did the math on that, right,
Speaker 6: that could have gotten us down to sort of the
Speaker 6: fifty six hundred ish type mark, which pulled that barecase
Speaker 6: down our sentiment work. Frankly, I mean centiment's so bad
Speaker 6: it's starting to be a good setup. On a twelve
Speaker 6: months forward basis, that would have pulled the number up
Speaker 6: a little bit. But the other thing, you know, putting
Speaker 6: the ten year yield issue aside, because we were taking
Speaker 6: the message right that the Treasury is really focused on
Speaker 6: keeping ten year yields lower. I think you have to
Speaker 6: look at economic growth, and this was one of the
Speaker 6: things we really focused on in our year ahead outlook
Speaker 6: was two percent GDP at the time was forecast for
Speaker 6: this year. That's now up to two three. Two to
Speaker 6: three a very very healthy environment for the stock market.
Speaker 6: It typically goes up you have strong gains, you know,
Speaker 6: and kind of the low teens ten percent ish type numbers.
Speaker 6: But if you slip into a one to two percent
Speaker 6: GDP environment, stocks are usually down more often than they're up,
Speaker 6: and we have on average about a three percent decline
Speaker 6: in the market in those kinds of years. So we
Speaker 6: worry that some of these economic headwinds could potentially start
Speaker 6: to push GDP expectations down, not a recession, but something
Speaker 6: like one and a half percent GDP.
Speaker 7: And I think Francis's number, by the way, is one
Speaker 7: to nine. You know it could push you into a
Speaker 7: troublesome territory.
Speaker 6: Markets do not like sluggish growth, so that's one way
Speaker 6: you could easily get there.
Speaker 2: What do companies do given this strange thing, sluggish growth?
Speaker 2: Does M and A pick up among the Russell two thousand?
Speaker 6: Well, look, I think we're we're seeing a slow start
Speaker 6: to M and A this year, and a lot of
Speaker 6: people are scratching their heads as.
Speaker 7: To why that will happen. You know, I think if
Speaker 7: you look at the.
Speaker 6: CEO confidence survey again from the conference board, they also
Speaker 6: showed that employment expectations came in just a little bit,
Speaker 6: so I think as economic, you know, sort of concerns emerge.
Speaker 6: You know, everyone's asked about capex. We haven't seen any
Speaker 6: shift in capex expectations in the survey data, but you
Speaker 6: have seen a little bit of ratcheting down on employment expectations,
Speaker 6: even given what we've had so far. And you know,
Speaker 6: you've also seen that sluggish start to M and A.
Speaker 7: We have a good chart.
Speaker 6: I forget what pagees on in the deck, but it
Speaker 6: shows you that M and A overtime does tend to
Speaker 6: track CEO confidence.
Speaker 7: I can't remember where any of the pages are. I'm
Speaker 7: not gonna lie.
Speaker 2: Sance as donald as a six page deck. Okay, Russell
Speaker 2: two thousand, I'm down thirteen percent in the vicinity of
Speaker 2: December fifteenth, Laurie, I'm down fourteen percent on Russell two
Speaker 2: thousand and forty percent annualize, and I've strapped two standard
Speaker 2: deviations plus all the way down negative two standard deviations.
Speaker 2: Is it Russell two thousand in a bear market?
Speaker 6: So, I mean, the Russell has been under pressure for
Speaker 6: so long, and we've had nothing but you know, sort
Speaker 6: of short term trades in and then the momentum fizzles out.
Speaker 6: It's really been jerked around by hedge fund trading and
Speaker 6: passive investments in the last year and a half. And
Speaker 6: we've seen you know, hedge funds in particular dialing up
Speaker 6: their optimism on the small caps when fed duvishness was
Speaker 6: picking up, and when fed hawkishness was coming back there
Speaker 6: dial down. And then we got to the election and
Speaker 6: they started getting dialed up on election optimism.
Speaker 7: I think the problem you've got for small caps right.
Speaker 6: Now is that you do you have had some valuation problems,
Speaker 6: You've had some frothiness. If you look at the positioning
Speaker 6: data from CFTC. We are starting to see the valuation
Speaker 6: data unwind We've gotten down to average on the long
Speaker 6: term pe for ther for the Russell two thousand. That
Speaker 6: often can mark the bottom, but if you have a
Speaker 6: real economic problem on your hand, you'll go to eleven,
Speaker 6: thirteen times or fifteen times.
Speaker 7: Right now, we had been up almost molost to nineteen.
Speaker 6: If you look at positioning, we've got a lot more
Speaker 6: room to fall. And in the meantime, we've got a
Speaker 6: lot of economic headwinds that are coming at this space,
Speaker 6: and you need economic tailwinds to come back, or at
Speaker 6: least a recession priced in to really want to buy
Speaker 6: this space. So I think it's, you know, interesting stuff
Speaker 6: happening here, but it still feels a little early to me.
Speaker 2: And the magic of Bloomberg surveillance. So Laurie's talk and
Speaker 2: I'm going to page one oh six of her stack
Speaker 2: and I'm doing Russell two thousand log linear standard deviation
Speaker 2: for the depths of two thousand and nine, and she
Speaker 2: beautifully describes we're only down one standard deviation on the
Speaker 2: long term log chart. We got a ways to go
Speaker 2: to get down to the anks of two standards audiation.
Speaker 2: Let's see.
Speaker 4: So, Laurie, what do we do here? What's the I mean,
Speaker 4: we're pretty much through the earnings. We're going to get
Speaker 4: some some retailers this week. But what did you learn
Speaker 4: from this earnings cycle here? And maybe some of the guidance.
Speaker 7: So I'll tell you the sector.
Speaker 6: And maybe it's on my mind because RBC has a
Speaker 6: conference coming up on this tomorrow, but I still like
Speaker 6: the financial sector in here, so I'm going to be,
Speaker 6: you know, really interested to hear what those companies have.
Speaker 7: To say the next couple of days. But look, as
Speaker 7: we did.
Speaker 6: Go through reporting season, one thing that became very clear
Speaker 6: to me was that financials, you know, they've got some
Speaker 6: tailwinds in terms of the policy backdrop from deregulation, and
Speaker 6: so the companies have absolutely been talking about that, but
Speaker 6: they're not really exposed, at least directly to a lot
Speaker 6: of the headwinds that might potentially be coming. So, you know,
Speaker 6: tariff impacts, you know, it impacts the economy, right, so
Speaker 6: we'll we'll end up here as well, but they're not.
Speaker 7: On the front lines of this debate.
Speaker 6: We've still got some good valuations, especially in the smaller
Speaker 6: calf financial sector, especially with the banks I would say
Speaker 6: the investment banks where the M and A optimism is overdone,
Speaker 6: those look pricey. We're not really buying those, but we
Speaker 6: do think kind of the plain vanilla, you know, sort
Speaker 6: of regional banks and smid banks looked pretty good in here.
Speaker 6: And they also don't have dollar pressure, they don't get
Speaker 6: caught up and where the currency is headed right, So
Speaker 6: we still like that space.
Speaker 7: And of course Gerard is still very bullish.
Speaker 2: There, Laurie, very quickly here we are great observation out
Speaker 2: on YouTube. Thank you for the live chat. Brilliance, Laurie.
Speaker 2: The Russell two thousand has a lot of stocks that
Speaker 2: don't make money. How do we address that, the lack
Speaker 2: of profit down the income statement of so many of
Speaker 2: those two thousand stocks.
Speaker 6: The simple answer, Tom, and nobody likes this answer, but
Speaker 6: you buy an actively managed small cap fund as opposed
Speaker 6: to the ETF. And when I talked to active managers
Speaker 6: in the small cap space, and I've been covering this
Speaker 6: space since two thousand and seven, I know a lot
Speaker 6: of these folks very very well. They don't tend to
Speaker 6: traffic in the unprofitable names. They tend to move up
Speaker 6: the quality curve. They really do have sort of a
Speaker 6: nose for finding the good companies, and I think that's
Speaker 6: really how you combat it, right as you just have
Speaker 6: to have individuals going in and picking the better companies
Speaker 6: within verticals, within industries, within sectors. Because there is a
Speaker 6: lot of illiquidity, there are a lot of companies with
Speaker 6: loss makers, and there are goofy you know, sort of
Speaker 6: industry exposures, lots of reads, lots of biotech, lots of
Speaker 6: unprofitable tech. An active manager can help you navigate around that.
Speaker 2: Laurie, thank you so much, greatly appreciate it. What do
Speaker 2: you have?
Speaker 4: Tom Lorid Calvacina, a resident of the Lawn at the
Speaker 4: University of Virginia that is for reserve for the most
Speaker 4: I think you know some of the more accomplished students there.
Speaker 4: You have to be a senior that type of thing.
Speaker 4: There's only fifty four single rooms on the lawn. Each
Speaker 4: room is furnished with a lofted bed ladder above a
Speaker 4: day bed with a cover, secretary desk with a chair,
Speaker 4: a hutch containing refrigerator in freezer and a microwave built
Speaker 4: in closet, seen closet, and a rocking chair.
Speaker 2: I gave a speech there one day and I sat
Speaker 2: not in the early morning, missed, but pretty close like
Speaker 2: ninety everybody's asleep. Calvaciana was passed out. But it has
Speaker 2: to be the most spectacularly gorgeous piece of collegiate real
Speaker 2: estate in America.
Speaker 3: Yep.
Speaker 4: My good buddy from high school, Robbe Stewart, he had
Speaker 4: a room at the on the lawn there at the
Speaker 4: Senior UVA. It's really really a special place. And if
Speaker 4: you get a room on the lawn, that means you're accomplishing.
Speaker 2: Closest I got to the lawn was at the Rochester
Speaker 2: Institute of Technology where there's winter in the fourth of July.
Speaker 2: The closest was to walk across the quarter mile when
Speaker 2: it was twenty two below zero. That was as close
Speaker 2: as we got to the romance of the lawn.
Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 1: starting at seven am Eastern on Apple Corplay and Android
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Speaker 2: You're a Skur report the Daily front Pages. Okay, Lisa
Speaker 2: Ariana shows up and a Chiaparelli was I mean, so
Speaker 2: she'd go right to the costume institute at the met
Speaker 2: It just deserves to be in the basement. It was
Speaker 2: like completely not modern, is how I know.
Speaker 8: I love she looked like a little princess, like on
Speaker 8: the red carpet, Like it's like when you open that
Speaker 8: jewelry box and the little ballerina process.
Speaker 2: To shut Chiaparelli. It wasn't poofy, it wasn't cheap.
Speaker 4: It was just it was beautiful.
Speaker 8: I loved it, loved it, lovedly.
Speaker 2: I throw that you wore it today to work?
Speaker 8: What do you got? All Right, I'm gonna kind of
Speaker 8: pull an audible here. I was going to do the
Speaker 8: story about the montage and the people that were kind
Speaker 8: of left out are the ones who the actors who
Speaker 8: died because you had a Michelle Trachtenberg, Shannon Dougherty, Yes, yes,
Speaker 8: surveillance audible. I'm going to go to this Lucas Shaw
Speaker 8: piece because I just find it so interesting about you know,
Speaker 8: Disney being the host of it for like fifty years
Speaker 8: for the for the Oscars, but now you see that
Speaker 8: it's starting to change. Because he has this article in
Speaker 8: screen time. You have to check it out about possibly
Speaker 8: them talking with Netflix maybe of being the next partner,
Speaker 8: because last year, you know, they were reopening that deal
Speaker 8: was worth more than one hundred million dollars a year.
Speaker 8: But that negotiating between the two sides, it's it's it's
Speaker 8: it's open. So now they have these talks going on.
Speaker 8: So I thought this was really interesting about how Netflix
Speaker 8: could be it because then you think about streaming and
Speaker 8: how streaming is going to a lot of more live events.
Speaker 8: So if this is going to be like another way
Speaker 8: for them, if that's what.
Speaker 4: They need, that's where the world's going. So I mean,
Speaker 4: you know, you've got to see some of these big
Speaker 4: ticket items and again the next big one of the
Speaker 4: next big things in addition to these whole broadcast like
Speaker 4: the Oscars, is you know, live sports at the NFL
Speaker 4: and things things like that.
Speaker 2: But the thing I noticed last night, missus Kean wrote
Speaker 2: this up addicted to all this idiocy, like Lisa is
Speaker 2: is is Paul? Streaming is completely taking short. I mean
Speaker 2: this year they didn't have Oppenheimer and Barbie period.
Speaker 8: Right right.
Speaker 4: I mean you just look where the where the programming
Speaker 4: budgets are going from some of the big companies like
Speaker 4: A Walt Disney Company. They're all going to their streaming services.
Speaker 4: What do you see on your network television? You see
Speaker 4: a lot of you know, just not a lot of
Speaker 4: scripted drama. They're just not allocating the budgets. So they're
Speaker 4: putting all their money in streaming.
Speaker 2: Is streaming a movie? Yeah?
Speaker 4: Sure, absolutely, we can do that. Okay, so why not?
Speaker 4: That's where everybody's going, what.
Speaker 5: Do you Yeah?
Speaker 8: And it was also talking about how like the box
Speaker 8: office numbers for all the Best Picture nominees was like
Speaker 8: forty percent lower and last year Yeah, I don't know.
Speaker 2: Forty one million worldwide.
Speaker 8: Yes, I haven't even heard of it. So that's that's
Speaker 8: going to be on my list. Okay, let's move on
Speaker 8: the gift bags. Okay, that's what I want to talk about,
Speaker 8: because the nominees, yes, so didn't take home the oscars.
Speaker 8: They did not go home empty handed. They were carrying
Speaker 8: along a two hundred and sixteen thousand dollars bag.
Speaker 4: Are you.
Speaker 8: There were gift bags from distinctive assets, mostly experiences that
Speaker 8: kind of make up the value. So you have like
Speaker 8: light bo Suction from art Light both twenty five thousand dollars. Okay,
Speaker 8: five nights at a Sri Lankan Wellness Retreat for about
Speaker 8: eighty five hundred dollars, four nights at Jolly Metaldives and
Speaker 8: Jolly Being for twenty three thousand.
Speaker 4: Right, is that what it is?
Speaker 8: Did I pronounce these.
Speaker 4: Fancy in historia?
Speaker 2: Quickly? Give me give me one more merch.
Speaker 8: Okay, one more merch item Oh did you know a
Speaker 8: three month top tier ancestry DNA membership is twenty five
Speaker 8: thousand dollars?
Speaker 2: Really?
Speaker 8: Yes, that one's in there too.
Speaker 4: Just tell me all my ancestors came from Ireland.
Speaker 8: Of all the beauty products and all that most sober, exactly.
Speaker 2: Thank so, Thank you so much, Lisa Matteo their words,
Speaker 2: Chaparrelli this morning with your oscar a summer. We'll do
Speaker 2: some more newspapers tomorrow. Hugely popular.
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
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