March 20, 2025 • 50 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg News Economics Editor Molly Smith and Bloomberg Opinion Columnist Conor Sen discuss how a surprisingly strong reading on the US housing market added fuel to stocks just a day after Federal Reserve Chair Jerome Powell downplayed mounting economic concerns amid President Donald Trump’s trade war.
Equities rose as data showed US existing-home sales topped estimates and the jobs market remained fairly resilient. While the Federal Reserve kept its benchmark rate steady at its meeting this week, investors are betting that the central bank will still likely cut rates this year. The yield on the benchmark 10-year Treasury fell Wednesday.
Bloomberg News US Sports Business Reporter Randall Williams talks about the Boston Celtics being bought by Chisholm-led group in $6.1 billion deal. Bloomberg Originals Chief Correspondent Jason Kelly shares the details of the 10th annual Brackets for a Cause charity competition. Peter Atwater, Adjunct Professor of Economics at William & Mary, explains why it's investor vulnerability rather than uncertainty that matters. And we Drive to the Close with Paisley Nardini, Asset Allocation Strategist at Simplify Asset Management.
Hosts: Carol Massar and Tim Stenovec. Producer: Paul Brennan.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:08):
This is Bloomberg business Week, Insight from the reporters and
editors that bring you America's most trusted business magazine, plus
global business, finance and tech news. The Bloomberg Business Week
Podcast with Carol Masser and Tim Stenovek on Bloomberg Radio.
Speaker 3 (00:26):
It's one day after the latest FED decision, the second
decision of twenty twenty five. We're President Trump posting on
social media that the FED should cut interest rates, splitting
with the US Central Bank as officials way the economic
cost of his tariff push. As you know, the FED
did not cut rates as expected yesterday, but they did
sharply reduce their twenty twenty five growth projections. Meantime, one
(00:47):
former FED official, former New York FED President Bill Dudley,
and a Bloomberg opinion columnist telling us right after the
decision that the FED is in a bit of a
tough place.
Speaker 4 (00:57):
You know, I think the reality is they're flying blind.
They don't really know what's going to happen the growth.
They don't know what it's going to happen to inflation,
and you know, that increases the risk of making a
policy mistake or just being late.
Speaker 3 (01:10):
Tough place to be Former New York President Bill Dudley,
Bloomberg opinion columnist as well yesterday and Bloomberg Surveillance. The
FED decides all right to talk about the day after
and also go over some US economic data points that
we got this morning back with us as Bloomberg News
Economics editor Molly Smith. She's here joining me and Tim.
She is here in our New York studio. Molly as
always so much coming at the economic universe and just
(01:35):
investors in general. Today's US economic data looks like the
labor market, okay, housing market bounce back from some weakness.
What do we need to know?
Speaker 5 (01:42):
Yeah, the job was claims numbers have really just been
in a bit of like a holding pattern in this
kind of like no nothing state. You know, they're really
very much in line with pre COVID levels, like hovering
in this two twenty thousand area on the initial claims
and that's nothing really to.
Speaker 6 (01:58):
Worry about, which is great.
Speaker 5 (02:00):
Of course, there are other data that we get later
today that are referring to federal workers specifically, and those
have been drifting higher as we would expect to see
per all of the government firings. That we've been having,
So that's.
Speaker 3 (02:14):
What is that data that we get later.
Speaker 5 (02:15):
So that's still from the jobless claims data, it's just
published a little bit later for the federal workers. Specifically
that the Department Labor also puts this out later on Thursday.
So we've been starting to pay closer attention for that.
Not something we used to look at before, but obviously
makes a lot more sense now. And then on the
housing front, we saw existing home sales up beat all
estimates in February.
Speaker 7 (02:36):
I think a lot of this was really due.
Speaker 5 (02:38):
To the weather though that coming back from remember in
January we had the wildfires in La. We had really
bad winter weather across a lot of the South. So
those were the two regions in February that really bounced back,
whereas the Northeast and the Midwest not as much.
Speaker 8 (02:52):
But why was this such a surprise, Molly, Because we
actually saw equity markets turn higher as a result of
this stronger than expected housing data. Why did this surprise analysts?
They knew about the weather already.
Speaker 5 (03:02):
Yeah, you know, this was above the reading was above
all estimates in the Bloomberg survey. I think that you know,
the expectation for the housing market right now is really
just so grim. Like you know, it's very much like
we're just going to be in this really steady state
of like you know, pretty tepid sales. Mortgage rates, yes,
have come down a bit in recent weeks, but are
(03:23):
still in that six point seven percent area, and home
prices are still really high. Even though you're getting more
inventory coming on the market, it still hasn't really made
much of a dent in prices. So the outlook for
housing isn't great right now. That said, we're going into
this season where home sales do typically pick up in
the spring, so that's going to be really.
Speaker 7 (03:42):
Key to watch.
Speaker 8 (03:43):
Okay, we have that economic data. We talked about the
economic data. Now that we've had about a day to
really digest what we heard from j Powell and the
Federal Reserve yesterday, what are your thoughts, Molly. I was
a little surprised to see the market reaction yesterday given
the uncertainty that Powell express but what it was the
best fed day market going all the way back to
(04:04):
July of last year.
Speaker 5 (04:06):
I think what Powell's job a lot of the time
is to do is understandably not induce panic or to
downplay where there might be perceptions of panic and the
SEP or Summary of Economic Projections yesterday that came out
before Powell spoke, For me, that would have been a
bit panic inducing. I think you know that sharp cuts
rvery sharp cuts to growth, you know, marked up unemployment
(04:28):
pretty noticeably, marked up risks to inflation as well, very much.
So those are things that all right now, you know,
add up to what we say is statflation risks, and
that was really the big word going into the press
conference yesterday. But then Powell gets up there and seems
to downplay all of these risks, doesn't seem to phase
by it. I think something for me that was really
bizarre was his idea that the marking down of growth
(04:52):
projections and higher risks to inflation somehow balance each other out.
That part I still don't really have great understanding on.
But I think the market rally was really just because
the Fed still sees two rate cuts this year. And
I think there was a real case where what if
you saw the dots price in more than that, because
normally we would love to see that and that would be,
(05:12):
you know, a good news rally. But I think in
this case, if you saw more cuts priced in. That
would have really clued in to say that the FED
is very worried about growth and that they would have
been expecting more cuts even though inflation's going to be
so high.
Speaker 3 (05:24):
What's the analysis after we kicked it off? Mentioning what
Bill Dudley, former New York FED President, said on the
Bloomberg broadcast yesterday following the FED decision, saying, you know,
I think the reality is that the FED is flying blind.
They don't really know what's going to happen to growth,
they don't know what's going to happen to inflation, and
how that increases the risk of making a policy mistake.
Do most folks that you talk to in the economic
(05:45):
community feel like we just don't know what's next. I
feel like there is a growing chorus of business leaders
who are kind of saying that, and it's why you're
seeing maybe m and a pull back, lots of things
pull back.
Speaker 5 (05:55):
Yeah, it's totally fair.
Speaker 6 (05:56):
I mean, I think it's.
Speaker 5 (05:58):
One of the funny parts of the press conference yesterday too,
was when Powell had said back to a reporter when.
Speaker 3 (06:03):
He broke out into the Grateful Dead song, No.
Speaker 5 (06:04):
Just that part. There was one part where he had
like put it back to a reporter saying, you know,
like forecasting is really hard, Like what would you put down?
It was like, okay, that's more your job than like hours,
but it's really hard.
Speaker 6 (06:22):
To his credit, it is very hard right now.
Speaker 5 (06:24):
So and you saw that very much in the economic
projections as well. Yeah, all of the heightened uncertainty around growth,
around the labor market, around inflation.
Speaker 7 (06:34):
He's not wrong.
Speaker 6 (06:35):
I think none of us really know.
Speaker 5 (06:37):
And you know, to Michael McKee's great question of how
long are you going to wait to see the totality
of these policies?
Speaker 6 (06:44):
Who the heck knows right?
Speaker 3 (06:45):
And will it be too late?
Speaker 2 (06:46):
Right?
Speaker 3 (06:46):
Because you have to be so preactive, I got to say,
I sow, I've you know, put buttons and like, you know,
things that fall off, and threading a needle can be
really tough. And I feel like that's where the FED
is right now. Threading a needle into terms of what
we need for monetary policy.
Speaker 5 (06:58):
Not easy right now, not at all. I don't want
their job. We'll just sit here and try to decipher it. Well.
Speaker 8 (07:03):
His job getting a little harder too, with President Trump
saying last night that the FED should cut interest rates.
Splitting with the US Central Bank is officials way the
economic cost of his tariff push. This is a post
on his social media network. The FED would be much
better off cutting rates as US tariffs start to transition
their way to the economy. Do the right thing. April
second is Liberation Day in America. How does that complicate
(07:26):
Powell's job?
Speaker 5 (07:28):
Well, Well, one thing, it totally breaks with a long
standing practice that you know, the FED is an independent
institution that.
Speaker 8 (07:35):
Yes, going all the way back to d eighteen, right.
Speaker 5 (07:39):
A long time, and Powell has been a very staunch
supporter as it did this last time, right. Yeah, Like
presidents don't usually comment on monetary policy, that's not their
job justice, Powell will often say real comments on fiscal policy.
Speaker 6 (07:51):
So that's one thing.
Speaker 5 (07:52):
The other thing is that if the as I was
kind of saying before, if the FED was going to
price in more rate cut ex expectations this year, I
think it honestly would have the inverse effect of what
Trump is going for. I think more people would perceive
that as the FED is really worried about growth and
that even though inflation's projected to be elevated, we need
(08:13):
to step in to save the economy, So I don't
think that would honestly have the effect that Trump is
going for.
Speaker 3 (08:18):
All Right, lots to keep on our mind, Molly, Thanks
so much, Bloomberg News Economics editor, Molly Smith. All right,
that is your economic update on this Thursday. Now what
it all means for those who have to invest in
this market where instability seems to be the norm. Volatility
we see it today due to trade war uncertainties, and
despite as we just talked about with Molly, a bounce
back in some housing and certainly job data looking pretty positive,
(08:41):
we do get a big test tomorrow with the expiration
of four and a half trillion dollars worth of options contracts.
So helping make sense of the trade for us here
at Bloomberg is Bloomberg Opinion columnist Connor Sen. He is
founder of Peachtree Creek Investments. He joins us from Atlanta. Hey, Connor,
good to have you back here with Tim and myself.
You know, there are always buyers and sellers in the market, right,
and whether there's more or less of one really kind
(09:03):
of helps develop, you know, or determine the flows, the demand,
the pricing. But I do think about and with the
acknowledgement that there's always buyers and sellers. Is today's market
investable in your view?
Speaker 9 (09:16):
I think so, just that the market we had coming
into the year was very momentum driven a lot of
optimism about the Trump administration, and I think we've seen
over the past month that that momentum has really come
out of the market. The Trump optimism is more mixed,
and so that sort of fast money trade, hot money
trade has really come out of the market, but sort
of a lot of parts of the market are still
not really that concerned about recession, and so basically you're
(09:38):
getting better valuations on stocks than need a month ago
without yet the kind of recession concern that you've gotten
over the past two years. A few times.
Speaker 8 (09:47):
Color, what about the rotation that we're seeing out of
US equities into international equities. I've spoken to two friends.
They're not in finance. They're normal people who are thinking
about their own retirement. They have nothing to do with
investing day to day in the market. But both of
them have said to me, I'm selling US equities and
I'm investing outside of the US. I think that it's
(10:07):
a little turbulent here right now, and I think the
opportunities outside of the US. What do you make of that?
Speaker 9 (10:14):
I think from a narrative standpoint, I get it in
that sort of over the past few years, the US
was seen as the only game in town globally to invest,
and I think that explains a lot of the valuations
you saw in US large cap stocks last year, when
you had Costco at fifty five times earnings and Walmart
at thirty five times earnings. It wasn't just the tech stocks,
so sort of a belief that don't bet against America.
American companies are going to win, and there's no growth
(10:35):
anywhere else in the world. And so I think now
you're seeing, well, you know, there is a need for
capital in Europe and we're seeing the stock market perform
better there. I'm sure globally a lot of investors who
were sort of betting on the US or I feel
kind of just you know, deceived, and so they're looking
to repatriot capital. And at least for now, I get
the story of well, Europe's going to grow faster, the
(10:56):
US is more mixed, So let's rotate money out of
the US to other parts of the world.
Speaker 3 (11:00):
Hey, one of the things I wanted to ask you
here we are Connor one day after the FED and
Tim was kidding or we kid it at the top
of the broadcast, like, don't look at your four oh
one k right now. I, however, did And I am
wondering about you know a column you wrote that gets
into where the stock market goes, the economy will follow.
We have seen a pullback in stock so far, certainly
(11:20):
this year. So based on that, where do you think
the US economy has had in your view? It sounds
like you're not talking about recession, but I am curious
how you kind of tie these together.
Speaker 9 (11:31):
We've had a negative momentum in the US economy, I
would say for about a year. I think the soft
landing ended last spring full employment and the bus spring.
But the acceleration and growth we're seeing is just very,
very slow, and it's not fall off a cliff like
we saw with Lehman Brothers in two thousand and eight
or with COVID, and so I think that's a case
where I don't think we're gonna have recession over the
next six months. For I think housing's already kind of dead,
(11:52):
so it's hard to kill housing again. And AI is
the other risk at economy that I see, and that
seems like more of a twenty twenty six story. With
all the CAPEX spent, what's going to happen this year?
And so I do think that high end consumption growth
could be slower, maybe pretty stagnant this year. But you're
not really seeing signs of growth falling off a table
or the kinds of fragilities that would lead to a
recession at least over the next few months.
Speaker 8 (12:12):
What's the AI risk that you see. I'm here in
San Francisco right now, everybody's talking about Nvidia GtC. We're
going to be hearing from ED in just a few minutes.
What's the AI risk?
Speaker 4 (12:22):
For me?
Speaker 9 (12:22):
It's just sort of the dollars being spent. So if
tens or hundreds of billion of dollars are being spent
on chips and data centers and power generation the utilities,
it's really that going away that would create the recession risk.
And I think just the lead times to cutting spending
on that are more than a few months, a few quarters,
and so it's really companies have committed to spend money
in twenty twenty five, it's really twenty twenty six that
(12:44):
the question mark is, and we're just not going to
know about that for at least six months. So I
think in twenty five maybe markets don't do well, but
the economy probably a stagnation is the worst case scenario
rather than.
Speaker 3 (12:54):
A bad recession, but not stagflation.
Speaker 9 (12:58):
I don't think so. I'm kind of with the that
the tariffs are likely more of a one time impact,
and it might be a significant one time impact, depending
on how sizable they are, but it's just not going
to be a nineteen seventies thing, even a twenty twenty
two thing. It'll just be, you know, some prices went
up for a few months, and then after that one
time price shock, it sort of happened. And that's even
if companies feel like they can pass along those prices,
(13:20):
and that's not clear the moment that they're willing to
do so.
Speaker 3 (13:23):
All right, So I'm going to get a bunch of
hate mail, but I'm only, you know, pigging back on
what fed Jo J. Powell said about tariff's like transitory,
We never get that wrong. Not a hot word here,
but I mean, truly, do you believe that the impact
of tariffs will be transitory even if they stay and
don't go away, or is it only if they stay
don't go away, and there is it more piled on
(13:44):
and we get using regulatory environment and we get tax cuts.
Speaker 9 (13:49):
It kind of depends on the underlying conditions in the economy.
And when Russia invaded Ukraine in early twenty twenty two,
we had a very overheated economy, low interest rates. That
was kind of the perfect dynamic for that inflation to
stick around and be amplified. Right now, you have an
economy where the cyclical parts that are pretty weak. The
hiring last year that was strong was government, healthcare and education.
(14:10):
That looks to week in this year. There's just not
a lot of underlying growth momentum in the economy, so
it's not clear that companies are in a position to
pass longst price increases. So I think it's the economy
is weaker and that's why I think it's more likely
to be transitory.
Speaker 3 (14:22):
Okay, so twenty seconds, don't be worried investors. Is that
your final line?
Speaker 9 (14:28):
I mean, I think you know, if you were super
invested heading into the year, that was probably a mistake.
After this selloff, I think you need sort of more
bad things to happen this year.
Speaker 6 (14:37):
Than just spooks.
Speaker 9 (14:38):
I think the spook move has already happened.
Speaker 3 (14:40):
All right, we're gonna leave with our Hey, Connor, thanks
so much. Glad we could check in with you. Bloomberg
Opinion Columbus Connorson. He's the founder of Peachtree Creek Investments.
Speaker 2 (14:48):
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Speaker 3 (15:02):
Well, some big news in the world of sports, and
no it's not March Madness, although that is also big,
and we'll get to that in just a moment. But
among our most read stories on the Bloomberg terminal at
this hour is a consortium reaching a deal to buy
the NBA's Boston Celtics for six point one billion dollars.
Takeover makes it the biggest NBA deal ever, surpassing the
four billion dollar valuation for the Phoenix Suns back in
(15:24):
late twenty twenty two. So let's talk about this. Joining
us is Bloomberg News US sports business reporter Randall Williams.
He's here in studio along with Bloomberg Originals Chief correspondent
Jason Kelly. Guys, I want to kick it off, Randall,
first talk to us about this deal. A lot of money,
A lot of money.
Speaker 10 (15:41):
It's the most ever paid for a sports franchise. It
edges out Josh Harris's purchase of the Commanders and NBA
owners in the league is happy he got the six billion.
Speaker 3 (15:49):
Uh. Jason is shaking his head. Why are you taking Mead?
Speaker 11 (15:54):
It's unbelievable when you think about the last even during
the period where these guys have owned the Boston Celtics,
they bought it for three hundred and sixty million dollars
correct back in.
Speaker 3 (16:05):
Twenty twenty two and two thousand and two. Forget me, yeah,
two and.
Speaker 11 (16:10):
Two won a couple championships. They put it on the
market for essentially a state planning on the part of
the Grouseback family. You know, I don't know what you heard, Randall.
It wasn't a certainty that they were going to get
to this price, but they did.
Speaker 7 (16:24):
No.
Speaker 10 (16:24):
I mean when they don't own their own stadium, and
you know, the stadium is a big part of this
because basketball in the NBA you fill up the stadium
forty one times a year. But there's three hundred and
sixty five days in a year. You want to fill
that with concerts. You want to fill that with other events, festivals,
and so when you don't own that, you lose out
on revenue. For the Celtics to reach six billion dollars
without owning their own stadium, it sets the precedent for
(16:46):
the NBA expansion owners who are going to be bidding
for this, who will own their stadium. And it's like, oh,
they sold for that without a stadium.
Speaker 3 (16:53):
Oh, I'm good, But that begs the question, why did
they pay so much without the stadium.
Speaker 10 (16:58):
Well, there's a lot of reasons why, I insult, right,
there's a lot of reasons why. But the first thing
I would say is that when you're buying a sports team,
you do want to get to a price. And I
think that for the league and for the Boston Basketball group,
they wanted that six billion, they got it. And there's
someone there's some unhappy people too, like Steve Pagliyuga. He
put out a statement and said, look, we're gonna pay
(17:19):
pat We're gonna excuse me, we're going to pay cash
into this. And he lost and we're seeing that Bill
Chisholms Group, which has Sixth Street and Rob Hale and
Bruce A. Beal Junior from relative companies they won Come.
Speaker 8 (17:32):
On, Jason, Yeah yeah, Jason, does does the deal make
sense to you? I mean somebody who's who's looked at
these valuations for a long time, does it actually pencil
out or is it pretty shocking to you? And look,
we should say something is worth whatever, somebody's going to
pay for it. So obviously it's worth this much, but
it's kind of mind blowing.
Speaker 11 (17:49):
Now it's hard to pencil it out. But then again,
you know Randall and now we're talking about this. Before
he came on air, people thought Steve Balmer was crazy
for paying two billion dollars for the LA Clippers. People
thought Matt Ishbiel was crazy for paying four billion dollars
for the Phoenix Suns and Mercury. People thought these guys
were crazy for paying three hundred and sixty million dollars,
(18:10):
you know, twenty some eighty years ago. So you're exactly right.
I think one thing that to build on what Randall
was saying. The other real interesting thing about this is
this is an expensive team, right. They have a very
high pay roll, and this is not the sort of
cash machine that maybe people would think it is right.
Speaker 10 (18:28):
And I'd say, going back to your point about you
know how crazy it is. You look crazy in the
moment buying any sports franchise, But as long as valuations
look good, you look like the wise guy in due time.
So as long as these valuations keep rising in the
NBA has a new media deal, everybody looks smart. On
the Celtics side, no stadium ownership, and you have a
lot of money to pay out to players, So they
have to definitely go back to the drawing board and
(18:50):
go back to their books and figure out like how
do we make this work long term?
Speaker 8 (18:54):
But Randall, as we were talking about it, it wasn't
just the biggest NBA deal in history. It's the biggest
sports franchise deal in history. So you got the Washington
Commanders last year for six billion, Manchester United last year
for five point four billion, the Broncos for four point
six billion back in twenty twenty two. It's football, it's soccer,
it's basketball. What's going on here, redl Is it just
(19:14):
supply and demand?
Speaker 3 (19:16):
It's a little bit of both.
Speaker 10 (19:17):
I mean you're seeing in the influx of private equity
in these deals, and so with these franchises rising as
quickly as they are, the number of people who are
able to buy these teams outright is diminishing. It's just
getting so much smaller. That's why you see Sixth Street
in this deal having a billion dollars to offer up
and help pay for this. With that in mind, if
(19:38):
private equity is going to pay a billion dollars for
this six billion dollar team, then even the number of
limited partners from individual people is going to be small
as well. So it all depends on how you're forming
your ownership group, whether you want private equity, whether you
want people.
Speaker 3 (19:54):
It just really depends.
Speaker 10 (19:55):
But private equity is a silent partner in this.
Speaker 3 (19:57):
All right, well, lent Man, Whenever we talk about these
big deals, we could go on forever because it's always
fascinating in the amount of money and the buyers continue
to pay up. Radel, thank you so much. We'll look
for more of your coverage on the ruer. Randall Williams,
US sports business reporter here at Bloomberg News. We're going
to stay with sports because didn't know, or maybe did
you notice, that March Madness is underway. Welten, Kelly, listen.
(20:20):
We do our own version here at Bloomberg and it's
now hitting what it's tenth anniversary, So tenth anniversary. This
is called Brackets for a Cause.
Speaker 11 (20:27):
This is something I've been really excited to be a
part of along with our chairman Numeritis Peter Grauer. For
the last ten years, we've raised six million dollars. More
than six million dollars so far, setting a new record.
In this year's contest, sixty one participants pledging twenty thousand dollars.
I'm not as good at math as you are, Carol
Masser and Tim Cenovic, but that's one point two million
(20:48):
dollars plus a purse. It's going to be split among
some really good charities. We couldn't be more excited.
Speaker 8 (20:55):
All right, who's playing this year? I did not do
my bracket yet, by the way, which means I can't
do it because the games have started. Yeah, come on, man,
it's twenty twenty six for me.
Speaker 3 (21:04):
Yeah. Who did get there?
Speaker 8 (21:06):
Who did get there?
Speaker 3 (21:07):
Together?
Speaker 7 (21:07):
Though?
Speaker 11 (21:07):
This year, some really good names, some names very familiar
to the Bloomberg BusinessWeek audience. We're talking about John Gray,
We're talking about David Solomon, John Gray, of course, President
Blackstone David Solomon, the CEO of Goldman Sachs. Jenny Johnson,
she is of course running Templeton. Carolyn Tish Blodgett. She
is an owner of her family of the New York
Football Giants as well as the controlling owner of Gotham FC.
Speaker 3 (21:30):
Katie Cootch of TCW Yes.
Speaker 11 (21:32):
Katie Kotch John Winkle read from TPG. So it is
a murderer's row.
Speaker 3 (21:38):
Most of these guys are who's been there from like
day one.
Speaker 11 (21:41):
So Gary Cone has been there from day one. He
won the very first contest. Of course, now the vice
chairman of IBM, former president of Goldman Sachs. We actually
got some of the champions together for a dinner a
few weeks ago and Gary was there. Of course, he
served in the first Trump administration. He's been just ride
or die for this for a long time. John Gray
has been with this pretty much since the beginning as well.
(22:02):
He won a couple of years ago. These people show up,
they get very excited, and you know Cliff Asnist, Dwight Anderson,
like lots of names.
Speaker 3 (22:10):
Bill Ackman, I always kid you when I used to
sit next to you, and it would be like Jason
would come in the morning and they would be like
messaging him like did you see what?
Speaker 5 (22:16):
Like how I?
Speaker 11 (22:16):
Well I did, and I mean, honestly, this will come again.
Is no surprise these guys, these men and women very competitive.
I'll get emails all weekend about you know, where they are,
and they're gaming it out, especially as it gets towards
the finals. And keep in mind we're looking at the
men's bracket and the women's bracket. It's split evenly between
the two. So six hundred thousand will go for the men's,
six hundred thousand will go for the women's.
Speaker 8 (22:38):
Yeah, Jason, I can still do my women's bracket right.
Speaker 11 (22:42):
Yes, you should be able to do your bracket on
the terminal. Yes, yeah, jeets.
Speaker 8 (22:45):
Until tomorrow at eleven thirty, so that one is still open.
Speaker 11 (22:48):
Yeah, get in there, Get in there, Tim Sten.
Speaker 3 (22:51):
He go on the Bloomberg terminal. You know it will
never get Tim on Jason's feet are bracket sneakers. Yes,
we will never get them our limited edition we needed
edition sneakers. Bracket sneakers.
Speaker 11 (23:03):
I'm gonna you can take a picture and put them
out on your social well.
Speaker 3 (23:07):
Yeah, Jason, I know what size is your shoe?
Speaker 8 (23:11):
Jason, maybe you can share?
Speaker 11 (23:13):
Yeah, no, not for sharing. Tim, All right, have fun
in San Franciscoy.
Speaker 3 (23:18):
Jason Kelly, thank you so much.
Speaker 2 (23:21):
This is the Bloomberg Business Week podcast. Listen live each
weekday starting at two pm Eastern on Apple Car Play
and Android Auto with the Bloomberg Business App. You can
also listen live on Amazon Alexa from our flagship New
York station, Just say Alexa Play Bloomberg eleven thirty.
Speaker 3 (23:39):
Do we want to talk a little bit about cars.
Gotta say one of the best known global auto brands.
Great read on the global auto economy and the luxury
global consumer. We're talking about Mercedes Benz and our Hannah
Elliott recently catching up with the company's CEO for more
on wear and why because there was a hilltop villa
involved and we want to know the details. Hannah, of course,
is Bloomberg Pursued Autocolumnists. She's also co host of the
(24:02):
Hot Pursuit podcast that she does with Matt Miller. You
can find that at Bloomberg dot Com or wherever you
get your podcast. Hannah, so good to check in with
you. You are on the West Coast, as you often are.
You're in Irvine, California today at Karma Automotive, the headquarters.
First of all, let's start there. Where are you? Why
are you? Who are they?
Speaker 7 (24:24):
Well, it's a funny thing. You should bring it up.
I can't actually tell you too much because I'm embargo.
But okay, the good news is I am at the
headquarters of Karma Automotive and they are bringing forth a
new vehicle that should be hitting the streets in twenty
twenty six. So I can't say much more than that.
It's going to be electric, of course, And of course
(24:45):
we remember Karma they had There was a Karma Fisker.
There have been multiple iterations of this company. They've struggled,
but they're going to They're going to fight again. So
I'm here to report about it.
Speaker 8 (24:58):
Can they Well, okay, I was gonna ask ask you
more questions. I'm so scared of Yeah, I'm so scared.
I'm so scared.
Speaker 7 (25:05):
I'll tell you if I can answer or not. I mean,
it's fascinating.
Speaker 8 (25:08):
Well, okay, but before we get to Mercedes, I do
you want to It's really really hard for an American
car company to start and pull this off. I mean,
look at Tesla, look at Rivian. Yes, but the road
of you know of that is paved with like the
bodies of so many car companies.
Speaker 3 (25:24):
Can they pull it off?
Speaker 7 (25:26):
I don't know. It's going to take a lot of money.
It's going to take a lot of money. And at
this point, and this is a great segue into Mercedes,
I don't know if they can catch up enough in
the technology world to compete with Mercedes. And I say
that having just driven the third generation Carma Rivero from
(25:46):
La down here, and the technology is moving so fast
these days for a small startup to now compete with Mercedes,
and I've just spent a week in Rome with Mercedes
with their new CLA said Anne, It's going to be
extremely difficult. And one thing I always said about the
startups were, you know, the big OEMs did not produce
(26:09):
electric cars at first because they didn't have to. It
didn't mean they couldn't, It just means they didn't have to. Now,
as OEMs realized, they're going to have to and they
need to to offer options for everybody, the market is
even more competitive. So I don't know, it's really a
tough challenge.
Speaker 3 (26:30):
Kind it feels like I don't know. Is just so
you know the word of the era right now, because
there's just so much coming out people. I want to
ask you about your conversation. I mean, take us to
the hilltop villa and what you saw, but who you
talked to. And I am curious about the global environment,
the global business environment, especially with you know, tariffs coming
(26:50):
out of the United States, global supply chains being maybe
potentially rethought. What did you have to say?
Speaker 7 (26:57):
So I spoke with Ola Collinius, who is the chief
executive officer and chairman of Mercedes Benz Group. This is
the guy where the buck stops. And he also is
saying he doesn't know the future. This is a common
thread that we've seen. When I ask him about tariffs,
when I ask him about China, when I ask him
about EV sales in the US, he is very open
(27:19):
saying nobody knows the future. What is important is to
be very quick and to be very flexible. And so
Mercedes is working to speed up everything and to be
incredibly flexible so they can pivot and turn if they
need to to satisfy the market. What they're hearing and
what the CLA sedan really provides is that some people
(27:41):
do want evs, but a lot of people still want
a combustion option. So this CLA sedan is really interesting
because it's very affordable. It should be around fifty thousand euros.
US prizing hasn't been announced, but for Mercedes that's considered
entry level. But it also is very advanced and it
will be offered in a hybrid version in the US
(28:02):
next year. So it's debuting as an electric vehicle, but
there will be a hybrid version coming next year. Again,
it's all about options, and it's also about going against Tesla,
the kind of original startup that made good. This is
this is Mercedes now going directly to Tesla.
Speaker 8 (28:20):
Well, speaking of that, Tesla is at least in the
ones that are sold in the US are made in
the US. Concern about and closely aligned now with President Trump,
with Elon Musk, how closely aligned he is. What is
the concern that Mercedes has about tariffs? About President Trump
given the comments that he's made about German car companies.
Speaker 7 (28:37):
It's a huge, huge concern. I asked Ola about it.
He used the word reciprocity. He of course is following
very closely, but he really made the point that Mercedes
has been in the US for decades. They've got two
factories in the US. They are one of the nation's
largest exporters, and he really emphasized, we feel a mare American.
(29:00):
We're part of the American fabric. We hope there's a
sense of reciprocity as we're talking about these tariffs.
Speaker 3 (29:06):
All right, great stuff as always, So glad we could
check in with you. Hannah. Thank you, thank you, Thank you.
Hannah Elliott. She is Bloomberg Pursuit's auto columnist out there
in Irvine, California. Highly recommend you check out her story.
It's on the Bloomberg and at Bloomberg dot com. You
and find out a little bit more too, about the
cla from the Mercedes from Mercedes, I should say, and
her experience doing a test drive.
Speaker 2 (29:28):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five pm Eastern Listen
on Applecarplay and the Android Auto with the Bloomberg Business app,
or watch us live on YouTube. Well, the NASTAC one
hundred is in correction. It's down about eleven percent from
its January highs. The S and P five hundred, Carol,
(29:48):
it's down by eight percent. Look, corrections happen, stocks go down.
Yet the volatility that we're seeing right now stemming from
a back and forth trade war, uncertainty over future economic conditions.
That's something Carol, that investors in this market may.
Speaker 3 (30:02):
Not be used to, that's for sure. And the question
that Peter Atwater has for investors is do they stay
buckled in in the passenger seat with President Trump behind
the wheel or do they chump from the car. It
is great to have back with us on Bloomberg Business
Swee Peter Atwater. He's President of Financial Insights and adjunct
Professor of Economics at William and Mary. He's also author
of the twenty twenty three book The Confidence mapp, charting
(30:24):
a path from chaos to Clarity. He also coined the
term K shaped recovery. He joins us from Williamsburg, Virginia. Peter,
so glued to be talking with you again. I feel
like I'm not even quite sure where to start because
there's so much coming at us. The volatility, you know,
you get into investors feeling vulnerable, uncertain, powerless sentiment is
(30:48):
a big factor. I don't know this market environment like
where do we go from here? Do we even know?
Bill Dudley of the New York Fed said, you know,
really that the Fed doesn't even really kind to know
where to go next.
Speaker 6 (31:02):
Yeah, we never really know where to go.
Speaker 12 (31:05):
But what's so interesting to meet about where we are
today is that there has been this huge mind shift
from inauguration day to today. So coming into inauguration, people
were fantasizing wildly about where the markets were going, where
the new administration was going to take the economy in
(31:26):
the markets, And since then investors have had to come
to grips with the fact that there is without question
a shift in behavior out of Washington where President Trump
is behind the wheel. And so investors are used to
being in the passenger seat with specific companies with you know,
(31:50):
next to CEOs.
Speaker 6 (31:52):
For good and for ill.
Speaker 12 (31:54):
But now they're having to look at their entire portfolio
and decide are the investment I'm involved in going to
be beneficiaries of the new administration or victims of them.
Speaker 8 (32:07):
It's just so interesting to hear this because I think
there's this narrative that emerged following the first Trump administration
that this is a guy who looks to the Dow
in the s and P five hundred as a scorecard,
as a sort of report card, and indeed, during his
first administration he touted numbers there. Yet we've heard a
(32:29):
different narrative emerge this time, Peter. Do you buy it
that he's not paying attention to the stock market.
Speaker 12 (32:38):
One of the things we know about President Trump is
he loves to cite metrics that work in his favor.
So I'm not surprised with the markets dropping that he's
looking for alternative measures of consumer and satisfaction in the economy.
Speaker 6 (32:56):
But I think at the end of the day, what
he is trying.
Speaker 12 (33:00):
To demonstrate, more than anything else is that he and
he alone is going to dictate economic policy, American diplomatic policy,
and that everyone else needs to come to grips with that.
Speaker 3 (33:20):
But is there a point like, yeah, No, It's interesting, Peter,
because how many conversations I've had with folks and they're like, oh,
you know how this is going to play out. It's
just like you know, you reported on at the first
go round, and it feels so different, and I think
so many people are realizing this is different this time around.
Having said that, is there a point a breaking point
(33:42):
where the team around the president somehow has a bigger
say like they did in the first administration, because right
now it does feel like absolutely, like you lay it out,
the president's in the driver's seat and everyone is there
in the back seat to back them up.
Speaker 6 (34:00):
Yeah.
Speaker 12 (34:00):
One of the things that I say to my students
is falling confidence individuals grow spines. And so what we're
likely to see is that should the markets continue to drop,
should consumer confidence continue to fall, those around him will
feel compelled to react. Whether that's sufficient or not, we
(34:23):
don't know. And to be fair, Carol, there are a
number of organizations and individuals who feel wildly empowered now,
and so we're in this interesting moment where individuals and
organizations are having to decide in which camp do they
(34:44):
expect to fall because one of the things we see
with dominant leaders such as Trump is there are clear
benefits and there are also clear punishment.
Speaker 8 (35:00):
Well, how do you advise people to weather this storm
if you indeed think it is a storm? Because there
are a lot of people we talk to Peter who say, okay,
wait a second, once he gets tax cuts figured out,
once we get to April, and there's more clarity when
it comes to trade, things will become less valid ale
what do you say to that?
Speaker 12 (35:21):
So I think that investors have to be thinking, I
say a lot. You know, plan for what you can imagine,
but be prepared for what you can't. In this environment,
investors and corporate executives need to have two playbooks at once.
(35:46):
One is in anticipation of things going in their favor,
but also a very clear playbook for if this goes
against me, what do I do? What is my what
are my preparations planned ahead in anticipation of that?
Speaker 6 (36:03):
Because the outcome.
Speaker 12 (36:04):
Here is going to be very binary. And that's what
we see over and over is that when you create
beneficiaries and victims, the vulnerability that comes from the victims
sets things in motion. We're seeing that in Europe right now,
where the geopolitical vulnerability has leaders on edge and they're
(36:25):
mobilizing in response.
Speaker 8 (36:27):
I'm going to ask you something crazy, Peter. Is one
of the outcomes here on an investor perspective, that the
US becomes uninvestable.
Speaker 12 (36:36):
In your view, I think that is a clear possibility.
I think that investors have to be made comfortable that
the United States is interested in foreign capital, in retaining
domestic capital and appreciate tim If you look at labor,
(37:02):
goods and capital, we're seeing We've already seen restrictions and
walls go up on the immigration front, We're seeing tariffs
creating friction in terms of the mobility of goods. It
is to me only a question of time when capital
(37:23):
falls into that same playing field where public policy begins
to intervene, and not just in the United States, but
globally in terms of wanting it, not wanting it, courting it,
pushing it away. Those are completely in sync with what
we're seeing with labor and goods.
Speaker 3 (37:45):
All right, So playing this out, Peter, what kind of
economy then is the US economy? How different might it become?
Speaker 12 (37:55):
I think one of the things that is so unusual
about where we are is that we were coming off
of extraordinary in vulnerability, invincibility, particularly in tech and so
this to me is a very different setup than we
saw in twenty sixteen in the valuations and the economic
(38:20):
growth may already be peaking, may already have peaked, and
so the administration i think needs to be very sensitive
to the risk that they're pouring water on a fire
that was already poised to go out.
Speaker 2 (38:36):
Peter.
Speaker 3 (38:36):
One thing I do think about too, and I think
we talk about it is God. It always happens whenever
there's a new administration. Okay, in two years we have,
or less than two years we've mid terms, in another
four years we have another presidential election, or less than
four years. Is the world though, moving on in many ways?
Because it just feels like no matter what changes politically again,
(38:59):
it just can't count the US like it has.
Speaker 12 (39:03):
Yeah, I think that trust, when broken, is incredibly difficult
to rebuild. And as I talk to folks from Europe,
it is unquestionable that they feel that trust of the
United States has been broken. And so the likelihood that
(39:24):
the midterms or even the twenty twenty eight election for
your will bring back what has been isn't the case.
Extreme vulnerability changes us and we will not endure it again.
And as I look at what we're seeing, particularly in
Europe right now, they are poised to make sure that
(39:46):
the vulnerability they've just experienced doesn't come back to bite them.
Speaker 3 (39:49):
All right, So just to stress again because Tim asked about,
you know, is the US, you know, not really a
market you want to invest in? Then perhaps in the future,
what's your advice to investors. I mean, we've seen Europe
certainly outperform. It came from a lower base and valuations
were different. Just got about thirty seconds. Should investors be
looking in Europe or elsewhere?
Speaker 12 (40:11):
I think investors have to be more diversified globally than
they are. Most American investors are far too concentrated in
the US right now to begin with. But I think
that the administration needs to demonstrate that as a place
to put capital, America remains the preferred choice globally, and
(40:36):
that is now I think very much in question.
Speaker 3 (40:40):
All right, Peter, we got to run. Thank you so much.
But another really big thing conversation, so important to the
environment today, Peter, Thank you again. Peter Atwater, President of
Financial Insights, adjunct professor over at William and Mary of Economics,
and author of the book The Confidence. Matt ro'out you
(41:01):
let me drive.
Speaker 2 (41:02):
Oh no, no, no, no, this is not a toy.
Speaker 3 (41:06):
Alright, please gravel, I want to drive.
Speaker 6 (41:10):
It's a good question.
Speaker 3 (41:17):
This is the drive to the clothes.
Speaker 2 (41:20):
Plus communic Well juled it on on Bloomberg Radio.
Speaker 8 (41:25):
All right, look at that. We got less than twenty minutes.
Do you all into the close of US trading here
in San Francisco. Carol Masser is in New York. That's
where the equity markets are, at least for now, until
everything moves to Texas.
Speaker 3 (41:38):
Carrol, Right, it isn't amazing.
Speaker 8 (41:41):
Yeah, I know we're talking about the Nasdaq. Was it
the Nasdaq this week that said they might be opening
up a little shop in Texas?
Speaker 6 (41:49):
Everything? Everything's going to Texas?
Speaker 8 (41:52):
Yeah, it is. Hey, let's stay in California though, and
talk to Paisley Nardini, portfolio manager at the Simplify Asset Management.
They've got about even billion dollars in assets under management.
Paisley joins us from Newport Beach, California, where I imagine
it is sunny and warm, like it is every single day.
Speaker 3 (42:09):
Paisley.
Speaker 8 (42:10):
Good to have you with us this afternoon. We're looking
at a market right now that earlier in the day
was searching for direction, but now solidly in the red,
down the S and P five hundred by about three
tenths of one percent. We just spoke to Peter Atwater
all about the uncertainty playing out right now. What are
you hearing from clients given the uncertainty in the environment.
Speaker 6 (42:32):
Yeah, well, thanks for having me exciting day.
Speaker 1 (42:34):
It's opening day of March Madness as well, so I'm
sure many people are multitasking as they're listening in and
looking at their brackets. But I would concur with what
Peter had shared around market uncertainty.
Speaker 6 (42:46):
I mean, coming into.
Speaker 1 (42:47):
This year, one of my kind of theories is around
this chaos theory. And really what this means is a
dynamic balance between order and disorder, and how.
Speaker 6 (42:56):
Does this relate to markets.
Speaker 1 (42:58):
Well, it means that small change can have these disproportionate
large effects, which ultimately just provides a greater backdrop of
uncertainty and risk. I think the positive note coming out
of that, though, is that there is also opportunity where
there is uncertainty. So as we're chatting with clients, as
we're hearing concerns, I think for the most part, although
(43:20):
markets have entered an official correction or they had, it
seems like we may have found a floor.
Speaker 6 (43:27):
How can clients think about navigating this?
Speaker 1 (43:29):
I mean, we've seen so much interest as clients are
looking for diversifiers.
Speaker 6 (43:33):
It's really been.
Speaker 1 (43:34):
The thorn and the side of a balanced portfolio for
the last decade or so. So it's really healthy to
see some of these tides shifting, and I think a
lot of what we've seen year to date so far
has been more of a rotation trade than an all
out recession flag.
Speaker 6 (43:48):
I mean, if we were expecting a recession, I think.
Speaker 1 (43:50):
We would see the ten year break below this kind
of arbitrary kind of floor of four and a quarter.
We're kind of hovering around that for whatever reas and
markets don't want to break below that.
Speaker 6 (44:03):
Even today, as we talk.
Speaker 1 (44:04):
About being in the red here at the close, not
all areas of the equity market are in the red.
I think we've seen again this rotation into international markets.
Speaker 6 (44:13):
We've seen a rotation into.
Speaker 1 (44:14):
More outside the top five or seven names in the
S and P five hundred. So as we're looking out,
I think we're going to continue to see more of
this uncertainty, which provides a backdrop of risk. But if
clients are prepared and they have their portfolios positioned to
whether this uncertainty take advantage of these opportunities through diversifiers
(44:35):
and alternatives. I think people are kind of looking out
and maybe optimistic of what the next couple months can provide.
Speaker 3 (44:41):
How are you thinking about the factor that is the
president of the United States and the policies and as
we just talked with Peter.
Speaker 6 (44:48):
At order, his.
Speaker 3 (44:52):
Seeming to not kind of care about the equity markets,
which everybody was so certain he would, and the policies
that are being put in place, be it geopolitically tariffs,
you know, alienating allies. You know, whether or not this
is a significant shift, certainly as a shift from what
we've seen from past presidents in terms of policy, But
(45:13):
is it something that is much more lasting that makes
the US economy a very different economy and the US
investment market a very different market. Are you having those
kinds of conversations in and around the office our clients
wondering whether you know, what is the US market that
they've known for so long? Is it different going forward?
Speaker 6 (45:34):
Yeah?
Speaker 1 (45:35):
Absolutely so, I would say, first and foremost, when we
when we found out Trump was going to be the
president again, markets became euphoric. We were focused on deregulation,
we were focused on tax cuts. We saw a massive
spike and small business optimism. Consumers were excited, and I
think we had too much euphoria. We weren't We weren't
really looking through the noise at the time, And so now.
Speaker 6 (45:58):
What we're faced with is this.
Speaker 1 (46:00):
This kind of negative kickoff to the year, and really
this focus on tariffs and the implications of that.
Speaker 6 (46:06):
I think that's going to be short lived.
Speaker 1 (46:07):
I think tariffs are really being seen as a negotiation tactic,
and as we all know, whether you love him or
hate him, wonderful negotiator, able to kind of pull strings
get what he wants. And so I think as we
look out, really Trump's focused on how to get what
he wants out of this, and the tariffs, of course,
are just noise in the interim, and so as we're
(46:29):
speaking with clients, I think coming into this year, a
lot of that euphoria was quickly kind of eroded, and
I think that's what we're experiencing right now with just
the digestion of what this uncertainty.
Speaker 6 (46:40):
And this noise might mean.
Speaker 1 (46:42):
I think as it relates to the administration, they've also
been quite explicit that they're not concerned about the stock market.
At the end of the day, stock market drives a
lot of activity in the economy and vice versa. So
I think that's maybe just kind of a narrative that
they're putting out there. But I do think we need
to take that at face value, because we haven't really
seen kind of the administration or politicians jump in to
(47:05):
put kind of a put.
Speaker 6 (47:06):
Or a floor on the markets.
Speaker 1 (47:08):
And I think that's a divergence than what we've seen
in the past. I think historically we've seen, you know,
whether it was not the President explicitly, but a lot
of people in power and even at the FED coming
through and ensuring the markets that everything was going to
be fine. And as Scott Bessent shared last week or
the week prior, we're in a detox period, and I
think it's rare to actually hear them come out and
(47:29):
say that, because they're essentially alerting us all that we
should be prepared for volatility. And so as we focus
on what it may look like as markets detox, we're
focused on diversification as a response to how to get
through that.
Speaker 8 (47:44):
Okay, well that's where I want to go, Paisley, because
you're also your portfolio manager and asset allocation strategists, So
how are you diversifying client portfolios right now? And look,
I know one size doesn't fit all and eighty year
old's not going to have the same portfolio as a
forty year old, but in general, what could you say.
Speaker 1 (47:59):
Yeah, in general say, we're really focused on unique sources
of risk and return. We're looking at, you know, from
a correlation perspective, asset classes or strategies that are not
going to move in tandem as.
Speaker 6 (48:11):
Or if equities sell off.
Speaker 1 (48:12):
And I think with that backdrop as well, investors has
become really comfortable over the last ten to fifteen years
that all you need in a portfolio of stocks.
Speaker 6 (48:20):
And bonds, Bonds have been that ballast.
Speaker 1 (48:23):
Bonds show up for your portfolio when we see equity volatility,
and really since mid twenty twenty two, bonds haven't been
that ballast.
Speaker 6 (48:30):
We've seen a bit of a rally year to date.
I think there's a little bit of kind of short lived.
Speaker 1 (48:34):
Are we going to see rates continue to rally as
equities sell off? Perhaps not, just given kind of where
we are from a deficit perspective, there's obviously some pressure
on rates also just given inflation. So how can investors
think beyond just the stock bond portfolio?
Speaker 6 (48:49):
And a command I.
Speaker 1 (48:49):
Had shared last week is really thinking beyond like what
we call this two legged stool and really thinking about
incorporating that third leg of the stool for stability, and
that third leg is all alternative, its diversifiers. So whether
we're talking about commodities, obviously we've seen significant tailwinds you're
to date in gold just given the uncertainty, but we
think there's a broader opportunity in commodities beyond just gold,
(49:13):
and especially if you're a dynamic in your commodity allocations,
being able to go long and short. Beyond commodities, we're
also looking at divergence and policy. Got it from interest rates,
which might support currencies as well.
Speaker 3 (49:28):
Got to run, Paisley, Thank you so much. Paisley Nardini,
portfolio manager at Simplify Asset Management, joining us there from
Newport Beach, California.
Speaker 2 (49:36):
This is the Bloomberg Business Week podcast, available on Apple, Spotify,
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Speaker 12 (50:01):
I say idea, how a bo
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:08):
This is Bloomberg business Week, Insight from the reporters and
editors that bring you America's most trusted business magazine, plus
global business, finance and tech news. The Bloomberg Business Week
Podcast with Carol Masser and Tim Stenovek on Bloomberg Radio.
Speaker 3 (00:26):
It's one day after the latest FED decision, the second
decision of twenty twenty five. We're President Trump posting on
social media that the FED should cut interest rates, splitting
with the US Central Bank as officials way the economic
cost of his tariff push. As you know, the FED
did not cut rates as expected yesterday, but they did
sharply reduce their twenty twenty five growth projections. Meantime, one
(00:47):
former FED official, former New York FED President Bill Dudley,
and a Bloomberg opinion columnist telling us right after the
decision that the FED is in a bit of a
tough place.
Speaker 4 (00:57):
You know, I think the reality is they're flying blind.
They don't really know what's going to happen the growth.
They don't know what it's going to happen to inflation,
and you know, that increases the risk of making a
policy mistake or just being late.
Speaker 3 (01:10):
Tough place to be Former New York President Bill Dudley,
Bloomberg opinion columnist as well yesterday and Bloomberg Surveillance. The
FED decides all right to talk about the day after
and also go over some US economic data points that
we got this morning back with us as Bloomberg News
Economics editor Molly Smith. She's here joining me and Tim.
She is here in our New York studio. Molly as
always so much coming at the economic universe and just
(01:35):
investors in general. Today's US economic data looks like the
labor market, okay, housing market bounce back from some weakness.
What do we need to know?
Speaker 5 (01:42):
Yeah, the job was claims numbers have really just been
in a bit of like a holding pattern in this
kind of like no nothing state. You know, they're really
very much in line with pre COVID levels, like hovering
in this two twenty thousand area on the initial claims
and that's nothing really to.
Speaker 6 (01:58):
Worry about, which is great.
Speaker 5 (02:00):
Of course, there are other data that we get later
today that are referring to federal workers specifically, and those
have been drifting higher as we would expect to see
per all of the government firings. That we've been having,
So that's.
Speaker 3 (02:14):
What is that data that we get later.
Speaker 5 (02:15):
So that's still from the jobless claims data, it's just
published a little bit later for the federal workers. Specifically
that the Department Labor also puts this out later on Thursday.
So we've been starting to pay closer attention for that.
Not something we used to look at before, but obviously
makes a lot more sense now. And then on the
housing front, we saw existing home sales up beat all
estimates in February.
Speaker 7 (02:36):
I think a lot of this was really due.
Speaker 5 (02:38):
To the weather though that coming back from remember in
January we had the wildfires in La. We had really
bad winter weather across a lot of the South. So
those were the two regions in February that really bounced back,
whereas the Northeast and the Midwest not as much.
Speaker 8 (02:52):
But why was this such a surprise, Molly, Because we
actually saw equity markets turn higher as a result of
this stronger than expected housing data. Why did this surprise analysts?
They knew about the weather already.
Speaker 5 (03:02):
Yeah, you know, this was above the reading was above
all estimates in the Bloomberg survey. I think that you know,
the expectation for the housing market right now is really
just so grim. Like you know, it's very much like
we're just going to be in this really steady state
of like you know, pretty tepid sales. Mortgage rates, yes,
have come down a bit in recent weeks, but are
(03:23):
still in that six point seven percent area, and home
prices are still really high. Even though you're getting more
inventory coming on the market, it still hasn't really made
much of a dent in prices. So the outlook for
housing isn't great right now. That said, we're going into
this season where home sales do typically pick up in
the spring, so that's going to be really.
Speaker 7 (03:42):
Key to watch.
Speaker 8 (03:43):
Okay, we have that economic data. We talked about the
economic data. Now that we've had about a day to
really digest what we heard from j Powell and the
Federal Reserve yesterday, what are your thoughts, Molly. I was
a little surprised to see the market reaction yesterday given
the uncertainty that Powell express but what it was the
best fed day market going all the way back to
(04:04):
July of last year.
Speaker 5 (04:06):
I think what Powell's job a lot of the time
is to do is understandably not induce panic or to
downplay where there might be perceptions of panic and the
SEP or Summary of Economic Projections yesterday that came out
before Powell spoke, For me, that would have been a
bit panic inducing. I think you know that sharp cuts
rvery sharp cuts to growth, you know, marked up unemployment
(04:28):
pretty noticeably, marked up risks to inflation as well, very much.
So those are things that all right now, you know,
add up to what we say is statflation risks, and
that was really the big word going into the press
conference yesterday. But then Powell gets up there and seems
to downplay all of these risks, doesn't seem to phase
by it. I think something for me that was really
bizarre was his idea that the marking down of growth
(04:52):
projections and higher risks to inflation somehow balance each other out.
That part I still don't really have great understanding on.
But I think the market rally was really just because
the Fed still sees two rate cuts this year. And
I think there was a real case where what if
you saw the dots price in more than that, because
normally we would love to see that and that would be,
(05:12):
you know, a good news rally. But I think in
this case, if you saw more cuts priced in. That
would have really clued in to say that the FED
is very worried about growth and that they would have
been expecting more cuts even though inflation's going to be
so high.
Speaker 3 (05:24):
What's the analysis after we kicked it off? Mentioning what
Bill Dudley, former New York FED President, said on the
Bloomberg broadcast yesterday following the FED decision, saying, you know,
I think the reality is that the FED is flying blind.
They don't really know what's going to happen to growth,
they don't know what's going to happen to inflation, and
how that increases the risk of making a policy mistake.
Do most folks that you talk to in the economic
(05:45):
community feel like we just don't know what's next. I
feel like there is a growing chorus of business leaders
who are kind of saying that, and it's why you're
seeing maybe m and a pull back, lots of things
pull back.
Speaker 5 (05:55):
Yeah, it's totally fair.
Speaker 6 (05:56):
I mean, I think it's.
Speaker 5 (05:58):
One of the funny parts of the press conference yesterday too,
was when Powell had said back to a reporter when.
Speaker 3 (06:03):
He broke out into the Grateful Dead song, No.
Speaker 5 (06:04):
Just that part. There was one part where he had
like put it back to a reporter saying, you know,
like forecasting is really hard, Like what would you put down?
It was like, okay, that's more your job than like hours,
but it's really hard.
Speaker 6 (06:22):
To his credit, it is very hard right now.
Speaker 5 (06:24):
So and you saw that very much in the economic
projections as well. Yeah, all of the heightened uncertainty around growth,
around the labor market, around inflation.
Speaker 7 (06:34):
He's not wrong.
Speaker 6 (06:35):
I think none of us really know.
Speaker 5 (06:37):
And you know, to Michael McKee's great question of how
long are you going to wait to see the totality
of these policies?
Speaker 6 (06:44):
Who the heck knows right?
Speaker 3 (06:45):
And will it be too late?
Speaker 2 (06:46):
Right?
Speaker 3 (06:46):
Because you have to be so preactive, I got to say,
I sow, I've you know, put buttons and like, you know,
things that fall off, and threading a needle can be
really tough. And I feel like that's where the FED
is right now. Threading a needle into terms of what
we need for monetary policy.
Speaker 5 (06:58):
Not easy right now, not at all. I don't want
their job. We'll just sit here and try to decipher it. Well.
Speaker 8 (07:03):
His job getting a little harder too, with President Trump
saying last night that the FED should cut interest rates.
Splitting with the US Central Bank is officials way the
economic cost of his tariff push. This is a post
on his social media network. The FED would be much
better off cutting rates as US tariffs start to transition
their way to the economy. Do the right thing. April
second is Liberation Day in America. How does that complicate
(07:26):
Powell's job?
Speaker 5 (07:28):
Well, Well, one thing, it totally breaks with a long
standing practice that you know, the FED is an independent
institution that.
Speaker 8 (07:35):
Yes, going all the way back to d eighteen, right.
Speaker 5 (07:39):
A long time, and Powell has been a very staunch
supporter as it did this last time, right. Yeah, Like
presidents don't usually comment on monetary policy, that's not their
job justice, Powell will often say real comments on fiscal policy.
Speaker 6 (07:51):
So that's one thing.
Speaker 5 (07:52):
The other thing is that if the as I was
kind of saying before, if the FED was going to
price in more rate cut ex expectations this year, I
think it honestly would have the inverse effect of what
Trump is going for. I think more people would perceive
that as the FED is really worried about growth and
that even though inflation's projected to be elevated, we need
(08:13):
to step in to save the economy, So I don't
think that would honestly have the effect that Trump is
going for.
Speaker 3 (08:18):
All Right, lots to keep on our mind, Molly, Thanks
so much, Bloomberg News Economics editor, Molly Smith. All right,
that is your economic update on this Thursday. Now what
it all means for those who have to invest in
this market where instability seems to be the norm. Volatility
we see it today due to trade war uncertainties, and
despite as we just talked about with Molly, a bounce
back in some housing and certainly job data looking pretty positive,
(08:41):
we do get a big test tomorrow with the expiration
of four and a half trillion dollars worth of options contracts.
So helping make sense of the trade for us here
at Bloomberg is Bloomberg Opinion columnist Connor Sen. He is
founder of Peachtree Creek Investments. He joins us from Atlanta. Hey, Connor,
good to have you back here with Tim and myself.
You know, there are always buyers and sellers in the market, right,
and whether there's more or less of one really kind
(09:03):
of helps develop, you know, or determine the flows, the demand,
the pricing. But I do think about and with the
acknowledgement that there's always buyers and sellers. Is today's market
investable in your view?
Speaker 9 (09:16):
I think so, just that the market we had coming
into the year was very momentum driven a lot of
optimism about the Trump administration, and I think we've seen
over the past month that that momentum has really come
out of the market. The Trump optimism is more mixed,
and so that sort of fast money trade, hot money
trade has really come out of the market, but sort
of a lot of parts of the market are still
not really that concerned about recession, and so basically you're
(09:38):
getting better valuations on stocks than need a month ago
without yet the kind of recession concern that you've gotten
over the past two years. A few times.
Speaker 8 (09:47):
Color, what about the rotation that we're seeing out of
US equities into international equities. I've spoken to two friends.
They're not in finance. They're normal people who are thinking
about their own retirement. They have nothing to do with
investing day to day in the market. But both of
them have said to me, I'm selling US equities and
I'm investing outside of the US. I think that it's
(10:07):
a little turbulent here right now, and I think the
opportunities outside of the US. What do you make of that?
Speaker 9 (10:14):
I think from a narrative standpoint, I get it in
that sort of over the past few years, the US
was seen as the only game in town globally to invest,
and I think that explains a lot of the valuations
you saw in US large cap stocks last year, when
you had Costco at fifty five times earnings and Walmart
at thirty five times earnings. It wasn't just the tech stocks,
so sort of a belief that don't bet against America.
American companies are going to win, and there's no growth
(10:35):
anywhere else in the world. And so I think now
you're seeing, well, you know, there is a need for
capital in Europe and we're seeing the stock market perform
better there. I'm sure globally a lot of investors who
were sort of betting on the US or I feel
kind of just you know, deceived, and so they're looking
to repatriot capital. And at least for now, I get
the story of well, Europe's going to grow faster, the
(10:56):
US is more mixed, So let's rotate money out of
the US to other parts of the world.
Speaker 3 (11:00):
Hey, one of the things I wanted to ask you
here we are Connor one day after the FED and
Tim was kidding or we kid it at the top
of the broadcast, like, don't look at your four oh
one k right now. I, however, did And I am
wondering about you know a column you wrote that gets
into where the stock market goes, the economy will follow.
We have seen a pullback in stock so far, certainly
(11:20):
this year. So based on that, where do you think
the US economy has had in your view? It sounds
like you're not talking about recession, but I am curious
how you kind of tie these together.
Speaker 9 (11:31):
We've had a negative momentum in the US economy, I
would say for about a year. I think the soft
landing ended last spring full employment and the bus spring.
But the acceleration and growth we're seeing is just very,
very slow, and it's not fall off a cliff like
we saw with Lehman Brothers in two thousand and eight
or with COVID, and so I think that's a case
where I don't think we're gonna have recession over the
next six months. For I think housing's already kind of dead,
(11:52):
so it's hard to kill housing again. And AI is
the other risk at economy that I see, and that
seems like more of a twenty twenty six story. With
all the CAPEX spent, what's going to happen this year?
And so I do think that high end consumption growth
could be slower, maybe pretty stagnant this year. But you're
not really seeing signs of growth falling off a table
or the kinds of fragilities that would lead to a
recession at least over the next few months.
Speaker 8 (12:12):
What's the AI risk that you see. I'm here in
San Francisco right now, everybody's talking about Nvidia GtC. We're
going to be hearing from ED in just a few minutes.
What's the AI risk?
Speaker 4 (12:22):
For me?
Speaker 9 (12:22):
It's just sort of the dollars being spent. So if
tens or hundreds of billion of dollars are being spent
on chips and data centers and power generation the utilities,
it's really that going away that would create the recession risk.
And I think just the lead times to cutting spending
on that are more than a few months, a few quarters,
and so it's really companies have committed to spend money
in twenty twenty five, it's really twenty twenty six that
(12:44):
the question mark is, and we're just not going to
know about that for at least six months. So I
think in twenty five maybe markets don't do well, but
the economy probably a stagnation is the worst case scenario
rather than.
Speaker 3 (12:54):
A bad recession, but not stagflation.
Speaker 9 (12:58):
I don't think so. I'm kind of with the that
the tariffs are likely more of a one time impact,
and it might be a significant one time impact, depending
on how sizable they are, but it's just not going
to be a nineteen seventies thing, even a twenty twenty
two thing. It'll just be, you know, some prices went
up for a few months, and then after that one
time price shock, it sort of happened. And that's even
if companies feel like they can pass along those prices,
(13:20):
and that's not clear the moment that they're willing to
do so.
Speaker 3 (13:23):
All right, So I'm going to get a bunch of
hate mail, but I'm only, you know, pigging back on
what fed Jo J. Powell said about tariff's like transitory,
We never get that wrong. Not a hot word here,
but I mean, truly, do you believe that the impact
of tariffs will be transitory even if they stay and
don't go away, or is it only if they stay
don't go away, and there is it more piled on
(13:44):
and we get using regulatory environment and we get tax cuts.
Speaker 9 (13:49):
It kind of depends on the underlying conditions in the economy.
And when Russia invaded Ukraine in early twenty twenty two,
we had a very overheated economy, low interest rates. That
was kind of the perfect dynamic for that inflation to
stick around and be amplified. Right now, you have an
economy where the cyclical parts that are pretty weak. The
hiring last year that was strong was government, healthcare and education.
(14:10):
That looks to week in this year. There's just not
a lot of underlying growth momentum in the economy, so
it's not clear that companies are in a position to
pass longst price increases. So I think it's the economy
is weaker and that's why I think it's more likely
to be transitory.
Speaker 3 (14:22):
Okay, so twenty seconds, don't be worried investors. Is that
your final line?
Speaker 9 (14:28):
I mean, I think you know, if you were super
invested heading into the year, that was probably a mistake.
After this selloff, I think you need sort of more
bad things to happen this year.
Speaker 6 (14:37):
Than just spooks.
Speaker 9 (14:38):
I think the spook move has already happened.
Speaker 3 (14:40):
All right, we're gonna leave with our Hey, Connor, thanks
so much. Glad we could check in with you. Bloomberg
Opinion Columbus Connorson. He's the founder of Peachtree Creek Investments.
Speaker 2 (14:48):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and the Android Auto with the Bloomberg
Business at or watch us live on YouTube.
Speaker 3 (15:02):
Well, some big news in the world of sports, and
no it's not March Madness, although that is also big,
and we'll get to that in just a moment. But
among our most read stories on the Bloomberg terminal at
this hour is a consortium reaching a deal to buy
the NBA's Boston Celtics for six point one billion dollars.
Takeover makes it the biggest NBA deal ever, surpassing the
four billion dollar valuation for the Phoenix Suns back in
(15:24):
late twenty twenty two. So let's talk about this. Joining
us is Bloomberg News US sports business reporter Randall Williams.
He's here in studio along with Bloomberg Originals Chief correspondent
Jason Kelly. Guys, I want to kick it off, Randall,
first talk to us about this deal. A lot of money,
A lot of money.
Speaker 10 (15:41):
It's the most ever paid for a sports franchise. It
edges out Josh Harris's purchase of the Commanders and NBA
owners in the league is happy he got the six billion.
Speaker 3 (15:49):
Uh. Jason is shaking his head. Why are you taking Mead?
Speaker 11 (15:54):
It's unbelievable when you think about the last even during
the period where these guys have owned the Boston Celtics,
they bought it for three hundred and sixty million dollars
correct back in.
Speaker 3 (16:05):
Twenty twenty two and two thousand and two. Forget me, yeah,
two and.
Speaker 11 (16:10):
Two won a couple championships. They put it on the
market for essentially a state planning on the part of
the Grouseback family. You know, I don't know what you heard, Randall.
It wasn't a certainty that they were going to get
to this price, but they did.
Speaker 7 (16:24):
No.
Speaker 10 (16:24):
I mean when they don't own their own stadium, and
you know, the stadium is a big part of this
because basketball in the NBA you fill up the stadium
forty one times a year. But there's three hundred and
sixty five days in a year. You want to fill
that with concerts. You want to fill that with other events, festivals,
and so when you don't own that, you lose out
on revenue. For the Celtics to reach six billion dollars
without owning their own stadium, it sets the precedent for
(16:46):
the NBA expansion owners who are going to be bidding
for this, who will own their stadium. And it's like, oh,
they sold for that without a stadium.
Speaker 3 (16:53):
Oh, I'm good, But that begs the question, why did
they pay so much without the stadium.
Speaker 10 (16:58):
Well, there's a lot of reasons why, I insult, right,
there's a lot of reasons why. But the first thing
I would say is that when you're buying a sports team,
you do want to get to a price. And I
think that for the league and for the Boston Basketball group,
they wanted that six billion, they got it. And there's
someone there's some unhappy people too, like Steve Pagliyuga. He
put out a statement and said, look, we're gonna pay
(17:19):
pat We're gonna excuse me, we're going to pay cash
into this. And he lost and we're seeing that Bill
Chisholms Group, which has Sixth Street and Rob Hale and
Bruce A. Beal Junior from relative companies they won Come.
Speaker 8 (17:32):
On, Jason, Yeah yeah, Jason, does does the deal make
sense to you? I mean somebody who's who's looked at
these valuations for a long time, does it actually pencil
out or is it pretty shocking to you? And look,
we should say something is worth whatever, somebody's going to
pay for it. So obviously it's worth this much, but
it's kind of mind blowing.
Speaker 11 (17:49):
Now it's hard to pencil it out. But then again,
you know Randall and now we're talking about this. Before
he came on air, people thought Steve Balmer was crazy
for paying two billion dollars for the LA Clippers. People
thought Matt Ishbiel was crazy for paying four billion dollars
for the Phoenix Suns and Mercury. People thought these guys
were crazy for paying three hundred and sixty million dollars,
(18:10):
you know, twenty some eighty years ago. So you're exactly right.
I think one thing that to build on what Randall
was saying. The other real interesting thing about this is
this is an expensive team, right. They have a very
high pay roll, and this is not the sort of
cash machine that maybe people would think it is right.
Speaker 10 (18:28):
And I'd say, going back to your point about you
know how crazy it is. You look crazy in the
moment buying any sports franchise, But as long as valuations
look good, you look like the wise guy in due time.
So as long as these valuations keep rising in the
NBA has a new media deal, everybody looks smart. On
the Celtics side, no stadium ownership, and you have a
lot of money to pay out to players, So they
have to definitely go back to the drawing board and
(18:50):
go back to their books and figure out like how
do we make this work long term?
Speaker 8 (18:54):
But Randall, as we were talking about it, it wasn't
just the biggest NBA deal in history. It's the biggest
sports franchise deal in history. So you got the Washington
Commanders last year for six billion, Manchester United last year
for five point four billion, the Broncos for four point
six billion back in twenty twenty two. It's football, it's soccer,
it's basketball. What's going on here, redl Is it just
(19:14):
supply and demand?
Speaker 3 (19:16):
It's a little bit of both.
Speaker 10 (19:17):
I mean you're seeing in the influx of private equity
in these deals, and so with these franchises rising as
quickly as they are, the number of people who are
able to buy these teams outright is diminishing. It's just
getting so much smaller. That's why you see Sixth Street
in this deal having a billion dollars to offer up
and help pay for this. With that in mind, if
(19:38):
private equity is going to pay a billion dollars for
this six billion dollar team, then even the number of
limited partners from individual people is going to be small
as well. So it all depends on how you're forming
your ownership group, whether you want private equity, whether you
want people.
Speaker 3 (19:54):
It just really depends.
Speaker 10 (19:55):
But private equity is a silent partner in this.
Speaker 3 (19:57):
All right, well, lent Man, Whenever we talk about these
big deals, we could go on forever because it's always
fascinating in the amount of money and the buyers continue
to pay up. Radel, thank you so much. We'll look
for more of your coverage on the ruer. Randall Williams,
US sports business reporter here at Bloomberg News. We're going
to stay with sports because didn't know, or maybe did
you notice, that March Madness is underway. Welten, Kelly, listen.
(20:20):
We do our own version here at Bloomberg and it's
now hitting what it's tenth anniversary, So tenth anniversary. This
is called Brackets for a Cause.
Speaker 11 (20:27):
This is something I've been really excited to be a
part of along with our chairman Numeritis Peter Grauer. For
the last ten years, we've raised six million dollars. More
than six million dollars so far, setting a new record.
In this year's contest, sixty one participants pledging twenty thousand dollars.
I'm not as good at math as you are, Carol
Masser and Tim Cenovic, but that's one point two million
(20:48):
dollars plus a purse. It's going to be split among
some really good charities. We couldn't be more excited.
Speaker 8 (20:55):
All right, who's playing this year? I did not do
my bracket yet, by the way, which means I can't
do it because the games have started. Yeah, come on, man,
it's twenty twenty six for me.
Speaker 3 (21:04):
Yeah. Who did get there?
Speaker 8 (21:06):
Who did get there?
Speaker 3 (21:07):
Together?
Speaker 7 (21:07):
Though?
Speaker 11 (21:07):
This year, some really good names, some names very familiar
to the Bloomberg BusinessWeek audience. We're talking about John Gray,
We're talking about David Solomon, John Gray, of course, President
Blackstone David Solomon, the CEO of Goldman Sachs. Jenny Johnson,
she is of course running Templeton. Carolyn Tish Blodgett. She
is an owner of her family of the New York
Football Giants as well as the controlling owner of Gotham FC.
Speaker 3 (21:30):
Katie Cootch of TCW Yes.
Speaker 11 (21:32):
Katie Kotch John Winkle read from TPG. So it is
a murderer's row.
Speaker 3 (21:38):
Most of these guys are who's been there from like
day one.
Speaker 11 (21:41):
So Gary Cone has been there from day one. He
won the very first contest. Of course, now the vice
chairman of IBM, former president of Goldman Sachs. We actually
got some of the champions together for a dinner a
few weeks ago and Gary was there. Of course, he
served in the first Trump administration. He's been just ride
or die for this for a long time. John Gray
has been with this pretty much since the beginning as well.
(22:02):
He won a couple of years ago. These people show up,
they get very excited, and you know Cliff Asnist, Dwight Anderson,
like lots of names.
Speaker 3 (22:10):
Bill Ackman, I always kid you when I used to
sit next to you, and it would be like Jason
would come in the morning and they would be like
messaging him like did you see what?
Speaker 5 (22:16):
Like how I?
Speaker 11 (22:16):
Well I did, and I mean, honestly, this will come again.
Is no surprise these guys, these men and women very competitive.
I'll get emails all weekend about you know, where they are,
and they're gaming it out, especially as it gets towards
the finals. And keep in mind we're looking at the
men's bracket and the women's bracket. It's split evenly between
the two. So six hundred thousand will go for the men's,
six hundred thousand will go for the women's.
Speaker 8 (22:38):
Yeah, Jason, I can still do my women's bracket right.
Speaker 11 (22:42):
Yes, you should be able to do your bracket on
the terminal. Yes, yeah, jeets.
Speaker 8 (22:45):
Until tomorrow at eleven thirty, so that one is still open.
Speaker 11 (22:48):
Yeah, get in there, Get in there, Tim Sten.
Speaker 3 (22:51):
He go on the Bloomberg terminal. You know it will
never get Tim on Jason's feet are bracket sneakers. Yes,
we will never get them our limited edition we needed
edition sneakers. Bracket sneakers.
Speaker 11 (23:03):
I'm gonna you can take a picture and put them
out on your social well.
Speaker 3 (23:07):
Yeah, Jason, I know what size is your shoe?
Speaker 8 (23:11):
Jason, maybe you can share?
Speaker 11 (23:13):
Yeah, no, not for sharing. Tim, All right, have fun
in San Franciscoy.
Speaker 3 (23:18):
Jason Kelly, thank you so much.
Speaker 2 (23:21):
This is the Bloomberg Business Week podcast. Listen live each
weekday starting at two pm Eastern on Apple Car Play
and Android Auto with the Bloomberg Business App. You can
also listen live on Amazon Alexa from our flagship New
York station, Just say Alexa Play Bloomberg eleven thirty.
Speaker 3 (23:39):
Do we want to talk a little bit about cars.
Gotta say one of the best known global auto brands.
Great read on the global auto economy and the luxury
global consumer. We're talking about Mercedes Benz and our Hannah
Elliott recently catching up with the company's CEO for more
on wear and why because there was a hilltop villa
involved and we want to know the details. Hannah, of course,
is Bloomberg Pursued Autocolumnists. She's also co host of the
(24:02):
Hot Pursuit podcast that she does with Matt Miller. You
can find that at Bloomberg dot Com or wherever you
get your podcast. Hannah, so good to check in with
you. You are on the West Coast, as you often are.
You're in Irvine, California today at Karma Automotive, the headquarters.
First of all, let's start there. Where are you? Why
are you? Who are they?
Speaker 7 (24:24):
Well, it's a funny thing. You should bring it up.
I can't actually tell you too much because I'm embargo.
But okay, the good news is I am at the
headquarters of Karma Automotive and they are bringing forth a
new vehicle that should be hitting the streets in twenty
twenty six. So I can't say much more than that.
It's going to be electric, of course, And of course
(24:45):
we remember Karma they had There was a Karma Fisker.
There have been multiple iterations of this company. They've struggled,
but they're going to They're going to fight again. So
I'm here to report about it.
Speaker 8 (24:58):
Can they Well, okay, I was gonna ask ask you
more questions. I'm so scared of Yeah, I'm so scared.
I'm so scared.
Speaker 7 (25:05):
I'll tell you if I can answer or not. I mean,
it's fascinating.
Speaker 8 (25:08):
Well, okay, but before we get to Mercedes, I do
you want to It's really really hard for an American
car company to start and pull this off. I mean,
look at Tesla, look at Rivian. Yes, but the road
of you know of that is paved with like the
bodies of so many car companies.
Speaker 3 (25:24):
Can they pull it off?
Speaker 7 (25:26):
I don't know. It's going to take a lot of money.
It's going to take a lot of money. And at
this point, and this is a great segue into Mercedes,
I don't know if they can catch up enough in
the technology world to compete with Mercedes. And I say
that having just driven the third generation Carma Rivero from
(25:46):
La down here, and the technology is moving so fast
these days for a small startup to now compete with Mercedes,
and I've just spent a week in Rome with Mercedes
with their new CLA said Anne, It's going to be
extremely difficult. And one thing I always said about the
startups were, you know, the big OEMs did not produce
(26:09):
electric cars at first because they didn't have to. It
didn't mean they couldn't, It just means they didn't have to. Now,
as OEMs realized, they're going to have to and they
need to to offer options for everybody, the market is
even more competitive. So I don't know, it's really a
tough challenge.
Speaker 3 (26:30):
Kind it feels like I don't know. Is just so
you know the word of the era right now, because
there's just so much coming out people. I want to
ask you about your conversation. I mean, take us to
the hilltop villa and what you saw, but who you
talked to. And I am curious about the global environment,
the global business environment, especially with you know, tariffs coming
(26:50):
out of the United States, global supply chains being maybe
potentially rethought. What did you have to say?
Speaker 7 (26:57):
So I spoke with Ola Collinius, who is the chief
executive officer and chairman of Mercedes Benz Group. This is
the guy where the buck stops. And he also is
saying he doesn't know the future. This is a common
thread that we've seen. When I ask him about tariffs,
when I ask him about China, when I ask him
about EV sales in the US, he is very open
(27:19):
saying nobody knows the future. What is important is to
be very quick and to be very flexible. And so
Mercedes is working to speed up everything and to be
incredibly flexible so they can pivot and turn if they
need to to satisfy the market. What they're hearing and
what the CLA sedan really provides is that some people
(27:41):
do want evs, but a lot of people still want
a combustion option. So this CLA sedan is really interesting
because it's very affordable. It should be around fifty thousand euros.
US prizing hasn't been announced, but for Mercedes that's considered
entry level. But it also is very advanced and it
will be offered in a hybrid version in the US
(28:02):
next year. So it's debuting as an electric vehicle, but
there will be a hybrid version coming next year. Again,
it's all about options, and it's also about going against Tesla,
the kind of original startup that made good. This is
this is Mercedes now going directly to Tesla.
Speaker 8 (28:20):
Well, speaking of that, Tesla is at least in the
ones that are sold in the US are made in
the US. Concern about and closely aligned now with President Trump,
with Elon Musk, how closely aligned he is. What is
the concern that Mercedes has about tariffs? About President Trump
given the comments that he's made about German car companies.
Speaker 7 (28:37):
It's a huge, huge concern. I asked Ola about it.
He used the word reciprocity. He of course is following
very closely, but he really made the point that Mercedes
has been in the US for decades. They've got two
factories in the US. They are one of the nation's
largest exporters, and he really emphasized, we feel a mare American.
(29:00):
We're part of the American fabric. We hope there's a
sense of reciprocity as we're talking about these tariffs.
Speaker 3 (29:06):
All right, great stuff as always, So glad we could
check in with you. Hannah. Thank you, thank you, Thank you.
Hannah Elliott. She is Bloomberg Pursuit's auto columnist out there
in Irvine, California. Highly recommend you check out her story.
It's on the Bloomberg and at Bloomberg dot com. You
and find out a little bit more too, about the
cla from the Mercedes from Mercedes, I should say, and
her experience doing a test drive.
Speaker 2 (29:28):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five pm Eastern Listen
on Applecarplay and the Android Auto with the Bloomberg Business app,
or watch us live on YouTube. Well, the NASTAC one
hundred is in correction. It's down about eleven percent from
its January highs. The S and P five hundred, Carol,
(29:48):
it's down by eight percent. Look, corrections happen, stocks go down.
Yet the volatility that we're seeing right now stemming from
a back and forth trade war, uncertainty over future economic conditions.
That's something Carol, that investors in this market may.
Speaker 3 (30:02):
Not be used to, that's for sure. And the question
that Peter Atwater has for investors is do they stay
buckled in in the passenger seat with President Trump behind
the wheel or do they chump from the car. It
is great to have back with us on Bloomberg Business
Swee Peter Atwater. He's President of Financial Insights and adjunct
Professor of Economics at William and Mary. He's also author
of the twenty twenty three book The Confidence mapp, charting
(30:24):
a path from chaos to Clarity. He also coined the
term K shaped recovery. He joins us from Williamsburg, Virginia. Peter,
so glued to be talking with you again. I feel
like I'm not even quite sure where to start because
there's so much coming at us. The volatility, you know,
you get into investors feeling vulnerable, uncertain, powerless sentiment is
(30:48):
a big factor. I don't know this market environment like
where do we go from here? Do we even know?
Bill Dudley of the New York Fed said, you know,
really that the Fed doesn't even really kind to know
where to go next.
Speaker 6 (31:02):
Yeah, we never really know where to go.
Speaker 12 (31:05):
But what's so interesting to meet about where we are
today is that there has been this huge mind shift
from inauguration day to today. So coming into inauguration, people
were fantasizing wildly about where the markets were going, where
the new administration was going to take the economy in
(31:26):
the markets, And since then investors have had to come
to grips with the fact that there is without question
a shift in behavior out of Washington where President Trump
is behind the wheel. And so investors are used to
being in the passenger seat with specific companies with you know,
(31:50):
next to CEOs.
Speaker 6 (31:52):
For good and for ill.
Speaker 12 (31:54):
But now they're having to look at their entire portfolio
and decide are the investment I'm involved in going to
be beneficiaries of the new administration or victims of them.
Speaker 8 (32:07):
It's just so interesting to hear this because I think
there's this narrative that emerged following the first Trump administration
that this is a guy who looks to the Dow
in the s and P five hundred as a scorecard,
as a sort of report card, and indeed, during his
first administration he touted numbers there. Yet we've heard a
(32:29):
different narrative emerge this time, Peter. Do you buy it
that he's not paying attention to the stock market.
Speaker 12 (32:38):
One of the things we know about President Trump is
he loves to cite metrics that work in his favor.
So I'm not surprised with the markets dropping that he's
looking for alternative measures of consumer and satisfaction in the economy.
Speaker 6 (32:56):
But I think at the end of the day, what
he is trying.
Speaker 12 (33:00):
To demonstrate, more than anything else is that he and
he alone is going to dictate economic policy, American diplomatic policy,
and that everyone else needs to come to grips with that.
Speaker 3 (33:20):
But is there a point like, yeah, No, It's interesting, Peter,
because how many conversations I've had with folks and they're like, oh,
you know how this is going to play out. It's
just like you know, you reported on at the first
go round, and it feels so different, and I think
so many people are realizing this is different this time around.
Having said that, is there a point a breaking point
(33:42):
where the team around the president somehow has a bigger
say like they did in the first administration, because right
now it does feel like absolutely, like you lay it out,
the president's in the driver's seat and everyone is there
in the back seat to back them up.
Speaker 6 (34:00):
Yeah.
Speaker 12 (34:00):
One of the things that I say to my students
is falling confidence individuals grow spines. And so what we're
likely to see is that should the markets continue to drop,
should consumer confidence continue to fall, those around him will
feel compelled to react. Whether that's sufficient or not, we
(34:23):
don't know. And to be fair, Carol, there are a
number of organizations and individuals who feel wildly empowered now,
and so we're in this interesting moment where individuals and
organizations are having to decide in which camp do they
(34:44):
expect to fall because one of the things we see
with dominant leaders such as Trump is there are clear
benefits and there are also clear punishment.
Speaker 8 (35:00):
Well, how do you advise people to weather this storm
if you indeed think it is a storm? Because there
are a lot of people we talk to Peter who say, okay,
wait a second, once he gets tax cuts figured out,
once we get to April, and there's more clarity when
it comes to trade, things will become less valid ale
what do you say to that?
Speaker 12 (35:21):
So I think that investors have to be thinking, I
say a lot. You know, plan for what you can imagine,
but be prepared for what you can't. In this environment,
investors and corporate executives need to have two playbooks at once.
(35:46):
One is in anticipation of things going in their favor,
but also a very clear playbook for if this goes
against me, what do I do? What is my what
are my preparations planned ahead in anticipation of that?
Speaker 6 (36:03):
Because the outcome.
Speaker 12 (36:04):
Here is going to be very binary. And that's what
we see over and over is that when you create
beneficiaries and victims, the vulnerability that comes from the victims
sets things in motion. We're seeing that in Europe right now,
where the geopolitical vulnerability has leaders on edge and they're
(36:25):
mobilizing in response.
Speaker 8 (36:27):
I'm going to ask you something crazy, Peter. Is one
of the outcomes here on an investor perspective, that the
US becomes uninvestable.
Speaker 12 (36:36):
In your view, I think that is a clear possibility.
I think that investors have to be made comfortable that
the United States is interested in foreign capital, in retaining
domestic capital and appreciate tim If you look at labor,
(37:02):
goods and capital, we're seeing We've already seen restrictions and
walls go up on the immigration front, We're seeing tariffs
creating friction in terms of the mobility of goods. It
is to me only a question of time when capital
(37:23):
falls into that same playing field where public policy begins
to intervene, and not just in the United States, but
globally in terms of wanting it, not wanting it, courting it,
pushing it away. Those are completely in sync with what
we're seeing with labor and goods.
Speaker 3 (37:45):
All right, So playing this out, Peter, what kind of
economy then is the US economy? How different might it become?
Speaker 12 (37:55):
I think one of the things that is so unusual
about where we are is that we were coming off
of extraordinary in vulnerability, invincibility, particularly in tech and so
this to me is a very different setup than we
saw in twenty sixteen in the valuations and the economic
(38:20):
growth may already be peaking, may already have peaked, and
so the administration i think needs to be very sensitive
to the risk that they're pouring water on a fire
that was already poised to go out.
Speaker 2 (38:36):
Peter.
Speaker 3 (38:36):
One thing I do think about too, and I think
we talk about it is God. It always happens whenever
there's a new administration. Okay, in two years we have,
or less than two years we've mid terms, in another
four years we have another presidential election, or less than
four years. Is the world though, moving on in many ways?
Because it just feels like no matter what changes politically again,
(38:59):
it just can't count the US like it has.
Speaker 12 (39:03):
Yeah, I think that trust, when broken, is incredibly difficult
to rebuild. And as I talk to folks from Europe,
it is unquestionable that they feel that trust of the
United States has been broken. And so the likelihood that
(39:24):
the midterms or even the twenty twenty eight election for
your will bring back what has been isn't the case.
Extreme vulnerability changes us and we will not endure it again.
And as I look at what we're seeing, particularly in
Europe right now, they are poised to make sure that
(39:46):
the vulnerability they've just experienced doesn't come back to bite them.
Speaker 3 (39:49):
All right, So just to stress again because Tim asked about,
you know, is the US, you know, not really a
market you want to invest in? Then perhaps in the future,
what's your advice to investors. I mean, we've seen Europe
certainly outperform. It came from a lower base and valuations
were different. Just got about thirty seconds. Should investors be
looking in Europe or elsewhere?
Speaker 12 (40:11):
I think investors have to be more diversified globally than
they are. Most American investors are far too concentrated in
the US right now to begin with. But I think
that the administration needs to demonstrate that as a place
to put capital, America remains the preferred choice globally, and
(40:36):
that is now I think very much in question.
Speaker 3 (40:40):
All right, Peter, we got to run. Thank you so much.
But another really big thing conversation, so important to the
environment today, Peter, Thank you again. Peter Atwater, President of
Financial Insights, adjunct professor over at William and Mary of Economics,
and author of the book The Confidence. Matt ro'out you
(41:01):
let me drive.
Speaker 2 (41:02):
Oh no, no, no, no, this is not a toy.
Speaker 3 (41:06):
Alright, please gravel, I want to drive.
Speaker 6 (41:10):
It's a good question.
Speaker 3 (41:17):
This is the drive to the clothes.
Speaker 2 (41:20):
Plus communic Well juled it on on Bloomberg Radio.
Speaker 8 (41:25):
All right, look at that. We got less than twenty minutes.
Do you all into the close of US trading here
in San Francisco. Carol Masser is in New York. That's
where the equity markets are, at least for now, until
everything moves to Texas.
Speaker 3 (41:38):
Carrol, Right, it isn't amazing.
Speaker 8 (41:41):
Yeah, I know we're talking about the Nasdaq. Was it
the Nasdaq this week that said they might be opening
up a little shop in Texas?
Speaker 6 (41:49):
Everything? Everything's going to Texas?
Speaker 8 (41:52):
Yeah, it is. Hey, let's stay in California though, and
talk to Paisley Nardini, portfolio manager at the Simplify Asset Management.
They've got about even billion dollars in assets under management.
Paisley joins us from Newport Beach, California, where I imagine
it is sunny and warm, like it is every single day.
Speaker 3 (42:09):
Paisley.
Speaker 8 (42:10):
Good to have you with us this afternoon. We're looking
at a market right now that earlier in the day
was searching for direction, but now solidly in the red,
down the S and P five hundred by about three
tenths of one percent. We just spoke to Peter Atwater
all about the uncertainty playing out right now. What are
you hearing from clients given the uncertainty in the environment.
Speaker 6 (42:32):
Yeah, well, thanks for having me exciting day.
Speaker 1 (42:34):
It's opening day of March Madness as well, so I'm
sure many people are multitasking as they're listening in and
looking at their brackets. But I would concur with what
Peter had shared around market uncertainty.
Speaker 6 (42:46):
I mean, coming into.
Speaker 1 (42:47):
This year, one of my kind of theories is around
this chaos theory. And really what this means is a
dynamic balance between order and disorder, and how.
Speaker 6 (42:56):
Does this relate to markets.
Speaker 1 (42:58):
Well, it means that small change can have these disproportionate
large effects, which ultimately just provides a greater backdrop of
uncertainty and risk. I think the positive note coming out
of that, though, is that there is also opportunity where
there is uncertainty. So as we're chatting with clients, as
we're hearing concerns, I think for the most part, although
(43:20):
markets have entered an official correction or they had, it
seems like we may have found a floor.
Speaker 6 (43:27):
How can clients think about navigating this?
Speaker 1 (43:29):
I mean, we've seen so much interest as clients are
looking for diversifiers.
Speaker 6 (43:33):
It's really been.
Speaker 1 (43:34):
The thorn and the side of a balanced portfolio for
the last decade or so. So it's really healthy to
see some of these tides shifting, and I think a
lot of what we've seen year to date so far
has been more of a rotation trade than an all
out recession flag.
Speaker 6 (43:48):
I mean, if we were expecting a recession, I think.
Speaker 1 (43:50):
We would see the ten year break below this kind
of arbitrary kind of floor of four and a quarter.
We're kind of hovering around that for whatever reas and
markets don't want to break below that.
Speaker 6 (44:03):
Even today, as we talk.
Speaker 1 (44:04):
About being in the red here at the close, not
all areas of the equity market are in the red.
I think we've seen again this rotation into international markets.
Speaker 6 (44:13):
We've seen a rotation into.
Speaker 1 (44:14):
More outside the top five or seven names in the
S and P five hundred. So as we're looking out,
I think we're going to continue to see more of
this uncertainty, which provides a backdrop of risk. But if
clients are prepared and they have their portfolios positioned to
whether this uncertainty take advantage of these opportunities through diversifiers
(44:35):
and alternatives. I think people are kind of looking out
and maybe optimistic of what the next couple months can provide.
Speaker 3 (44:41):
How are you thinking about the factor that is the
president of the United States and the policies and as
we just talked with Peter.
Speaker 6 (44:48):
At order, his.
Speaker 3 (44:52):
Seeming to not kind of care about the equity markets,
which everybody was so certain he would, and the policies
that are being put in place, be it geopolitically tariffs,
you know, alienating allies. You know, whether or not this
is a significant shift, certainly as a shift from what
we've seen from past presidents in terms of policy, But
(45:13):
is it something that is much more lasting that makes
the US economy a very different economy and the US
investment market a very different market. Are you having those
kinds of conversations in and around the office our clients
wondering whether you know, what is the US market that
they've known for so long? Is it different going forward?
Speaker 6 (45:34):
Yeah?
Speaker 1 (45:35):
Absolutely so, I would say, first and foremost, when we
when we found out Trump was going to be the
president again, markets became euphoric. We were focused on deregulation,
we were focused on tax cuts. We saw a massive
spike and small business optimism. Consumers were excited, and I
think we had too much euphoria. We weren't We weren't
really looking through the noise at the time, And so now.
Speaker 6 (45:58):
What we're faced with is this.
Speaker 1 (46:00):
This kind of negative kickoff to the year, and really
this focus on tariffs and the implications of that.
Speaker 6 (46:06):
I think that's going to be short lived.
Speaker 1 (46:07):
I think tariffs are really being seen as a negotiation tactic,
and as we all know, whether you love him or
hate him, wonderful negotiator, able to kind of pull strings
get what he wants. And so I think as we
look out, really Trump's focused on how to get what
he wants out of this, and the tariffs, of course,
are just noise in the interim, and so as we're
(46:29):
speaking with clients, I think coming into this year, a
lot of that euphoria was quickly kind of eroded, and
I think that's what we're experiencing right now with just
the digestion of what this uncertainty.
Speaker 6 (46:40):
And this noise might mean.
Speaker 1 (46:42):
I think as it relates to the administration, they've also
been quite explicit that they're not concerned about the stock market.
At the end of the day, stock market drives a
lot of activity in the economy and vice versa. So
I think that's maybe just kind of a narrative that
they're putting out there. But I do think we need
to take that at face value, because we haven't really
seen kind of the administration or politicians jump in to
(47:05):
put kind of a put.
Speaker 6 (47:06):
Or a floor on the markets.
Speaker 1 (47:08):
And I think that's a divergence than what we've seen
in the past. I think historically we've seen, you know,
whether it was not the President explicitly, but a lot
of people in power and even at the FED coming
through and ensuring the markets that everything was going to
be fine. And as Scott Bessent shared last week or
the week prior, we're in a detox period, and I
think it's rare to actually hear them come out and
(47:29):
say that, because they're essentially alerting us all that we
should be prepared for volatility. And so as we focus
on what it may look like as markets detox, we're
focused on diversification as a response to how to get
through that.
Speaker 8 (47:44):
Okay, well that's where I want to go, Paisley, because
you're also your portfolio manager and asset allocation strategists, So
how are you diversifying client portfolios right now? And look,
I know one size doesn't fit all and eighty year
old's not going to have the same portfolio as a
forty year old, but in general, what could you say.
Speaker 1 (47:59):
Yeah, in general say, we're really focused on unique sources
of risk and return. We're looking at, you know, from
a correlation perspective, asset classes or strategies that are not
going to move in tandem as.
Speaker 6 (48:11):
Or if equities sell off.
Speaker 1 (48:12):
And I think with that backdrop as well, investors has
become really comfortable over the last ten to fifteen years
that all you need in a portfolio of stocks.
Speaker 6 (48:20):
And bonds, Bonds have been that ballast.
Speaker 1 (48:23):
Bonds show up for your portfolio when we see equity volatility,
and really since mid twenty twenty two, bonds haven't been
that ballast.
Speaker 6 (48:30):
We've seen a bit of a rally year to date.
I think there's a little bit of kind of short lived.
Speaker 1 (48:34):
Are we going to see rates continue to rally as
equities sell off? Perhaps not, just given kind of where
we are from a deficit perspective, there's obviously some pressure
on rates also just given inflation. So how can investors
think beyond just the stock bond portfolio?
Speaker 6 (48:49):
And a command I.
Speaker 1 (48:49):
Had shared last week is really thinking beyond like what
we call this two legged stool and really thinking about
incorporating that third leg of the stool for stability, and
that third leg is all alternative, its diversifiers. So whether
we're talking about commodities, obviously we've seen significant tailwinds you're
to date in gold just given the uncertainty, but we
think there's a broader opportunity in commodities beyond just gold,
(49:13):
and especially if you're a dynamic in your commodity allocations,
being able to go long and short. Beyond commodities, we're
also looking at divergence and policy. Got it from interest rates,
which might support currencies as well.
Speaker 3 (49:28):
Got to run, Paisley, Thank you so much. Paisley Nardini,
portfolio manager at Simplify Asset Management, joining us there from
Newport Beach, California.
Speaker 2 (49:36):
This is the Bloomberg Business Week podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on Bloomberg dot Com,
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and always on the Bloomberg terminal.
Speaker 12 (50:01):
I say idea, how a bo
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