June 6, 2025 • 24 mins
Watch Alix and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Alix Steel
Steven Blitz, Chief US Economist at TS Lombard, discusses the May jobs report. US job growth moderated in May, with nonfarm payrolls increasing 139,000, and prior months' figures revised lower, indicating employers' caution about growth prospects.
Max Chafkin, Bloomberg Businessweek Senior Reporter and and Co-Host of the Elon Inc Podcast, discusses the feud between Elon Musk and President Donald Trump. Elon Musk and Donald Trump's alliance ended in a public spat, with Musk eventually backing down after Tesla's stock price tanked and his net worth crumbled by $34 billion.
Janet Lorin, Bloomberg Higher Education Finance Reporter, discusses the latest news at Harvard University. A US District Judge has granted Harvard University a temporary restraining order, blocking the Trump administration's ban on international students entering the US
Poonam Goyal, Senior U.S. E-Commerce and Retail Analyst at Bloomberg Intelligence, discusses Lululmon earnings. Lululemon Athletica posted a second straight disappointing quarter, with projected sales and profit below analyst estimates, causing its shares to tumble as much as 21% in premarket trading.
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Speaker 1 (00:02):
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Speaker 2 (00:23):
Let's get to this job's number.
Speaker 3 (00:25):
I mean better than expected, as John pointed out, again, weaker.
Speaker 2 (00:29):
From last period.
Speaker 3 (00:30):
Let's see what the world of the economists are thinking
about this. So Steve Blitz, chief US economist at TS Lombard. Hey, Steve,
what was your takeaway from kind of the various.
Speaker 2 (00:40):
Parts of this job's report today?
Speaker 4 (00:44):
Yeah, you know, I actually find the market reaction a
bit perplexing because when you look at a lot of
the pieces inside of it, it really shows a weakening
job more trempening one. Right, all the job games really
were in restaurants and healthcare services. The rest of it
(01:06):
was added up to pretty much of a flat number.
A good part of the decline was an employment look
at the households survey was in the sixteen to twenty
four year old, so people who are parents who are
fretting about their children not being able to find jobs,
they're right, it is a bad market for them. But
(01:30):
when I look at a lot of the different things
that diffusion index and stuff like that, I see it
in number that reflects a lot of what ADP was saying.
Even though obviously ADP is typical the number, it's very
off from the reactual number, but it's a weakening trend,
especially against the backdrop of the Bays report.
Speaker 5 (01:52):
Right then you have President Trump saying basically Defedcha J.
Powell on social media, saying the Fed's got to go
for a full perconercentage point rocket fuel. Is this an
economy that needs one hundred basis point worth of cuts
and rocket fuel?
Speaker 4 (02:08):
Well, first of all, you know, a real estate guy
wanting lower interest rates is neither neither news nor novel. Right, So,
but I think there, you know, the fans betwixt and
between a tough spot here, right, because inflation is higher is.
Speaker 6 (02:29):
Running if you look at it from an on a
rolling three month basis, we're still stuck in this too,
and af three percent range on core PC inflation where
it was under two percent you know pre COVID.
Speaker 4 (02:40):
So we're still higher. Yet we're seeing lower hiring rates
and things like that and the fans leaning on the
inflation side. Everything that president is doing, all of his
policies are inflationary, not deflationary. And you know how all
of effect has a whole right, So I think that
(03:02):
you know, he knows he's got of a job. In
May's we're into legacy building on his part. And Trump
said a few months ago, though you know it changes
every day with him, but he said, no pay, no
gain on the tariff side. So it's a tough spot
for them. I think though, the we're going to get
(03:24):
a doubsh sentiment coming out of the June meeting, and
I think the chances of a July hike, well, I'm
not I certainly don't think they're gonna cut, not hike.
I don't think they're going to cut in July, but
I think the odds are closely to fifty to fifty
than what the market is priced in.
Speaker 3 (03:41):
Steve, is this economy, I mean, how do you think
this economy is going to perform in the back half
of this year?
Speaker 2 (03:46):
Here?
Speaker 3 (03:46):
Is it a time when maybe some of these tariffs
are going to catch up and we will see a
market slow down?
Speaker 4 (03:54):
Yeah, because there's a couple of things here that you know,
we're in a bit of a sweet spot. And and
I look to the third quarter one, firms are just
beginning to find out how much of this of these
tariffs they can pass through to the final price, right.
I mean, we saw the surge of buying, so they've
got a lot of stuff in inventory pre tariff. They're
(04:17):
going to sell it tariff plus their markup. What can
they get through, how much can they get out? And
then once they know that, then there's gonna be a
payroll question, do we now have too many people that
have to shrink my firm whatever, We're gonna find that
out in the next few months. At the same time,
(04:38):
you're getting the debt sealing is going to get lifted
in July either as part of the budget or is
it one off, and then it'll be part of the
budget later a few months later. And that means that
we've got to return to treasury borrowing a treasury borrowing
plus because they're going to borrow for the deficit and
Q three and then they're gonna also have to borrow
to put money back in the in the savings account,
(05:01):
and that's going to put up with pressure on yields
at a time when you don't really have a lot
of sponsorship for the ten year, so it really is
a going to get pushed up. And also what I
found is that there's a tailwind to the economy when
you have a debt ceiling in place, because Treasury is
spending money, they're not raising and you get the reverse
(05:22):
of that in the third quarter. So there's a lot
of things coming in Q three that are more likely
to slow growth than speed it up. And so what
the Fed does in reaction to that, we'll have to see.
Speaker 5 (05:36):
All right, Chuck, Sorry, I Chuck, We're going to speak
to Chuck.
Speaker 7 (05:39):
Just kidding.
Speaker 5 (05:40):
Thanks at We really appreciate it. Steve, Steve Blitz joining
us from ts Lombard. Thank you for breaking down that
jobs number four.
Speaker 1 (05:48):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Apple, Cock Play and
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wherever you get your podcasts, or watch us live on YouTube.
Speaker 5 (06:02):
I feel like yesterday we'll go down in the analogs
of history is where were you when dot dot dot?
The tweet fight between President Trump and Elon Musk. Arguably
two of the most important people in the entire world
started on social media and then erupted overnight into full
public display. Elon Musk Donald Trump's alliance just ended with
that public spat. Now, the latest read is that Musk
(06:26):
has backed down after Tesla's stock price just tanked his
networth crumbled thirty four billion dollars. Matt max Chafkin is
Bloomberger Business Week senior reporter and the co host of
the Elon Inc. Podcast. He joins us, now, who has
the upper hand here? Quote unquote who won?
Speaker 8 (06:42):
Donald Trump has the upper hand here? He's the President
of the United States. He controls a lot of aspects
of Elon Musk's businesses. He also is the more important
cultural figure. The fandom around Donald Trump. You know, as
popular as Elon Musk is, the fandom around Donald Trump
is much more intent and he's much more influential.
Speaker 2 (07:02):
That said, nobody's one yet.
Speaker 8 (07:04):
I mean, this has been just disastrous for Elon Musk,
especially not ideal for Donald Trump. You know, I think
he'd prefer to just have the big, beautiful bill, his
his tax bill, the extension of the tax cuts, which
with a bunch of other stuff swirled in just sail
through the Senate rather than have this very influential, very loud,
(07:26):
rich guy, you know, banging on on Twitter or suggesting
he should be impeached and so on. So so I'm
not sure there are any winners. I will say I
was shocked by this because and I wrote a piece
a week ago basically saying, you know, for all the
talk of a breakup, you shouldn't bet on it, because
there are so many reasons why these two guys need
each other. And of course that's looking like not the
(07:47):
right take on this. And and you know, it just
seems like Elon Musk at his most erratic, most self destructive,
you know, taking the opportunity he had the chance to
exit the White House, you know, gracefully maintain his contact,
his influence with Trump, while also keeping investors happy by
by by spending more time with his companies.
Speaker 2 (08:09):
And that all feels like it's out the window.
Speaker 8 (08:11):
He's not spending time with his companies, he's spending time
on Twitter.
Speaker 2 (08:14):
You know.
Speaker 8 (08:15):
Obviously, investors not going to be thrilled with the stock price.
I think they're hoping, against hope that he somehow backs
down and they are able to resolve this.
Speaker 3 (08:23):
My personally, I saw this day coming the first day
they got together, said this is exactly how it's going
to end. This is how it always ends when someone
gets closest to President Trump, either in his political life
or in his personal life. That's been well documented. Didn't
Elon what was Elon's thinking? Didn't Elon know it had
to end this way?
Speaker 8 (08:42):
You know, Elon Musk is not a man renowned for humility, right.
Speaker 2 (08:46):
This is a guy whose.
Speaker 8 (08:47):
Whole thing is doing more than anyone can do. I
think the big surprise here for Elon Musk was that
he wasn't able to control Donald Trump in the way
that I think he imagined. And you see that come
out that in that very surreal Oval Office meeting with
Friedrich Murz yesterday where Trump is talking about ev tax credits,
(09:11):
he's talking about the ways in which he wasn't delivering
for Elon Musk.
Speaker 2 (09:15):
And I think ultimately that is a big part of this.
Of course, there's also ego.
Speaker 8 (09:20):
You know that there is the you know, like kind
of what you're alluding to here, Paul, the two alpha
guys who can't handle, you know, playing second fiddle, And
I think that's that's another factor.
Speaker 5 (09:32):
What on the other on the flip side, though, one
can make the argument that the US government really does
need Elon Musk when it comes to SpaceX.
Speaker 2 (09:38):
Absolutely without that.
Speaker 5 (09:40):
I mean, I realized that Musk is back down on
his threats to pull space SpaceX in the government. But
how important is that to our government? What does it
mean if Musk did pull out?
Speaker 2 (09:51):
What would that look like?
Speaker 8 (09:52):
I mean, it was that, honestly, was probably the most
shocking thing that happened yesterday. It was Elon Musk threatened
to cancel its Dragon spacecraft, that is the vessel that
is used to bring cargo and astronauts to the International
Space Program. He's effectively saying, I am going to end
the US support for the ISS, which you know, obviously
(10:15):
the ISS is not like a military program. But that's
the kind of thing that I think the Pentagon probably
would react very negatively to. And you're right, there aren't
really any other aerospace companies that can do what Elon
Musk can can do. But but you saw immediately saw
people in MAGA world talking about nationalizing SpaceX, And honestly,
(10:37):
I don't think that is the craziest like I think
I think you would have started, you would have seen
that start to bubble up if if Elon must try
to make good on this threat, because the Pentagon has
like put itself in a position where it really is
dependent on SpaceX. You know, long run, the US government
has a lot of money, and there are other big
defense contractors, and they also have launch vehicles.
Speaker 2 (10:58):
So I think you know this.
Speaker 8 (11:00):
It's not like Elon can just can just dictate policy
to Donald Trump because of his position in the aerospace market,
in the launch market, but his position is stronger because
of that.
Speaker 9 (11:11):
Hey, from the peanut gallery of question, can these companies
survive and thrive someday without Elon?
Speaker 8 (11:19):
You know, I've been talking to Tesla investors and one
of the interesting things you hear in the before this happened,
there were people saying, hey, Tesla will be better off
without Elon Musk. But it was really a kind of
a rump coalition, right. It's the basically the people who
are really upset by his behavior, who see him walking
(11:40):
away from evs and the sort of like ROBOTAXI Elon
Musk as a visionary. Those folks really saw Elon as
being one hundred percent linked with the success of Tesla,
like there would be no way for Tesla to.
Speaker 2 (11:54):
Succeed without him.
Speaker 8 (11:56):
You know, I'm starting to hear little murmurs of hey,
you know, actually, like our robotaxes are pretty good, we
wouldn't necessarily need Elon Musk. I think if Elon Musk
were ousted from the company tomorrow or today, the stock
would instantly plummet, because the shareholder base is really much
is very much behind him. That said, if enough things
(12:17):
like this happens, you know, like crazy things can happen,
and this is an important company. This is a company
with you know, a huge amount of market cap. There
is a lot of money on the line, and anytime
when there's a lot of money on the line, you know,
opinions can change very quickly.
Speaker 2 (12:31):
All Right, Max, thanks so much, appreciate it.
Speaker 3 (12:33):
Max Chaffian, Bloomberg BusinessWeek, Senior reporter and co host of
the Elon Inc.
Speaker 2 (12:38):
Podcasters.
Speaker 3 (12:38):
Anybody knows what's going on inside the head of Elon
Musk in this building, it would be Max Chaffick.
Speaker 2 (12:43):
I appreciate getting a.
Speaker 3 (12:44):
Few minutes of his time on our Bloomberg Interactive Broker's studio.
Speaker 1 (12:49):
You're listening to the Bloomberg Intelligence Podcast. Catch US Live
weekdays at ten am Eastern on Apple, Cocklay and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your or watch US live on YouTube.
Speaker 3 (13:03):
Looks like Harvard has won a reprieve from some of
Trump's bands, particularly as rates to foreign students.
Speaker 2 (13:08):
What's the latest janet?
Speaker 9 (13:10):
Yes, So that came last night, a temporary restraining order
from President Trump's latest efforts on international students, and that
was banning them from entering following a couple of weeks
ago revoking Harvard's ability to issue student visas. So another
(13:31):
pause on a second track regarding international students, and in
Harvard filed a third lawsuit yesterday. It's getting hard to
keep track of everything because there's so much going on.
Speaker 5 (13:44):
It was hard before, Like now your spreadsheet must be huge.
But if I'm a foreign student, even though it's going
to go to the courts and there's been stays on
it from the court system, why would I want to
go to Harvard anymore? Why would I want to go
to any major US institution.
Speaker 9 (13:58):
Yeah, No, it's a good question, and I think the
intention is to as we've talked about before, So uncertainty, confusion,
do I go What if I'm going just for the summer,
if I'm going to go for a four year program?
Is this going to be continuous disruptions? It's it's very confusing,
and if you're an international student, somebody you know, seventeen
(14:21):
eighteen years old starting college, it's it's confusing and it's scary.
Speaker 3 (14:27):
Harvard appears to be I guess Harvard recognizes it's being
targeted by the Trump administration. Their strategy seems to be
to fight back. Have they said what their strategy is,
how aggressive they plan to do this. Are they still
in the mode of, you know, we'll work something out
with you the administration, or what have they been saying.
Speaker 9 (14:44):
Recently, Well publicly, what they're saying is in their lawsuits
and they they're trying to fight back, And you know, privately,
I'm not sure what's going on. But you know, they
certainly train a lot of lawyers, and they certainly train a.
Speaker 2 (14:58):
Lot of people in strategy.
Speaker 9 (15:01):
But you know, as we've talked about before, the federal
government has tremendous power and money at stake. You saw
the other day the administration talking about accreditation in Colombia.
What that triggers is issues over federal student loans, which
doesn't affect international students because they can't take federal student loans.
Speaker 2 (15:22):
But that's another.
Speaker 9 (15:23):
Potential money source that's you know, hundreds of millions of
dollars that you know, that's upping the ante for a
completely different source of revenue that we haven't seen before.
And it's actually not revenue, but it's it helps the
students finance or education. Because a year at Harvard Law
School Columbia Law School is about one hundred and twenty
thousand dollars, So how are you going to pay for
(15:46):
that student loans?
Speaker 2 (15:48):
Yep, these are great questions. What else is on your radar.
Speaker 5 (15:51):
In the world of higher education? Obviously this Harvard thing
will unfold as it goes. What else is a front
and center for you?
Speaker 9 (16:00):
Well, we can talk about secondary sales of private equity.
Speaker 2 (16:05):
That's another issue.
Speaker 9 (16:06):
We had a story about a month ago that Harvard
had been shopping around about a billion dollars in private
equity secondary sales. We had a story this week about
Yale closing in on selling about two point five billion
in secondary sale.
Speaker 5 (16:21):
And by secondary is we mean that they have private
equity investments they can't get out of them, so they're
going to sell them to someone else who's going to
get them because they need the liquidity.
Speaker 2 (16:27):
Well, Yale, good question about liquidity.
Speaker 9 (16:32):
So when we're talking about forty one billion dollar endowment,
they have roughly, you know, thirty to forty percent in
private equity tied up. Is it a question of liquidity? Possibly? Yes,
certainly for some universities, but as we know, private equity
has not really been returning very much lately. And to
(16:53):
have a huge chunk of your endowment tied up in
an investment that isn't giving you distributions like it had
been before. Or yes, question about liquidity, but perhaps they
wanted to do something else more opportunistic without cash.
Speaker 2 (17:07):
So just remind us of your reporting.
Speaker 3 (17:11):
What has a Trump administration said to just universities generally
in the US about funding?
Speaker 2 (17:17):
Has that been frozen tech efficial? Well, there's a couple
of things.
Speaker 9 (17:21):
First off, the bat is the reimbursements for research funding.
Some universities like Harvard had very high reimbursements for research
costs sixty percent. So let's say you get a grant
for a million dollars, then Harvard would get an additional
say six hundred thousand dollars for things like hiring people
(17:41):
in the labs, lab equipment rent and that went down
to fifteen percent, So that was a big change for
most institutions. Then other grants, you know, across the board
affecting lots of universities were frozen terminated over diversity equity inclusion,
so that that affects not just the top universities that
(18:04):
have been targeted. And then at Harvard they have frozen
grants and contracts almost to the tune of three billion
dollars and has said Harvard will not get future grants.
Speaker 3 (18:16):
Wow, I mean this changes the generational research and development
strategy of this country.
Speaker 2 (18:25):
Yes, in one Well, so what.
Speaker 3 (18:27):
I learned my work at Douke is you know, on average,
at these big research universities, including state schools like the
University of Florida, University of Texas, two thirds of the
R and D budget that is used for lab work
and all the stuff that they do is two thirds
is roughly the government. One third is the private and
the university itself and other private funding sources. So that
public private real cooperation or relationship that was really born
(18:51):
after World War.
Speaker 2 (18:51):
Two it's really important. Goodbye, Janet Lauren, thanks so much
for joining us. Really appreciate general and covers the higher
education for us. We really appreciate that.
Speaker 1 (19:00):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, Cocklay and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 2 (19:14):
Let's talk to Lululemon Athletica l U. L U is
the ticker.
Speaker 3 (19:18):
It's off twenty percent here today, it's off thirty one
percent here to date. Tough, tough quarter tariffs are taking
effect the consumer, all that kind of stuff. It is
a challenge for a lot of these consumer companies. So
we talked to Punham Goyle. She covers all the retailers
for Bloomberg Intelligence. Punham, what's the Lululemon story that we
heard this quarter?
Speaker 7 (19:39):
Yeah, it's the guidance. You know, they slashed guidance and
they're expecting margins to fall all largely due to tariffs.
The hardest hit quarter will be too Q because they're
unable to mitigate a lot of the tariff headwinds until
two h and along with that they're going to have
more promotions. They did say that traffic was lighter in stories.
That's not something new, you know, we've heard the story
(20:00):
for quite a few quarters now, and it just means
that they really need to step up their game to
get traffic back to stores. Be the Lululemon that we
knew where you know, the stores would be crowded, irrespective
of what was going on inside the walls.
Speaker 5 (20:15):
What does this do for the supply chain? So that's
the consumer part. In terms of their supply part, what
are they dealing with?
Speaker 7 (20:23):
Sure, So when you think of Lululemon, the one thing
that I think we should have noticed they don't make
product in China, so they do not have product exposure
to China. They do source raw material from China, for
which there will be some exposure, but the largest hit
that they're going to face is from the other countries
in Asia, where the tariff is a ten percent right
(20:43):
now until early July, so they have that ten percent
headwind and we do think that they'll be able to
mitigate that in two age and they said they would too,
largely through a combination of supplier negotiations, some select price
increases and then internal efficiencies, the.
Speaker 3 (21:00):
Ability to pass along cost increases. It sounds like Lululemon
does not maybe have the pricing power that maybe some
of the other retailers you follow have talk to us
about Lululemon in that side.
Speaker 7 (21:12):
Sure, so one thing is that Lululemon does have the
more affluent customer, so they can, you know, sell things
at relatively higher prices than other retailers that sell at leisure.
That said, if you're used to paying one hundred and
twenty dollars for a pair of yoga pants, you know,
and you see the price book to one thirty, you'll
be you know, you may start to wonder. The way
(21:33):
to take up prices here for retailers like lul Lemon
is on new product, because you don't have a price
set in mind for what that product should be. So
if they introduce a new lagging, if they introduce a
new siloette, and they price that a little higher, the
customer may not even notice. So I think that would
be the smarter way to do it.
Speaker 5 (21:52):
Oh, I see what you're saying, and I'm one hundred
percent not paying one hundred and thirty dollars for a
pair of pants.
Speaker 3 (21:56):
I'm gonna sweat in that.
Speaker 2 (21:57):
Just can't they look good?
Speaker 8 (21:59):
Though? No?
Speaker 5 (22:00):
I mean I literally just work out in my bedroom anyway,
Moving on, not about me.
Speaker 2 (22:05):
One of the competition.
Speaker 5 (22:06):
We were talking earlier about that and I was saying, well,
but now you have Alo Yoga, you have a lot
of other competitors in a way that we didn't have
about ten years ago or so.
Speaker 2 (22:13):
So how is that affecting Lulu?
Speaker 7 (22:16):
Yeah, competition is definitely getting tough or not just from
the likes of Alo, but also from the traditional legacy
at leisure players like Nike, Adidas. You know, they're all
making a put big push, especially into women's and focusing
on the same segment that lul Lemon sort of made
its money on.
Speaker 3 (22:35):
So put them a sense of timing for tariff share?
What are your companies telling you about when they think
they will really start to see their costs increase and
then they're going to have to make a decision. I mean,
is that happening now? Is that something that will happen
maybe even.
Speaker 7 (22:50):
Fall, it's happening. It started to happen. Costs are going
up and they can only mitigate so much. If you
have a ten percent headwind and you have to no
exployure to China. I could see you mitigating most of
that for some of our companies, but as soon as
you add China to the mix where you need China
to get product to the US, it's much much harder
(23:12):
and the margins will be pressured. You know, these retailers
all they have margins that are in the single digits.
So even a ten percent increase in costs is a
big increase. We're all thinking ten percents. Okay, you know
it's not that bad when we heart one hundred and
thirty five percent with China, but it's still a big deal.
It's a large increase for them to have to absorb
(23:34):
or deal with.
Speaker 5 (23:35):
Put them thirty seconds. Top retailer right now.
Speaker 7 (23:38):
Amazon. You know, we like Amazon as a long term play.
We think their cloud business, their advertising business, they have
a lot of runway, even on the retail side, to
really grow. And in this environment, scale matters, scales where
you get pricing power, and we think Amazon, out of
all the retailers that we cover, have the largest scale.
Speaker 2 (23:57):
Yeah. Absolutely goods tough. Put them goil, Thank you so much.
We appreciate that.
Speaker 3 (24:00):
Putam Goyle, Senior Retail analysts covering all the retailers for
Bloomberg Intelligence down there in Prince, New Jersey.
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Speaker 2 (00:23):
Let's get to this job's number.
Speaker 3 (00:25):
I mean better than expected, as John pointed out, again, weaker.
Speaker 2 (00:29):
From last period.
Speaker 3 (00:30):
Let's see what the world of the economists are thinking
about this. So Steve Blitz, chief US economist at TS Lombard. Hey, Steve,
what was your takeaway from kind of the various.
Speaker 2 (00:40):
Parts of this job's report today?
Speaker 4 (00:44):
Yeah, you know, I actually find the market reaction a
bit perplexing because when you look at a lot of
the pieces inside of it, it really shows a weakening
job more trempening one. Right, all the job games really
were in restaurants and healthcare services. The rest of it
(01:06):
was added up to pretty much of a flat number.
A good part of the decline was an employment look
at the households survey was in the sixteen to twenty
four year old, so people who are parents who are
fretting about their children not being able to find jobs,
they're right, it is a bad market for them. But
(01:30):
when I look at a lot of the different things
that diffusion index and stuff like that, I see it
in number that reflects a lot of what ADP was saying.
Even though obviously ADP is typical the number, it's very
off from the reactual number, but it's a weakening trend,
especially against the backdrop of the Bays report.
Speaker 5 (01:52):
Right then you have President Trump saying basically Defedcha J.
Powell on social media, saying the Fed's got to go
for a full perconercentage point rocket fuel. Is this an
economy that needs one hundred basis point worth of cuts
and rocket fuel?
Speaker 4 (02:08):
Well, first of all, you know, a real estate guy
wanting lower interest rates is neither neither news nor novel. Right, So,
but I think there, you know, the fans betwixt and
between a tough spot here, right, because inflation is higher is.
Speaker 6 (02:29):
Running if you look at it from an on a
rolling three month basis, we're still stuck in this too,
and af three percent range on core PC inflation where
it was under two percent you know pre COVID.
Speaker 4 (02:40):
So we're still higher. Yet we're seeing lower hiring rates
and things like that and the fans leaning on the
inflation side. Everything that president is doing, all of his
policies are inflationary, not deflationary. And you know how all
of effect has a whole right, So I think that
(03:02):
you know, he knows he's got of a job. In
May's we're into legacy building on his part. And Trump
said a few months ago, though you know it changes
every day with him, but he said, no pay, no
gain on the tariff side. So it's a tough spot
for them. I think though, the we're going to get
(03:24):
a doubsh sentiment coming out of the June meeting, and
I think the chances of a July hike, well, I'm
not I certainly don't think they're gonna cut, not hike.
I don't think they're going to cut in July, but
I think the odds are closely to fifty to fifty
than what the market is priced in.
Speaker 3 (03:41):
Steve, is this economy, I mean, how do you think
this economy is going to perform in the back half
of this year?
Speaker 2 (03:46):
Here?
Speaker 3 (03:46):
Is it a time when maybe some of these tariffs
are going to catch up and we will see a
market slow down?
Speaker 4 (03:54):
Yeah, because there's a couple of things here that you know,
we're in a bit of a sweet spot. And and
I look to the third quarter one, firms are just
beginning to find out how much of this of these
tariffs they can pass through to the final price, right.
I mean, we saw the surge of buying, so they've
got a lot of stuff in inventory pre tariff. They're
(04:17):
going to sell it tariff plus their markup. What can
they get through, how much can they get out? And
then once they know that, then there's gonna be a
payroll question, do we now have too many people that
have to shrink my firm whatever, We're gonna find that
out in the next few months. At the same time,
(04:38):
you're getting the debt sealing is going to get lifted
in July either as part of the budget or is
it one off, and then it'll be part of the
budget later a few months later. And that means that
we've got to return to treasury borrowing a treasury borrowing
plus because they're going to borrow for the deficit and
Q three and then they're gonna also have to borrow
to put money back in the in the savings account,
(05:01):
and that's going to put up with pressure on yields
at a time when you don't really have a lot
of sponsorship for the ten year, so it really is
a going to get pushed up. And also what I
found is that there's a tailwind to the economy when
you have a debt ceiling in place, because Treasury is
spending money, they're not raising and you get the reverse
(05:22):
of that in the third quarter. So there's a lot
of things coming in Q three that are more likely
to slow growth than speed it up. And so what
the Fed does in reaction to that, we'll have to see.
Speaker 5 (05:36):
All right, Chuck, Sorry, I Chuck, We're going to speak
to Chuck.
Speaker 7 (05:39):
Just kidding.
Speaker 5 (05:40):
Thanks at We really appreciate it. Steve, Steve Blitz joining
us from ts Lombard. Thank you for breaking down that
jobs number four.
Speaker 1 (05:48):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Apple, Cock Play and
Android Auto with the Bloomberg Business App. Listen on demand
wherever you get your podcasts, or watch us live on YouTube.
Speaker 5 (06:02):
I feel like yesterday we'll go down in the analogs
of history is where were you when dot dot dot?
The tweet fight between President Trump and Elon Musk. Arguably
two of the most important people in the entire world
started on social media and then erupted overnight into full
public display. Elon Musk Donald Trump's alliance just ended with
that public spat. Now, the latest read is that Musk
(06:26):
has backed down after Tesla's stock price just tanked his
networth crumbled thirty four billion dollars. Matt max Chafkin is
Bloomberger Business Week senior reporter and the co host of
the Elon Inc. Podcast. He joins us, now, who has
the upper hand here? Quote unquote who won?
Speaker 8 (06:42):
Donald Trump has the upper hand here? He's the President
of the United States. He controls a lot of aspects
of Elon Musk's businesses. He also is the more important
cultural figure. The fandom around Donald Trump. You know, as
popular as Elon Musk is, the fandom around Donald Trump
is much more intent and he's much more influential.
Speaker 2 (07:02):
That said, nobody's one yet.
Speaker 8 (07:04):
I mean, this has been just disastrous for Elon Musk,
especially not ideal for Donald Trump. You know, I think
he'd prefer to just have the big, beautiful bill, his
his tax bill, the extension of the tax cuts, which
with a bunch of other stuff swirled in just sail
through the Senate rather than have this very influential, very loud,
(07:26):
rich guy, you know, banging on on Twitter or suggesting
he should be impeached and so on. So so I'm
not sure there are any winners. I will say I
was shocked by this because and I wrote a piece
a week ago basically saying, you know, for all the
talk of a breakup, you shouldn't bet on it, because
there are so many reasons why these two guys need
each other. And of course that's looking like not the
(07:47):
right take on this. And and you know, it just
seems like Elon Musk at his most erratic, most self destructive,
you know, taking the opportunity he had the chance to
exit the White House, you know, gracefully maintain his contact,
his influence with Trump, while also keeping investors happy by
by by spending more time with his companies.
Speaker 2 (08:09):
And that all feels like it's out the window.
Speaker 8 (08:11):
He's not spending time with his companies, he's spending time
on Twitter.
Speaker 2 (08:14):
You know.
Speaker 8 (08:15):
Obviously, investors not going to be thrilled with the stock price.
I think they're hoping, against hope that he somehow backs
down and they are able to resolve this.
Speaker 3 (08:23):
My personally, I saw this day coming the first day
they got together, said this is exactly how it's going
to end. This is how it always ends when someone
gets closest to President Trump, either in his political life
or in his personal life. That's been well documented. Didn't
Elon what was Elon's thinking? Didn't Elon know it had
to end this way?
Speaker 8 (08:42):
You know, Elon Musk is not a man renowned for humility, right.
Speaker 2 (08:46):
This is a guy whose.
Speaker 8 (08:47):
Whole thing is doing more than anyone can do. I
think the big surprise here for Elon Musk was that
he wasn't able to control Donald Trump in the way
that I think he imagined. And you see that come
out that in that very surreal Oval Office meeting with
Friedrich Murz yesterday where Trump is talking about ev tax credits,
(09:11):
he's talking about the ways in which he wasn't delivering
for Elon Musk.
Speaker 2 (09:15):
And I think ultimately that is a big part of this.
Of course, there's also ego.
Speaker 8 (09:20):
You know that there is the you know, like kind
of what you're alluding to here, Paul, the two alpha
guys who can't handle, you know, playing second fiddle, And
I think that's that's another factor.
Speaker 5 (09:32):
What on the other on the flip side, though, one
can make the argument that the US government really does
need Elon Musk when it comes to SpaceX.
Speaker 2 (09:38):
Absolutely without that.
Speaker 5 (09:40):
I mean, I realized that Musk is back down on
his threats to pull space SpaceX in the government. But
how important is that to our government? What does it
mean if Musk did pull out?
Speaker 2 (09:51):
What would that look like?
Speaker 8 (09:52):
I mean, it was that, honestly, was probably the most
shocking thing that happened yesterday. It was Elon Musk threatened
to cancel its Dragon spacecraft, that is the vessel that
is used to bring cargo and astronauts to the International
Space Program. He's effectively saying, I am going to end
the US support for the ISS, which you know, obviously
(10:15):
the ISS is not like a military program. But that's
the kind of thing that I think the Pentagon probably
would react very negatively to. And you're right, there aren't
really any other aerospace companies that can do what Elon
Musk can can do. But but you saw immediately saw
people in MAGA world talking about nationalizing SpaceX, And honestly,
(10:37):
I don't think that is the craziest like I think
I think you would have started, you would have seen
that start to bubble up if if Elon must try
to make good on this threat, because the Pentagon has
like put itself in a position where it really is
dependent on SpaceX. You know, long run, the US government
has a lot of money, and there are other big
defense contractors, and they also have launch vehicles.
Speaker 2 (10:58):
So I think you know this.
Speaker 8 (11:00):
It's not like Elon can just can just dictate policy
to Donald Trump because of his position in the aerospace market,
in the launch market, but his position is stronger because
of that.
Speaker 9 (11:11):
Hey, from the peanut gallery of question, can these companies
survive and thrive someday without Elon?
Speaker 8 (11:19):
You know, I've been talking to Tesla investors and one
of the interesting things you hear in the before this happened,
there were people saying, hey, Tesla will be better off
without Elon Musk. But it was really a kind of
a rump coalition, right. It's the basically the people who
are really upset by his behavior, who see him walking
(11:40):
away from evs and the sort of like ROBOTAXI Elon
Musk as a visionary. Those folks really saw Elon as
being one hundred percent linked with the success of Tesla,
like there would be no way for Tesla to.
Speaker 2 (11:54):
Succeed without him.
Speaker 8 (11:56):
You know, I'm starting to hear little murmurs of hey,
you know, actually, like our robotaxes are pretty good, we
wouldn't necessarily need Elon Musk. I think if Elon Musk
were ousted from the company tomorrow or today, the stock
would instantly plummet, because the shareholder base is really much
is very much behind him. That said, if enough things
(12:17):
like this happens, you know, like crazy things can happen,
and this is an important company. This is a company
with you know, a huge amount of market cap. There
is a lot of money on the line, and anytime
when there's a lot of money on the line, you know,
opinions can change very quickly.
Speaker 2 (12:31):
All Right, Max, thanks so much, appreciate it.
Speaker 3 (12:33):
Max Chaffian, Bloomberg BusinessWeek, Senior reporter and co host of
the Elon Inc.
Speaker 2 (12:38):
Podcasters.
Speaker 3 (12:38):
Anybody knows what's going on inside the head of Elon
Musk in this building, it would be Max Chaffick.
Speaker 2 (12:43):
I appreciate getting a.
Speaker 3 (12:44):
Few minutes of his time on our Bloomberg Interactive Broker's studio.
Speaker 1 (12:49):
You're listening to the Bloomberg Intelligence Podcast. Catch US Live
weekdays at ten am Eastern on Apple, Cocklay and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your or watch US live on YouTube.
Speaker 3 (13:03):
Looks like Harvard has won a reprieve from some of
Trump's bands, particularly as rates to foreign students.
Speaker 2 (13:08):
What's the latest janet?
Speaker 9 (13:10):
Yes, So that came last night, a temporary restraining order
from President Trump's latest efforts on international students, and that
was banning them from entering following a couple of weeks
ago revoking Harvard's ability to issue student visas. So another
(13:31):
pause on a second track regarding international students, and in
Harvard filed a third lawsuit yesterday. It's getting hard to
keep track of everything because there's so much going on.
Speaker 5 (13:44):
It was hard before, Like now your spreadsheet must be huge.
But if I'm a foreign student, even though it's going
to go to the courts and there's been stays on
it from the court system, why would I want to
go to Harvard anymore? Why would I want to go
to any major US institution.
Speaker 9 (13:58):
Yeah, No, it's a good question, and I think the
intention is to as we've talked about before, So uncertainty, confusion,
do I go What if I'm going just for the summer,
if I'm going to go for a four year program?
Is this going to be continuous disruptions? It's it's very confusing,
and if you're an international student, somebody you know, seventeen
(14:21):
eighteen years old starting college, it's it's confusing and it's scary.
Speaker 3 (14:27):
Harvard appears to be I guess Harvard recognizes it's being
targeted by the Trump administration. Their strategy seems to be
to fight back. Have they said what their strategy is,
how aggressive they plan to do this. Are they still
in the mode of, you know, we'll work something out
with you the administration, or what have they been saying.
Speaker 9 (14:44):
Recently, Well publicly, what they're saying is in their lawsuits
and they they're trying to fight back, And you know, privately,
I'm not sure what's going on. But you know, they
certainly train a lot of lawyers, and they certainly train a.
Speaker 2 (14:58):
Lot of people in strategy.
Speaker 9 (15:01):
But you know, as we've talked about before, the federal
government has tremendous power and money at stake. You saw
the other day the administration talking about accreditation in Colombia.
What that triggers is issues over federal student loans, which
doesn't affect international students because they can't take federal student loans.
Speaker 2 (15:22):
But that's another.
Speaker 9 (15:23):
Potential money source that's you know, hundreds of millions of
dollars that you know, that's upping the ante for a
completely different source of revenue that we haven't seen before.
And it's actually not revenue, but it's it helps the
students finance or education. Because a year at Harvard Law
School Columbia Law School is about one hundred and twenty
thousand dollars, So how are you going to pay for
(15:46):
that student loans?
Speaker 2 (15:48):
Yep, these are great questions. What else is on your radar.
Speaker 5 (15:51):
In the world of higher education? Obviously this Harvard thing
will unfold as it goes. What else is a front
and center for you?
Speaker 9 (16:00):
Well, we can talk about secondary sales of private equity.
Speaker 2 (16:05):
That's another issue.
Speaker 9 (16:06):
We had a story about a month ago that Harvard
had been shopping around about a billion dollars in private
equity secondary sales. We had a story this week about
Yale closing in on selling about two point five billion
in secondary sale.
Speaker 5 (16:21):
And by secondary is we mean that they have private
equity investments they can't get out of them, so they're
going to sell them to someone else who's going to
get them because they need the liquidity.
Speaker 2 (16:27):
Well, Yale, good question about liquidity.
Speaker 9 (16:32):
So when we're talking about forty one billion dollar endowment,
they have roughly, you know, thirty to forty percent in
private equity tied up. Is it a question of liquidity? Possibly? Yes,
certainly for some universities, but as we know, private equity
has not really been returning very much lately. And to
(16:53):
have a huge chunk of your endowment tied up in
an investment that isn't giving you distributions like it had
been before. Or yes, question about liquidity, but perhaps they
wanted to do something else more opportunistic without cash.
Speaker 2 (17:07):
So just remind us of your reporting.
Speaker 3 (17:11):
What has a Trump administration said to just universities generally
in the US about funding?
Speaker 2 (17:17):
Has that been frozen tech efficial? Well, there's a couple
of things.
Speaker 9 (17:21):
First off, the bat is the reimbursements for research funding.
Some universities like Harvard had very high reimbursements for research
costs sixty percent. So let's say you get a grant
for a million dollars, then Harvard would get an additional
say six hundred thousand dollars for things like hiring people
(17:41):
in the labs, lab equipment rent and that went down
to fifteen percent, So that was a big change for
most institutions. Then other grants, you know, across the board
affecting lots of universities were frozen terminated over diversity equity inclusion,
so that that affects not just the top universities that
(18:04):
have been targeted. And then at Harvard they have frozen
grants and contracts almost to the tune of three billion
dollars and has said Harvard will not get future grants.
Speaker 3 (18:16):
Wow, I mean this changes the generational research and development
strategy of this country.
Speaker 2 (18:25):
Yes, in one Well, so what.
Speaker 3 (18:27):
I learned my work at Douke is you know, on average,
at these big research universities, including state schools like the
University of Florida, University of Texas, two thirds of the
R and D budget that is used for lab work
and all the stuff that they do is two thirds
is roughly the government. One third is the private and
the university itself and other private funding sources. So that
public private real cooperation or relationship that was really born
(18:51):
after World War.
Speaker 2 (18:51):
Two it's really important. Goodbye, Janet Lauren, thanks so much
for joining us. Really appreciate general and covers the higher
education for us. We really appreciate that.
Speaker 1 (19:00):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, Cocklay and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 2 (19:14):
Let's talk to Lululemon Athletica l U. L U is
the ticker.
Speaker 3 (19:18):
It's off twenty percent here today, it's off thirty one
percent here to date. Tough, tough quarter tariffs are taking
effect the consumer, all that kind of stuff. It is
a challenge for a lot of these consumer companies. So
we talked to Punham Goyle. She covers all the retailers
for Bloomberg Intelligence. Punham, what's the Lululemon story that we
heard this quarter?
Speaker 7 (19:39):
Yeah, it's the guidance. You know, they slashed guidance and
they're expecting margins to fall all largely due to tariffs.
The hardest hit quarter will be too Q because they're
unable to mitigate a lot of the tariff headwinds until
two h and along with that they're going to have
more promotions. They did say that traffic was lighter in stories.
That's not something new, you know, we've heard the story
(20:00):
for quite a few quarters now, and it just means
that they really need to step up their game to
get traffic back to stores. Be the Lululemon that we
knew where you know, the stores would be crowded, irrespective
of what was going on inside the walls.
Speaker 5 (20:15):
What does this do for the supply chain? So that's
the consumer part. In terms of their supply part, what
are they dealing with?
Speaker 7 (20:23):
Sure, So when you think of Lululemon, the one thing
that I think we should have noticed they don't make
product in China, so they do not have product exposure
to China. They do source raw material from China, for
which there will be some exposure, but the largest hit
that they're going to face is from the other countries
in Asia, where the tariff is a ten percent right
(20:43):
now until early July, so they have that ten percent
headwind and we do think that they'll be able to
mitigate that in two age and they said they would too,
largely through a combination of supplier negotiations, some select price
increases and then internal efficiencies, the.
Speaker 3 (21:00):
Ability to pass along cost increases. It sounds like Lululemon
does not maybe have the pricing power that maybe some
of the other retailers you follow have talk to us
about Lululemon in that side.
Speaker 7 (21:12):
Sure, so one thing is that Lululemon does have the
more affluent customer, so they can, you know, sell things
at relatively higher prices than other retailers that sell at leisure.
That said, if you're used to paying one hundred and
twenty dollars for a pair of yoga pants, you know,
and you see the price book to one thirty, you'll
be you know, you may start to wonder. The way
(21:33):
to take up prices here for retailers like lul Lemon
is on new product, because you don't have a price
set in mind for what that product should be. So
if they introduce a new lagging, if they introduce a
new siloette, and they price that a little higher, the
customer may not even notice. So I think that would
be the smarter way to do it.
Speaker 5 (21:52):
Oh, I see what you're saying, and I'm one hundred
percent not paying one hundred and thirty dollars for a
pair of pants.
Speaker 3 (21:56):
I'm gonna sweat in that.
Speaker 2 (21:57):
Just can't they look good?
Speaker 8 (21:59):
Though? No?
Speaker 5 (22:00):
I mean I literally just work out in my bedroom anyway,
Moving on, not about me.
Speaker 2 (22:05):
One of the competition.
Speaker 5 (22:06):
We were talking earlier about that and I was saying, well,
but now you have Alo Yoga, you have a lot
of other competitors in a way that we didn't have
about ten years ago or so.
Speaker 2 (22:13):
So how is that affecting Lulu?
Speaker 7 (22:16):
Yeah, competition is definitely getting tough or not just from
the likes of Alo, but also from the traditional legacy
at leisure players like Nike, Adidas. You know, they're all
making a put big push, especially into women's and focusing
on the same segment that lul Lemon sort of made
its money on.
Speaker 3 (22:35):
So put them a sense of timing for tariff share?
What are your companies telling you about when they think
they will really start to see their costs increase and
then they're going to have to make a decision. I mean,
is that happening now? Is that something that will happen
maybe even.
Speaker 7 (22:50):
Fall, it's happening. It started to happen. Costs are going
up and they can only mitigate so much. If you
have a ten percent headwind and you have to no
exployure to China. I could see you mitigating most of
that for some of our companies, but as soon as
you add China to the mix where you need China
to get product to the US, it's much much harder
(23:12):
and the margins will be pressured. You know, these retailers
all they have margins that are in the single digits.
So even a ten percent increase in costs is a
big increase. We're all thinking ten percents. Okay, you know
it's not that bad when we heart one hundred and
thirty five percent with China, but it's still a big deal.
It's a large increase for them to have to absorb
(23:34):
or deal with.
Speaker 5 (23:35):
Put them thirty seconds. Top retailer right now.
Speaker 7 (23:38):
Amazon. You know, we like Amazon as a long term play.
We think their cloud business, their advertising business, they have
a lot of runway, even on the retail side, to
really grow. And in this environment, scale matters, scales where
you get pricing power, and we think Amazon, out of
all the retailers that we cover, have the largest scale.
Speaker 2 (23:57):
Yeah. Absolutely goods tough. Put them goil, Thank you so much.
We appreciate that.
Speaker 3 (24:00):
Putam Goyle, Senior Retail analysts covering all the retailers for
Bloomberg Intelligence down there in Prince, New Jersey.
Speaker 1 (24:06):
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ten am to noon Eastern on Bloomberg dot com, the
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