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Speaker 2: Joining us now, someone who is a foundation of Bloomberg
Speaker 2: Surveillance and all we've done for decades. Ghen writing definitive
Speaker 2: at bear Stearns years ago preing capital Right now, let
Speaker 2: John thank you so much for coming in. The clear
Speaker 2: message I received on the trip to Phoenix among people
Speaker 2: that are optimistic about American GDP are innovation or manufacturing,
Speaker 2: is why in God's name are we talking about cutting
Speaker 2: interest rates? What's the case now for cutting rates?
Speaker 3: I don't think there is one. I think there's a
Speaker 3: case for racing rates. If you look at the ism
Speaker 3: reports that we had on Monday for manufacturing and yesterday
Speaker 3: for services, and you put them together, you have a clear,
Speaker 3: very strong uptrend. You've an economy growing above potential. The
Speaker 3: administration itself says the economy is doing well so and
Speaker 3: inflation's above the fetch target, and we still have the
Speaker 3: tariff feedthrough to fully work through and the oil price
Speaker 3: shot of an unknown magnitude. I think there is no
Speaker 3: economic case non whatsoever for cutting rates.
Speaker 2: Your definitive take is it your service to the Bank
Speaker 2: of England, your England, your United Kingdom, and also your
Speaker 2: service to the Federal Reserve. Are the bankers listening to
Speaker 2: the PhDs, the analysts that you know, the kids that
Speaker 2: you used to be.
Speaker 3: Well, I think we all know that there's a voice
Speaker 3: just outside the room that's louder than all those voices,
Speaker 3: and that makes monetary policy difficult to carry out.
Speaker 4: In fact, makes fundamental economics.
Speaker 3: Difficult to carry out in policy circles, I think, but
Speaker 3: there are very good people at the FED. There are
Speaker 3: very good researchers at the FED. I think Raphael Bostik,
Speaker 3: for example, will be greatly missed because he listened to
Speaker 3: his researchers and then made his policy decisions and thoughts
Speaker 3: based on what his researchers were telling him. That's why
Speaker 3: he was the first person to call out transitory. He
Speaker 3: came up with a swear jar.
Speaker 4: In twenty twenty two. So I think there are those
Speaker 4: people there.
Speaker 3: The Cleveland FED has an excellent inflation center, and I
Speaker 3: think that that information is getting worked through. But I
Speaker 3: think under this palle fed we don't know how long
Speaker 3: this powerfited's gonna last. It depends how long it takes
Speaker 3: Kevin to get through hearings. I don't think as much
Speaker 3: chance for great unless something real significantly changes. And the
Speaker 3: one wildcard that can do that would be a many
Speaker 3: nineteen seventies rerun with a short moved higher and oil
Speaker 3: not the kind of move we've had.
Speaker 4: This is, this is contained.
Speaker 5: But if we use.
Speaker 3: Fundamental economics, I know you love that time we go
Speaker 3: back to Alfred Marshall invented the concept of the price
Speaker 3: elasticity at demand. The price elasticity a demand for oil
Speaker 3: is very low. Estimates are about minus point one, which means.
Speaker 2: Okay, I dear Paul wants to jump in here, but
Speaker 2: this is incredible. We're not reliving the nineteen seventies oil show.
Speaker 4: No, no, no, no, we're not.
Speaker 3: I mean if we What that elis system means is
Speaker 3: that if you had a one percent reduction in global
Speaker 3: oil supplies on a semi permanent base for the new term,
Speaker 3: you'd expect to see about a ten percent.
Speaker 4: Increase in prices.
Speaker 3: So if we really have a disruption, and you mentioned
Speaker 3: the strength of the Strait of Home moves. Twenty percent
Speaker 3: of the world's oil goes through there, So if you
Speaker 3: have a serious interruption there, then you're looking at a
Speaker 3: potentially very big move in the price soil. I'm not
Speaker 3: forecasting it. I just think we need economics to frame
Speaker 3: the magnitude of what we're seeing and history to frame
Speaker 3: the magnitude of what we're seeing. And what we're seeing
Speaker 3: is very contained right now.
Speaker 6: Reporting that just in the last week the price of
Speaker 6: gasoline at the pumps up a little over twenty cents
Speaker 6: per barrel. When does that start becoming an inflation risk
Speaker 6: for this economy or does it become a risk just
Speaker 6: to the consumer out there, who probably doesn't need another
Speaker 6: bat of inflation to deal with.
Speaker 4: Well, there's a number of elements.
Speaker 3: First, let me say one of the reasons this isn't
Speaker 3: the nineteen seventies because the US is now self sufficient
Speaker 3: in oil. So in the nineteen seventies, the oil price
Speaker 3: shot transferred income from the US to OPEC countries. Now
Speaker 3: it reshuffles income within the US, but it does shuffle
Speaker 3: income away from the consumer and to producers and owners
Speaker 3: of oil companies. And I think we have to see
Speaker 3: a bigger move. But what it does do for the consumer,
Speaker 3: I believe long time and research has begin to support
Speaker 3: that view that it's the frequent purchases that consumers make that.
Speaker 4: Impact their expectations.
Speaker 3: It is going to the shop during the pandemic, things
Speaker 3: like toilet paper and something that weren't having prize that
Speaker 3: I didn't understand why that influencerer expectations. So groceries gasoline
Speaker 3: that has a big impact. Twenty thirty cents a gallon
Speaker 3: isn't a game changer for the consumer. But you know,
Speaker 3: another favorite letter of people want to talk about in
Speaker 3: the economy, the K shape, that it will hurt those
Speaker 3: at the bottom of the K.
Speaker 6: Economic growth, as you mentioned, continues to be solid, I
Speaker 6: mean kind of across the board.
Speaker 5: Here we had some good ism data points here.
Speaker 6: What is the risk to this US economy to the
Speaker 6: GDP call out there?
Speaker 3: Do you think, well, I think it's one a potential
Speaker 3: and just say a potential, not forecasting for a real
Speaker 3: big oil price shop that would definitely have an impact
Speaker 3: in terms of the costs of non oil companies, who
Speaker 3: are the non oil producing companies are the primary employers
Speaker 3: in the economy. Old companies are much small and more
Speaker 3: contained in size. So I think that's one. And I
Speaker 3: just think the general uncertainty and we've had if you
Speaker 3: think of what this economy is absorbed increases and interest rates,
Speaker 3: you know, all the way up to five and a
Speaker 3: quarter to five and a half percent from effectively zero.
Speaker 3: We didn't the US didn't go into recession. That surprised me.
Speaker 3: I was wrong on that call.
Speaker 4: The tariff shock, which.
Speaker 3: I thought would have pushed the economy potentially over the edge,
Speaker 3: that has been absorbed. And the thing that has done
Speaker 3: that is productivity growth. Now we get productivity in numbers
Speaker 3: at eight thirty this morning. That is the We are
Speaker 3: fortunate in the US in having the potential for this big,
Speaker 3: secular and long running story on productivity at the game.
Speaker 3: It's disruptive on people when they look at history, look
Speaker 3: at statistics, don't look at the people who were disrupted.
Speaker 3: And my hat's off to Governor Barr, who gave a
Speaker 3: terrific speech a couple of weeks ago on AI on
Speaker 3: what monitor policy can do, and cont.
Speaker 2: John writings, who starts wrong? Today? We continue from bringing capital.
Speaker 2: We say good morning to all of you worldwide on YouTube.
Speaker 2: A big message I learned in Phoenix Serious XM yep,
Speaker 2: huge good morning on Serious XM channel one twenty one,
Speaker 2: and this thing building on YouTube every day. Paul and
Speaker 2: I are really unsure of what to do with that.
Speaker 2: The February numbers were gratifying, to say the least. Lots
Speaker 2: of good talk here again we're focused on oil. Eighty
Speaker 2: three sixty nine of two dollars twenty nine really buck
Speaker 2: used up against at eighty four level. John, I really
Speaker 2: want to talk about this productivity issue. Is the better
Speaker 2: productivity now from AI? I don't think so? Or is
Speaker 2: it from something different? Where's this two thous twenty five
Speaker 2: twenty six productivity coming from.
Speaker 3: It's coming from capital spending. I think AI is beginning
Speaker 3: to have an impact. But again, give another shout out
Speaker 3: to a form of fact governor Governor Larry Meyer, he
Speaker 3: cave one of the best speeches I've ever heard from
Speaker 3: a Fed governor back in two thousand and one. I
Speaker 3: think it was whatever happened to the new economy, and
Speaker 3: he documented these historical periods of productivity growth going back
Speaker 3: to eighteen eighty and you had twenty five year phases
Speaker 3: on average in productivity growth, high productivity growth and low
Speaker 3: productivity growth. Now we were in a very low productivity
Speaker 3: growth in the middle of the last decade and we
Speaker 3: started to come out of it. I think that COVID
Speaker 3: was a huge shakeup, and to be honest, I actually
Speaker 3: think that the work from home has enabled people to
Speaker 3: tap more effectively into the workforce.
Speaker 4: That those people who don't need.
Speaker 3: To go into the office are tired by an hour
Speaker 3: as commute. An hour's commute home, there are inevitable destructs
Speaker 3: in the house, but I think that may have been
Speaker 3: a factor.
Speaker 4: But the thing is, whatever.
Speaker 3: The cause is, these swings in productivity tend to last
Speaker 3: for at least ten years and on average for twenty
Speaker 3: five years, and so we could be looking at a
Speaker 3: three percent productivity growth number or higher for the next decade.
Speaker 3: And that kind of productivity has enabled companies to absorb
Speaker 3: the tarreft shop.
Speaker 2: I mean, Paul, you're in cyclopedic gun as you've been
Speaker 2: to Arizona forty seven times. North Phoenix is something we
Speaker 2: don't understand on the East coast. Taiwan's semiconductors coming in
Speaker 2: with manufacturing sites and the real secret is tens or
Speaker 2: hundreds of small suppliers to supply that, and that's that
Speaker 2: capital investment and productivity that we're just missing on a
Speaker 2: landstarved East coast. Yeah.
Speaker 6: Absolutely, and there's lots of places where that money is going.
Speaker 6: John talked to us about just the labor market in general. Obviously,
Speaker 6: that's the other part of the Fed's remit here seems
Speaker 6: to be hanging in there more than hanging in there.
Speaker 6: But are there some concerns underneath the surface for.
Speaker 4: You, Well, there's definitely concerns. We had very very slow, barely.
Speaker 3: Noticeable job growth last year, but it happened, and I
Speaker 3: don't want to get too political, at a time when
Speaker 3: the US was contracting its labor force due to its
Speaker 3: policies on immigration, and so we didn't really see it
Speaker 3: show up in the numbers. Apart from the November you know,
Speaker 3: during the shutdown, household released within a plumb rate pup
Speaker 3: to four point six percent. We're now at four point
Speaker 3: three percent, but within the labor market, and this is
Speaker 3: a bit worrying to me for the US. The US
Speaker 3: labor market has been very dynamic historically. We've got a
Speaker 3: very sclerotic internals to this labor market. We have very
Speaker 3: low hiring and very low firing. And I think the
Speaker 3: uncertainty about tariff's now maybe obviously too certain of impact
Speaker 3: any of the numbers, certainly about oil. That thing sas
Speaker 3: companies like sitting on the sidelines and trying to work
Speaker 3: through and tapping into productivity growth.
Speaker 4: But here's the thing.
Speaker 3: There was the Stanford University paper. There's been other papers
Speaker 3: come out that have said, you know, AI is allowing
Speaker 3: companies not to hire that entry level person in a
Speaker 3: bunch of industries, and that is a problem because you
Speaker 3: need to get those people on board and you need
Speaker 3: to train them. So they moved from being AI competitive
Speaker 3: to AI complementary, if you want to think of it
Speaker 3: that way, and that that is something that monetary policy
Speaker 3: cannot address.
Speaker 2: Okay, so a side caught me up. He says, we
Speaker 2: got to talk to writing about soccer. You forget about
Speaker 2: Preston North End in your commitment there there and off
Speaker 2: your Coventry city maybe or pop up into the Premier
Speaker 2: League over this thing called relegation. Can you imagine the
Speaker 2: Colorado Rockies, the Chicago White Sox and Nathan Hager's Washington
Speaker 2: Nationals out of the Major League Baseball and replaced by
Speaker 2: the Jacksonville Jumbo Shrimp to Scranton Wilkespeare rail Riders and
Speaker 2: the Lehi Valley Iron Pigs. Tottenham relegated, John, That's never
Speaker 2: happened in your lifetime, right, I.
Speaker 3: Think Tottenham has been not in the not in what
Speaker 3: would then called the First Division in my lifetime. But
Speaker 3: you know, it's just tremendously fluid. It's very difficult running
Speaker 3: the economics of a team. I know people who owners
Speaker 3: and managers, and it is it is difficult. But then
Speaker 3: look at Wrexham, right, give a shout out to Ryan
Speaker 3: Reynolds here.
Speaker 4: Look at Wrexham, which.
Speaker 3: In the Championship and will be playing got the email
Speaker 3: yesterday at Yankee Stadium against Liverpool in an exhibition game
Speaker 3: over the summer.
Speaker 4: We should go to that.
Speaker 2: Should be surveillance road trip. See that. I just so
Speaker 2: much wish that American sports had this relegation.
Speaker 5: Though, Oh boy, can you.
Speaker 2: Imagine Colorado Rockies worried about the Jacksonville some Exactly, it's all.
Speaker 3: About protecting the economics. In the US, they're franchises. The
Speaker 3: teams well, I mean they are teams, but the franchises,
Speaker 3: and you know, with the franchise, you get perverse rights
Speaker 3: like the most exciting games at the end of the
Speaker 3: season could be the team between and fourth.
Speaker 4: From the bottom.
Speaker 2: Email me, she says, what are we going to do
Speaker 2: with the tots? John Riding? What does Tottenham have to do?
Speaker 2: They've got that palace of a stadium, They've blown up
Speaker 2: the team over four years. What do they need to do?
Speaker 3: I don't know, I don't I don't pay too much
Speaker 3: attention to the internals of Tottenham.
Speaker 4: But you know, it's all about managing the resources you have.
Speaker 3: And you look at a team like United you're doing
Speaker 3: terribly and to change managers and now they're doing Verry
Speaker 3: Sodleik much better work.
Speaker 4: So it is about managing the resources you have.
Speaker 2: Side says that was a good stager, John writing, thank
Speaker 2: you so much for coming in. We need to get
Speaker 2: you way more offend. Stay with us. More from Bloomberg
Speaker 2: Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
Speaker 1: Apple Karplay and Android Auto with the Bloomberg Business app,
Speaker 1: or watch us live on YouTube.
Speaker 2: Fiona Greg joins US Global had a policy and research
Speaker 2: at Vanguard, who owns a high ground on this with
Speaker 2: a few other select worthies. We could go two hours here.
Speaker 2: Puss screwed up is our four to oh one K
Speaker 2: experiment coming out of ARISA of nineteen seventy four.
Speaker 7: Well, I would actually beg to differ. I actually think
Speaker 7: we're seeing some strength in terms of the design of
Speaker 7: our four oh and k plans. More and more plans
Speaker 7: are actually auto and rolling people in those plans. We're
Speaker 7: seeing more people get auto and rolled into slightly higher rates.
Speaker 7: And the other big experiment that has been successful is
Speaker 7: getting people auto enrolled into target date funds, which is
Speaker 7: a professionally managed allocation that makes sense for retirement. Now,
Speaker 7: there is a sort of dark side of the cloud,
Speaker 7: which is that if we think about the overall Vanguard
Speaker 7: retirement outlook of our baby boomers on track for retirement,
Speaker 7: well we see about two and five are. That means
Speaker 7: three and five are not, So we still have wood
Speaker 7: to chop on this system.
Speaker 2: Paul and I argue about this, and I'm in the
Speaker 2: camp that we screwed up so bad that our children
Speaker 2: are saving earlier in bigger than we did when we
Speaker 2: are in our twenties and thirties, are you seeing.
Speaker 7: That at Vanguard actually are seeing some strengthening of that savement,
Speaker 7: that saving journey. So younger employees are more likely to
Speaker 7: be on track for retirement, and that is impartly because
Speaker 7: they are benefiting from this stronger plan design and retirement
Speaker 7: plans for more of their careers. Right, So those in
Speaker 7: their fifties and sixties might not have been auto enrolled,
Speaker 7: whereas the typical twenty year old is definitely going to
Speaker 7: be auto enrolled into their plans, so they will be saving.
Speaker 6: Here's some primary research from the Sweeney household. Here were
Speaker 6: my three working folks in late twenties and thirty. They
Speaker 6: are Maxanta, four oh and Ka because I told them to.
Speaker 6: But b they don't.
Speaker 5: Believe they're going to be able to own a home and.
Speaker 6: Have that asset is part of their portfolio like prior generations.
Speaker 5: They think they're foreing ky. That's it, and that.
Speaker 8: Is I can second that my kids.
Speaker 2: I just tell you that the three of us dealing
Speaker 2: with this day to day, the basic blather, not Vanguard,
Speaker 2: but the bladder that we hear, the certitude that we
Speaker 2: hear is way off the mark. The kids, Sweeney's kids
Speaker 2: are petrifig.
Speaker 7: Well, you know, it is definitely the case that the
Speaker 7: younger generation is feeling more of a pinch in certain ways. Right,
Speaker 7: So millennials gen Z they have two x the amount
Speaker 7: of non housing debts that Baby Boomers had at their
Speaker 7: same age. So although there are tailwinds in their favor
Speaker 7: like stronger plan design and retirement savings, et cetera, there
Speaker 7: are also headwinds that they are facing, like student loan debt,
Speaker 7: you know, things of that nature that are putting pressure
Speaker 7: on their pocketbooks.
Speaker 6: My First Wall Street bonus, blew it all. Second Wall
Speaker 6: Street bonus, I paid off all my student loans.
Speaker 5: That's how we rule. But they don't have that opportunity
Speaker 5: for the most part.
Speaker 6: So what are some of the trends here in just
Speaker 6: the four oh one k business? Are people taking more
Speaker 6: of risk with it? Are they changing their allocations or
Speaker 6: are they saying, oh, I need to maybe take put
Speaker 6: more into alternatives investments and things like that, because mine
Speaker 6: is just I just thought it all onto you know, kid,
Speaker 6: just a little onto stock funds. You know that will
Speaker 6: down off a you know, fidelity manager for me.
Speaker 7: Yeah, well, because of qualified default investment alternatives. A person
Speaker 7: enrolling in a four oh one K plan today would
Speaker 7: automatically have that dollar invested in the target date fund.
Speaker 7: So what we're seeing actually among younger generations is that
Speaker 7: they actually have textbook allocations. They have high equity allocations,
Speaker 7: they have very little cash and that is appropriate for
Speaker 7: their age. If you compare them to you know, older
Speaker 7: generations at their same age, they would have had more
Speaker 7: extreme portfolios that might not have been as professionally managed.
Speaker 7: So that is one really positive trend.
Speaker 6: Tomorrow's Jobs Day, we know that Vanguard launched a new
Speaker 6: job market. You have some new data there tell us
Speaker 6: about that and what it's.
Speaker 7: Telling you absolutely, So we're actually using these retirement plan
Speaker 7: data to understand labor market conditions. Why, because we can
Speaker 7: see hiring, we can see separations, we can see income
Speaker 7: growth among people in those retirement plans. You know, seventy
Speaker 7: percent of American workers have access to a defined contribution plan,
Speaker 7: and in Vanguard plans are roughly more than eighty percent
Speaker 7: of them actually participate. So through this we actually have
Speaker 7: a pretty good window into the employment picture. What we're
Speaker 7: seeing is that you know, we're actually seeing a pretty
Speaker 7: quietly resilient labor market. So we are in a low
Speaker 7: higher environment, and normally that would be quite concerning because
Speaker 7: the first thing affirms does in an economic downturn is
Speaker 7: they stop hiring new workers. But at the same time,
Speaker 7: we're also seeing very few separations. So it's a low higher,
Speaker 7: low fire environment, less movement than normal.
Speaker 2: Odd I agree with us. I hear this morning folks
Speaker 2: with Vanguard Investment Strategy Group, and we continue, Good morning
Speaker 2: all of you. Can I go academic nerd time now? Sure, folks,
Speaker 2: darken the door. It's Stanford. This is like the land
Speaker 2: of Michael McFall and of course all of the Hoover Institute.
Speaker 2: Did you have the privilege of the author of the
Speaker 2: End of History? In the last man? Were you in
Speaker 2: the classroom?
Speaker 7: Chase? You're asking me to rewind my life. So I'm
Speaker 7: going to say, I have no idea, no idea.
Speaker 2: But the huge thing you're going back to nineteen ninety
Speaker 2: two in the End of History is the basic idea
Speaker 2: with President Trump is at the end of the democracy
Speaker 2: experiment worldwide as well. What are your thoughts on the
Speaker 2: testing of this After President Trump? Do we revert to
Speaker 2: some form of traditional democracy?
Speaker 7: Look, I mean what we're seeing is our institutions being tested,
Speaker 7: and we're seeing resilience in some of those institutions. So,
Speaker 7: you know, I think we can look to the midterms
Speaker 7: to see what's going to happen exactly.
Speaker 2: These midterms are not normal midterms, are they?
Speaker 7: They're consequential, But every midterm is consequential for any Do.
Speaker 2: You know anyone who's staying in San Jose or Palo Alto,
Speaker 2: or is everyone leaving the state.
Speaker 7: I think some Californians are calling themselves Californians.
Speaker 6: Now, yeah, I tell you the rent I'm paying for
Speaker 6: my number four off spring out there in Santa Clara.
Speaker 6: It's like New York and could get home, you know,
Speaker 6: you could even get home. Yeah, they lost the plane.
Speaker 6: So what are we doing here with this AI? How's
Speaker 6: a AI factoring into your work on the data the
Speaker 6: labor market? Because it seems like the no hire, no
Speaker 6: fire in one of the reasons. Maybe the no hires
Speaker 6: because AI is taking some of those entry level jobs.
Speaker 5: We do we know that for sure.
Speaker 7: Well, you know, in any month we do see you know,
Speaker 7: separations or firing, and in any month there are companies
Speaker 7: laying people off. I think those are actually in February,
Speaker 7: we're seeing a slight downtick in those in terms of
Speaker 7: the overall arching aggregate trends, I wouldn't say there's cause
Speaker 7: for huge alarm, were and to pating maybe more adjustments
Speaker 7: in twenty twenty seven. The other thing I would point to, though,
Speaker 7: is income growth, because the four to win K data
Speaker 7: actually allow us to track what's happening to people's income
Speaker 7: year over year, and there we're seeing considerable growth, actually
Speaker 7: above inflation, and in particular for younger workers who tend
Speaker 7: to change jobs a lot there, you know, and see
Speaker 7: productivity gains. And I mentioned this income growth just because
Speaker 7: you know, AI is a productivity booster and workers may
Speaker 7: be reaping the benefits of that through increased income.
Speaker 2: Fiona, if we get I mean, if I'm elected, free beer,
Speaker 2: so I'm going to give one thousand dollars to everybody
Speaker 2: for investment or retirement. I don't know what the president
Speaker 2: is doing runs a one thousand or three thousands. It
Speaker 2: sounds almost cute, isn't the Only way that's effective is
Speaker 2: that people are forced to give it the some form
Speaker 2: a four to win K provider.
Speaker 7: Well, actually, what you just described sounds a lot like
Speaker 7: Trump accounts. And you know, at Vanguard, we're actually pretty
Speaker 7: bullish on these accounts. Why because they give people an
Speaker 7: early start to saving and investing. We think that people
Speaker 7: should be out there making sure that they get access
Speaker 7: to this free money, that they sign up for the
Speaker 7: account and get the free money that their qualifying kid
Speaker 7: might be available, might be able to get.
Speaker 5: Are those actually happening. Are they in the marketplace?
Speaker 7: Not yet in the marketplace, although you can sign up
Speaker 7: for the account via the tax form, so you can
Speaker 7: indicate that you want the account, but they go live
Speaker 7: July fourth.
Speaker 2: July fourth, Paul, Yeah, I got for those who you tube.
Speaker 2: We have the Fiona greg HP twelve C on our phone,
Speaker 2: one thousand dollars, sixty years of six zero in an
Speaker 2: equity eleven percent per year being don't give me your
Speaker 2: legal compliance time. You got to go at seven percent?
Speaker 2: Are you ready? Yeah, five hundred twenty four thousand dollars.
Speaker 2: President Trump would say, giving you a half a million dollars,
Speaker 2: shut up, yep, yep, that's what I'll say. Yeah, after
Speaker 2: a million dollars.
Speaker 7: Yeah. And one of the benefits of this account is
Speaker 7: that it is going to be invested in a low
Speaker 7: cost equity fund. So that's a great place for a
Speaker 7: baby to start investing, right, low cost index once half.
Speaker 2: A million dollars over sixty years, power of component, that's yeah.
Speaker 7: But you might have a grandson or a granddaughter or
Speaker 7: who would Yeah.
Speaker 5: All right, very good.
Speaker 6: So we appreciate if Fiona Greg appreciate you having us
Speaker 6: here on a Greg Global head of.
Speaker 5: Policy and Research at Vanguard.
Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on Apple,
Speaker 1: Karplay and Android Atto with the Bloomberg Business Up, or
Speaker 1: watch us live on YouTube.
Speaker 2: Joining us now in well timed Wendy Schiller, Professor of
Speaker 2: political science at Brown University. Her writings are definitive and
Speaker 2: what I'll call civis one oh one across America. Wendy,
Speaker 2: I just think it's so important, and particularly with a
Speaker 2: very brave navy in an ocean, with the first sinking
Speaker 2: by a US submarine of a threat a Navy ship
Speaker 2: here since World War Two in nineteen forty two. We
Speaker 2: declared war in nineteen seventy three things forever changed with
Speaker 2: the War Powers Resolution, Can Congress have anything to do
Speaker 2: with guiding our military in twenty twenty six?
Speaker 9: Well, yes, I mean the Warhouse Resolution gives the executive
Speaker 9: branch some time, you know, so sixty days essentially, and
Speaker 9: then you know, the president can ask for an extra
Speaker 9: thirty day extension ninety days three months to see, you know,
Speaker 9: where it's going, how it's going, and what the needs are.
Speaker 9: And then if it becomes clear that the United States
Speaker 9: needs to stay engaged in what is considerable military action,
Speaker 9: the president technically needs an authorization from Congress for a
Speaker 9: use of force to spend the money on the military.
Speaker 9: So it's really the power of the purse as much
Speaker 9: as it's the War Powers Resolution that gives Congress power.
Speaker 2: Here, when will we see that?
Speaker 9: We won't see it. We won't see it until. I mean,
Speaker 9: the timing is really kind of extraordinary. It's March April.
Speaker 9: May you know, most but not all of this, the
Speaker 9: Republican primaries will be over by the time you get
Speaker 9: to June. There are a couple of ones in July
Speaker 9: and August, but generally speaking, Trump's biggest leverage is obviously
Speaker 9: the primaries. So if he wants to continue this and
Speaker 9: get that authorization for Basically, once you give as we know,
Speaker 9: once you give the president a congressional authorization for use
Speaker 9: of force, as we saw with the Rock, you can
Speaker 9: be there ten years, fifteen years, twenty years. It's you know,
Speaker 9: you've relinquished all of your power essentially. So it's really
Speaker 9: going to be an interesting political situation for the Republicans
Speaker 9: once this time clock expires.
Speaker 7: You know, what do they worry about?
Speaker 8: Do they worry about?
Speaker 9: They don't have to worry about Trump intervening in their
Speaker 9: partners anymore, most of them, and so I'm not sure
Speaker 9: how that goes once we get to June.
Speaker 6: So politically, Wendy, what potentially could be the ramifications for
Speaker 6: this Republican party. We did have the vote yesterday along
Speaker 6: party lines to support the president's actions, but what are
Speaker 6: the political ramifications potentially?
Speaker 9: You know, it's a tricky situation for both parties.
Speaker 7: I think there's two things.
Speaker 9: Loss of life, which we hope stays quite low.
Speaker 7: And gas prices.
Speaker 9: I mean, Americans are pretty predictable in elections over the
Speaker 9: last fifty years. You know, if gas prices are high
Speaker 9: in the summer before the election, even if they come
Speaker 9: down in the fall doing a lot of traveling over
Speaker 9: the summer, voters remember that. So if the Democrats can
Speaker 9: successfully link that to this effort in Iran, then they
Speaker 9: are going to score points to the voters. The problem is,
Speaker 9: if we have tragically more casualties of our service people,
Speaker 9: then the Democrats are capitalizing on that, and that becomes
Speaker 9: politically much more difficult. So it's not an easy path
Speaker 9: for either party, particularly the Democrats, to attack the Republicans
Speaker 9: because if this gets messy, then you're attacking the service
Speaker 9: people who die. So that's a problem for them. But
Speaker 9: gas prices, gas prices, gas prices. This is the sole
Speaker 9: domestic political impact of this conflict at the moment, and
Speaker 9: if they are high in the summer, then I think
Speaker 9: the Republicans go in possibly weaker than they look like
Speaker 9: they're going in.
Speaker 6: Now, when did we had some midterm elections in Texas
Speaker 6: and North Carolina?
Speaker 5: What did we learn there?
Speaker 9: Well, you know, North Carolina looks like Roy Cooper is
Speaker 9: going to be quite a strong candidate to flip that seat.
Speaker 9: But you know Wattley is a very well connected Republican,
Speaker 9: so we think that's going to be quite tight and
Speaker 9: both parties spend a lot of money. But you know, Texas,
Speaker 9: the Democrats the pipe dream of winning statewide, which hasn't
Speaker 9: happened in more than thirty years. But now we have
Speaker 9: Tall Rico, who you know, avoided a runoff, which makes
Speaker 9: him potentially quite strong going into the election. It's really
Speaker 9: up to Donald Trump. But even if Donald Trump endorses Cornyn,
Speaker 9: you saw a lot of Latino voters get out the
Speaker 9: door of the Democrat primary in Texas and vote for
Speaker 9: Tall Rico, and that was really the strength for the
Speaker 9: Republicans in Texas.
Speaker 7: So that's that's a really.
Speaker 2: Wild car any ways to go here, But let me
Speaker 2: just go to the simple one. Money. Somebody told me
Speaker 2: one of the races was forty million dollars plus was spent.
Speaker 2: Did the Democrats have the money to take on what
Speaker 2: I presume is the Trump money juggernaut.
Speaker 7: Well, so this is an interesting thing.
Speaker 9: So you're right, it's forty million on one side. I
Speaker 9: believe it's almost ninety more than ninety million spent on
Speaker 9: the Republican side on that front in that primary. So far,
Speaker 9: Quarnyon's an incumbent, and you know, the incumbents have advantages
Speaker 9: quite a few advantages.
Speaker 7: About eighty seven percent of Senate.
Speaker 9: Incumbents get re elected and ninety four percent of House
Speaker 9: members get re elected when they choose to run as incumbents.
Speaker 7: But you can't do a lot with your.
Speaker 9: Reputation as an incumbent that you haven't already done. It
Speaker 9: is baked in what Texas thinks of John Cornyan. So
Speaker 9: they're going to have to smear tall Rico. And tall
Speaker 9: Rico's had a lot of national press so far, and
Speaker 9: I think that's going to be a problem for the Republicans.
Speaker 9: You know, someone young, someone fresh, someone who's avowed Christian
Speaker 9: faith should appeal to a lot of voters in Texas.
Speaker 9: But Cornyan can't do that much with who he is.
Speaker 7: He's already done what he's done.
Speaker 9: But tall Ico has an opportunity to shape his own reputation.
Speaker 9: And if they go after toal Rico really vehemently, you know,
Speaker 9: that could backfire on them. So I think money here matters,
Speaker 9: But with an incumbent serving as long as he has,
Speaker 9: I think intra party it doesn't quite matter as much
Speaker 9: as it does within the Republican Party.
Speaker 6: Wendy, what do we what's the expectation for the influence
Speaker 6: that President Trump can have on these midterm elections. Does
Speaker 6: he still have this sway over his party that he's
Speaker 6: enjoyed for these so many years.
Speaker 9: Certainly, I think the Republicans in Congress believe that absolutely.
Speaker 9: And getting back to money, that's the interesting thing. If
Speaker 9: Trump ends this runoff in Texas by endorsing Cordon and
Speaker 9: essentially trying to push Baxton out, then they save a
Speaker 9: tremendous amount of money that they can use in other
Speaker 9: races around the country. So money may not matter as
Speaker 9: much in the Texas race, but it's going to matter,
Speaker 9: for example, in North Carolina where there isn't an incumbent
Speaker 9: senator who's running again, and it's going to matter a
Speaker 9: lot in Michigan.
Speaker 7: Where there's an open seat.
Speaker 9: So I think that's where the money equation comes in,
Speaker 9: and that's where Trump comes in.
Speaker 7: But remember Trump is underwater.
Speaker 9: He's underwater in his general approval rating, he's underwater on
Speaker 9: key issues of the economy and immigration that isn't changing
Speaker 9: with the Iran war. So it's really important to remember
Speaker 9: that he could still be quite underwater in the summer,
Speaker 9: and so then does he become a liability after the
Speaker 9: primaries are over.
Speaker 2: I'm just trying to imagine spending ninety million out of
Speaker 2: primary race in Rhode Island. What would ninety million dollars
Speaker 2: do to the Rhode Island economy?
Speaker 9: Wendy Well Charles Brighton, who was a who was a
Speaker 9: colonel ran Nelson Alders's campaigns. Nelson Aldreds was the de
Speaker 9: factor Republican leader in the eighteen nineties and the early
Speaker 9: nineteen hundreds in the Senate, and he paid every voter
Speaker 9: between five dollars and ten dollars for their vote in
Speaker 9: Rhode Island.
Speaker 8: So money could go.
Speaker 7: A long way if you paid people to vote.
Speaker 2: Professor, thank you so much for the brief, particularly there
Speaker 2: on the Texas primaries, which are fascinating to say least.
Speaker 2: Joe Matthew and Kately lines with that earlier a Professor
Speaker 2: Schuller at Brown University. Stay with us more from Bloomberg
Speaker 2: Surveillance coming up after this.
Speaker 1: You are listening to the Bloomberg Surveillance podcast live weekday
Speaker 1: afternoons from seven to ten am Eastern Listen on Applecarplay
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Speaker 1: us live on YouTube.
Speaker 2: Wayne Sanders joined us now to say he's senior defense
Speaker 2: analyst at Bloomberg Intelligence barely describes his service to the nation.
Speaker 2: Colonel Sanders with the important information engineering information systems engineering
Speaker 2: degree from West Point, Colonel Sanders, thank you so much
Speaker 2: for joining Bloomberg. If you go through the Thayer Gate
Speaker 2: at the bottom of West Point and there's the iconic
Speaker 2: Theyer Hotel, there is a magisterial new building CEAC at
Speaker 2: West Point where the technological magic is made. Describe what's
Speaker 2: going on in that building with the young officers and
Speaker 2: enlisted people in the Mideast.
Speaker 10: Oh, great, thank you so much for having me on. No,
Speaker 10: they do a great job from an innovation integration perspective
Speaker 10: at this point in time, tied into military professionalism, so
Speaker 10: they are actually spending quite a bit.
Speaker 8: Of their time.
Speaker 10: This is a great learning opportunity for the cadets at
Speaker 10: West Point right now as they're going forward to to
Speaker 10: be able to build what it is saying, these are
Speaker 10: the lesson learned. What are we actually finding out about this?
Speaker 10: What does the future of modern warfare it look like?
Speaker 10: When I was a lieutenant, I didn't have AI, I
Speaker 10: didn't have you know, a lot of the technical advancements
Speaker 10: that are going on now so even as an intel
Speaker 10: officer earlier on, I had to rely a lot.
Speaker 8: On you know, single source reporting as they come in.
Speaker 10: So these lieutenants that are coming out of at West
Speaker 10: Point Naval Academy and others, they all have to be
Speaker 10: prepared for a battlefield unlike anything I had ever seen.
Speaker 2: What's the single thing in the American media coverage that
Speaker 2: we get wrong tick by tick on this new war?
Speaker 10: I think probably the biggest one right now is the
Speaker 10: stockpile of munitions, right. I mean think one of the
Speaker 10: biggest things right now is the United States military does
Speaker 10: a great job of what they call contingency. They do
Speaker 10: con plans and they put it together and say, in
Speaker 10: case of a scenario like X or Y, when you
Speaker 10: put those together, saying okay, I have kill chain analysis,
Speaker 10: I've run the war game thousands of times and during
Speaker 10: that timeframe, we think it would take this amount of time.
Speaker 10: We think these are the number of targets. These are
Speaker 10: also the types of munitions that we would need. And
Speaker 10: so they look at this from a two front war perspective.
Speaker 10: They look at it as sustained operations, and they know
Speaker 10: what type of missile stockpiles they need now that's not
Speaker 10: to say that there isn't running the risk of the higher,
Speaker 10: higher end missiles like your Tomahawks and your jasms near
Speaker 10: el rasms that are being used right now. But it's
Speaker 10: not that there's not a worry about them actually running out.
Speaker 10: I think at this point in time, it's how much
Speaker 10: operational and strategic risk you want to take for a
Speaker 10: potential China contingency In twenty twenty seven in the Iran conflict.
Speaker 6: Wayne, I guess one of the questions that a lot
Speaker 6: of observers have, a lot of folks in the market
Speaker 6: have is duration. President Trump suggested four to five weeks
Speaker 6: was the initial outlook, but they can do pretty much
Speaker 6: any They're pretty wide open here in your experience. Do
Speaker 6: you have any sense of the duration of this conflict
Speaker 6: given some of the goals that have been discussed by
Speaker 6: this administration.
Speaker 10: Yeah, you know, it's a difficult, wicked problem, as they say,
Speaker 10: because when you look at it from a military perspective,
Speaker 10: you can take out most of the military targets and
Speaker 10: all that probably by the by mid next week, I
Speaker 10: would say by Wednesday next week would be that for those.
Speaker 8: Original operational targets.
Speaker 10: The problem is that the enemy has a vote and
Speaker 10: they start being able to move around different things around
Speaker 10: the battlefield. What I took is a very positive transition.
Speaker 10: As part of this was the move away from standoff weapons.
Speaker 10: As you heard Secretary of Hex Seth say yesterday, is
Speaker 10: that move away from standoff weapons to more of the
Speaker 10: precision guided munitions and the air superiority means that you
Speaker 10: can ramp up the targets that you're trying to hit
Speaker 10: with cheaper munitions. So moving from the Lockheed Martin, Jazz
Speaker 10: and Nell rasins that run around one one and a
Speaker 10: half million dollars RTX is Tomahawks, which is about one
Speaker 10: and a half to two million dollars, and now you're
Speaker 10: bringing in munitions that are twenty five thousand to forty
Speaker 10: thousand dollars and we have a lot more of them.
Speaker 8: So from an.
Speaker 10: Inventory perspective, even on your jadams for Boeing. Boeing is
Speaker 10: another good one because they have small diameter bombs and
Speaker 10: the joint direct attack munitions. Those ones right there, they've
Speaker 10: been in production for a very long time. We have
Speaker 10: hundreds of thousands that have been produced. Now you have
Speaker 10: to take some of that and say, okay, where have
Speaker 10: they been expended to this point, and obviously we don't
Speaker 10: get a good good say of that right now because
Speaker 10: they keep those numbers as operational risk and operational security,
Speaker 10: they keep those close to the best.
Speaker 8: Wayne.
Speaker 6: One of the challenges I think we've all come to
Speaker 6: know as we over the years, you thought about a
Speaker 6: RAN and its nuclear program is well, a lot of
Speaker 6: the real critical parts of their nuclear program are very deep,
Speaker 6: deep underground, really hard to get to. Is that something
Speaker 6: you think the military will try to attack this go round.
Speaker 8: I think it definitely can.
Speaker 10: It really ends up being where it is on a
Speaker 10: valid military target platform. If you're looking at it and saying, okay,
Speaker 10: we have enough reason to believe that this does exist,
Speaker 10: credible intelligence that says that the fistle material is still there,
Speaker 10: we want to decimate that nuclear program. I absolutely think
Speaker 10: it's going to be a target. It wasn't a target
Speaker 10: necessarily right up front, because they were going after leadership
Speaker 10: and high value targets, air defenses, missilestock files, things that
Speaker 10: could return fire.
Speaker 8: If you will.
Speaker 10: But as long as this goes a little bit longer,
Speaker 10: I think those strategic level targets and those strategic level
Speaker 10: objectives becomes more important better question is whether or not
Speaker 10: they're able to verify without boots on the ground, how
Speaker 10: well can you verify whether or not those strikes were successful.
Speaker 2: We continue with Wayne Sanders, senior Defense analyst Bloomberg Intelligence,
Speaker 2: Colonel Sanders with his service to the nation and expertise
Speaker 2: and information systems. Colonel Sanders, I remember the clearest memory
Speaker 2: of a rock and standing in the Bloomberg Television studios
Speaker 2: at three am and I opened up the you know, Paul,
Speaker 2: the atlas we had as kids, that big national geographic outlasts. Yep,
Speaker 2: I know, yeah, Wait a minute, the geography, Colonel Sanders.
Speaker 2: When you open up the National Geographic Atlas of Iran
Speaker 2: and you look at the geography, how do you respond
Speaker 2: to American boots on the ground.
Speaker 10: It's always been a it has been a tough area
Speaker 10: to be able to go into, especially with the you know,
Speaker 10: the vehicles that we have in tanks and beyond. I
Speaker 10: don't see that being even on the geopolitical side of
Speaker 10: the house. I don't see that being something that President
Speaker 10: Trump would want. The administration would not want to see
Speaker 10: this lagged out, not only for military readiness for contingencies,
Speaker 10: but also to our stockpiles.
Speaker 8: Uh, it ends up being more difficult.
Speaker 10: The air campaign works in this region based off of
Speaker 10: the terrain because it's not it's not the same as Afghanistan,
Speaker 10: where you know, you're looking into uh, you know, deep
Speaker 10: inside of caves and you're not exactly sure where where
Speaker 10: folks are.
Speaker 8: But it still creates a problem the further east you go.
Speaker 10: So you present General Kine when the chairman, when he
Speaker 10: actually showed where those strikes took place. You notice there
Speaker 10: on the western side, we need to get east as well.
Speaker 5: Wayne.
Speaker 6: I think what we've all kind of learned throughout history
Speaker 6: is airpower, while impressive and devastating, has its limits, and
Speaker 6: can airpower alone achieve the goals.
Speaker 5: That have been laid out by this administration.
Speaker 10: Do you think you know there's actually case studies on
Speaker 10: both sides. You know, people bring up you know, Libya
Speaker 10: versus Iraq in terms of you know, limited success from there.
Speaker 10: I think really it does come down to the Iranian people.
Speaker 10: It comes down to the other instruments of excuse me,
Speaker 10: of national power, instruments and national power, diplomatic, information, military
Speaker 10: and economic and being able to put those pieces on there.
Speaker 10: If the military piece can only be done through air power,
Speaker 10: and you're not going to be put boots on the ground.
Speaker 10: You really have to rely on those other mechanisms to
Speaker 10: carry the weight and where that strategic objectives are.
Speaker 8: I think the intelligencemmunity plays a.
Speaker 10: Big part inner this because at that point in time,
Speaker 10: I think it could actually be some level of you know,
Speaker 10: peer to peer if you will, across the line obviously,
Speaker 10: but peer to peer communications across the intelligence apparatus that
Speaker 10: could potentially carry these as well as maybe some of
Speaker 10: the diplomatic pieces.
Speaker 8: The big piece is the resolve.
Speaker 10: If you can continue to go after the IRGC commanders,
Speaker 10: if you can continue to dismantle anybody who would be
Speaker 10: left for command and control, you're taking out systematically any
Speaker 10: type of infrastructure that they have. So now it's really
Speaker 10: about who are the leaders kind of like Ali Larjhani,
Speaker 10: you know, are you know? Obviously the US doesn't want
Speaker 10: Larjanni to be the one who would be next in succession,
Speaker 10: So it's really a question is to can they remove
Speaker 10: the right individuals and work with the other right individuals
Speaker 10: that could bring about peace.
Speaker 2: Colonel Sanders, we hope to call upon your expertise again,
Speaker 2: he writes for Bloomberg. Intelligence or senior defense analyst Dwayne Sanders.
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