April 29, 2025 • 41 mins
Watch Tom and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Surveillance hosted by Tom Keene & Paul SweeneyApril 29th, 2025
Featuring:
1) Russ Koesterich, Global Head of Investment Strategy for BlackRock Scientific Active Equities, joins for a discussion on near term volatility in stocks and whether the bull run in international stocks is set to slow. Investors are tracking a stream of data for clues on the health of the American economy and prospects for Federal Reserve interest-rate cuts, with some experts warning of the risk of recession in the US. Tariffs continued to dominate headlines, with Treasury Secretary Scott Bessent saying the US has put China to the side for now as it seeks trade deals with 15 to 17 other countries.
2) Elizabeth Economy, Hargrove senior fellow and co-director of the U.S., China and the world program at the Hoover Institution at Stanford University, joins for a discussion on US-China relations and who has the upper hand in a trade war. Chinese Foreign Minister Wang Yi warned countries against giving in to US tariff threats, saying it would only embolden the "bully". Wang's remarks came as the Trump administration hinted at using new trade tools to pressure Beijing, and US Treasury Secretary Scott Bessent suggested banning certain exports to China to gain leverage.
3) Ethan Harris, former Head of Research at Bank of America, talks about a potential golden age for the US economy and what a post-Powell Federal Reserve would look like. Currently, Fed Chair Jay Powell is trying to prevent price increases from spreading through the economy due to Donald Trump's tariffs, earning him the nickname "Mr. Too Late" from the president. The Fed is expected to leave rates unchanged at their next meeting, and Powell has emphasized the need to keep longer-term inflation expectations anchored to prevent a one-time price increase from becoming an ongoing inflation problem.
4) Dr. David Dodge, former Governor of the Central Bank of Canada, joins to discuss Mark Carney's victory in the Canadian election. Canada's Liberal Party, led by Carney, is projected to win a fourth consecutive election, but with a narrow margin of victory. Carney's win represents a major turnaround for the Liberals, and he has pledged to focus on strengthening Canada's economic independence and standing up to US President Trump in a trade war.
5) Lisa Mateo joins with the latest headlines in newspapers across the US, including Fortune's story on a harsh new reality when it comes to groceries and inflation and Business Insider's look at how a Chinese mobile dating game is getting single women across Asia to open their hearts and wallets.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Surveillance Podcast. Catch us live weekdays at seven am Eastern
on Apple CarPlay or Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
(00:25):
us live on YouTube.
Speaker 2 (00:27):
A really interesting path to investment management. Russ coster Rich
is out of Brandeis and Boston College Law, also at Columbia.
Really just a wonderful set of academics. We're thrilled at.
Russ Costs could join this morning from Blackrock, where he
has a focus on scientific active equities. Rostcon strance is
(00:51):
science right now is a new study of international investment.
You push against that, you say beware a focus on
international investment.
Speaker 3 (01:01):
Discuss that and more and tom so right now.
Speaker 4 (01:05):
We've had an unusual start to the year, to put
it mildly, and one of the many things that's been
going on which was not expected when we started twenty
twenty five, was this dramatic outperformance of international markets, particularly Europe,
and people will remember that began early in the year,
before we really knew the full extent of the tariffs.
But it's actually continued, albeit at a slower pace. So,
(01:28):
you know, one of the questions we're getting from our
clients frequently with the Global Allocation Fund is should we
be more invested in international? And while I do think
that there's always a good argument for international diversification, it's
not clear to us that that strong outperformance of Germany
of the rest of Europe that began the year can
(01:48):
continue in an environment in which economic growth is slowing.
There's a lot of policy and certainty, and trade is
likely to be very different than it's been for the
past several decades. So we are still of the you
that many of the best companies in a multi assid
portfolio are going to be from the United States.
Speaker 5 (02:06):
So, Russ, how do you think about some of this?
You know, all the headwinds investors are trying to deal
with right now. Has that changed the way you allocate
between stocks and bonds and maybe alternatives? Are you trying
to get at play a little closer to the vest
a little bit more conservative or defensive? How are you
guys playing this?
Speaker 4 (02:25):
Well, that's definitely the case you and we have brought
in our risks. So we had an equity overweight for
most of twenty and twenty four actually much of twenty
three as well. We've brought that closure to home. We've
added a little bit of duration back into portfolio. So yes,
given the uncertainty, we're definitely thinking about where do we
want to bring.
Speaker 3 (02:43):
Risk and where do we want to make our bests.
Speaker 4 (02:45):
But there are a couple of other areas too that
I think go to your question, one of which our
bond's going to work as a hedge.
Speaker 3 (02:51):
Now we've shifted from.
Speaker 4 (02:53):
An environment where for a lot of the last three
years the concern was inflation to more of a concern
about recession. Session is the issue? Then generally bonds work
better and mitigating equity risk. The question is are we
going to get a recession or we can to see
higher inflation in the back of the tariffs. That's one
thing we're wrestling with. The other, which has definitely had
an impact on how we allocate and goes to the
(03:14):
question about alternatives, is gold Right now? The biggest risk
to markets is uncertainty. There's also a risk about whether
or not international investors are going to trim their allocation
to dollar denominated assets. In that environment, we found that
gold is actually very helpful in the portfolio obviously it
record highs. That's another place we've actually been increasing our
(03:37):
bet to over the last three to six months.
Speaker 5 (03:41):
So you know, in terms of fixed income RUSS, is
there any call here to take credit risk or do
you just sit kind of in the three to five
year treasury kind of belly of the curve kind of thing.
Speaker 4 (03:52):
Well, I think it's actually both. I think we do
like the belly of the curve in general. We've been
cautious about the long end of the curve for a
while and it really hasn't done too much so far
year to date. But absolutely we think that credit is
one of the areas you can actually find opportunity. And
the reason is there's a lot of risk on the economy.
But even if we were to get a recession, our
views would be a mode recession. Corporate balance sheets, at
(04:15):
least for large companies, are in good shape. Many of
them turned out their debt back in twenty and twenty one.
In other words, that extended the maturity of their debt
and for the first time in years, really more than
a decade, you can build a portfolio with high quality
credit get seven seven and a half percent. That's looking
pretty good at an environment where equity returns are obviously
(04:37):
more questionable and you get more volatility. So credit is
one of the areas we definitely like in a multi
asset portfolio.
Speaker 2 (04:43):
Russ got to get you into the studio here to
do it much longer, and you a couple more questions
here before we dash to Canada risk costurage like the
Blackrocks Science and Technology Fund. What Tony Kim is doing.
The bottom line is, is what retail loves big tech companies
as well with it AWE as you mentioned the Maelstrom
of the Q one the first one hundred days of
(05:04):
President Trump. Are the persistent cash flows of those science
and technology leaders in Nvidia, Amazon, Microsoft, the rest. Are
they still in place?
Speaker 4 (05:16):
I think so, Tom Now Tony could do much more
adjustice to that question than I Can't sure, but I
think it's the right question because this is something that's
going to become increasingly important. We came into the year
expecting a stronger economy. If we have a weaker economy,
which is almost certain, we're going to focus on companies
that can produce reliable cash flow. And yes, there are
questions about the buildout on AI, but the reality is
(05:40):
many of the companies you mentioned. These are platform companies.
Their profitability is much higher than average, their earnings are
much more.
Speaker 3 (05:48):
Consistent than average.
Speaker 4 (05:50):
This is still an opportunity long term for a lot
of investors. And I said in the beginning, while we
still like the US because we find more of these
companies in the US than other regions, Russ.
Speaker 2 (06:00):
We got to leave it there. I'm so sorry. Russ Costrich.
Please get into her studio. He's got to get into
the studio.
Speaker 4 (06:05):
Sure.
Speaker 2 (06:05):
I mean, you know exactly, Russ. The food court. You'll
love it. Russ Costrich, Black Rock, Thank you.
Speaker 1 (06:11):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Applecarplay 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 2 (06:27):
If she was in Michigan and did a paper or
whatever and it ended up being a book, The River
runs Black, think of what Oppenheimer, Barbie, that's the way
the River Run Black worked. Within the academics on China,
Elizabeth Economy immediately rose to a claim on analysis of
the Pacific Rim. She's followed up with any set of books,
(06:49):
including the World according to China and The Third Revolution.
We know her public service to the nation with Secretary
of Romando at Commerce. She is the Hargro Senior Fellow
co Director US China and World Program. This on the
Left Coast Hoover Institution at Stanford University, Doctor Economy. When
(07:10):
you hear diplomats of China in an organized manner called
the President of the United States for bullying, how do
you translate that?
Speaker 6 (07:21):
I think it's pretty straightforward. Look, I think right now
the two countries aren't a game of chicken, and the
Chinese are waiting for a real signal from President Trump
in the form of dropping the unilateral tariffs or reducing
them substantially. I think actually President Trump did blink last
(07:41):
week when he said that he expected to reduce those tariffs.
But I think the Chinese decided not to recognize that.
At least the Chinese officials decided not to recognize it.
Maybe they saw it more as a wink than a blink,
and they don't trust it. But I think, you know,
it's not just the Chinese, frankly world, and I think
China's being pretty confident in their assessment of President Trump,
(08:04):
and that you know, many other countries are also looking
at the United States in the same way.
Speaker 2 (08:09):
Within the gi real politic. Do they have the power
in the leverage to say to other nations, if you
dance with President Trump, you won't dance with China. Do
they have that power to say that to act on that.
Speaker 6 (08:27):
You know, It's been interesting to me as I've watched
the Chinese go around, first with the charm offensive in
Asia and Europe and then with the more coercive sort
of approach that you just noted. I've been surprised at
the extent to which China has not managed to translate,
you know, the sort of chaotic policy and bullying behavior
(08:49):
of the United States into a sort of a greater
leverage for China itself. I think we saw Australia say,
you know, when China reached out to them, you know, no,
thank you, We're not about to join hands. We saw
Canada do the same. I think the EU is flirting
with China, but you know, they have their own economic
problems with China, and they're also you know, there continue
(09:11):
to be extremely unhappy with China. Support for Russia and Ukraine.
So what I've seen really is that China has not
been able, either through coercive messaging or through sort of
a more positive approach to bring countries to its side.
That being said, I think there are probably some countries,
you know, emerging in middle income economies that are heavily
(09:34):
reliant on China where that kind of coercive tactic is
likely to work. But I think it's important to remember
that while China is the largest trading partner for most
countries in the world, that the US is a larger
export market for most countries in the world, and I
think that's also playing into this.
Speaker 5 (09:53):
So we saw Elizabeth just yesterday up in Canada, we
saw the result of President Trump's kind of verbal attacks
on Canada, fifty first state and all that type of
stuff really united the people of Canada here behind a candidate.
Here is something similar happening in China. Are the people
uniting behind President g on this hey, this nationalism platform?
Speaker 6 (10:18):
Absolutely? I mean, I think the terriffs in that regard
have been a real boon to see jinping into his standing.
I think, you know, previously you saw that there was
a lot of negative sentiment, for example, in social media
and China about the state of Chinese economy, and it
was really directed towards the Chinese government. With the tariffs, basically,
(10:40):
the US has become a scapegoat for all of China's
economic ills, and so there's a rally around the flag
element to what's going on in China. And frankly, I
was in Hong Kong last week, and I will tell
you that there's increasing confidence in China. And I was
at a conference with a lot of leaders from China's
tech sector, and there, you know, they not only feel
(11:03):
that they can get around any kind of export restrictions
or other kinds of tariffs that the US might be
placing on China, but they also just have they're just
looking at the United States and thinking how many own
goals can the US government score here? And so I
just I think that that's what's that is what the
tariffs are triggering, primarily in China.
Speaker 2 (11:25):
A good evening to the Pacific rim on YouTube. Thank
you so much for tuning in with us our conversation
of the month, indeed, perhaps the second quarter. Elizabeth Economy,
Hargrove's senior fellow at the Hoover Institution at Stanford University
here on all of our expertise on China, and now
the America must and will respond. We do this with
(11:47):
reading green and screen. The Secretary Treasury is scheduled to
speak here in twenty minutes. That'll be interesting, Paul.
Speaker 5 (11:54):
Which country has the stronger hand here in negotiations going forward?
Speaker 6 (12:00):
You know, I think to some extent, China has the
stronger hand. I think we had a little bit of
an arrogance on our part because we thought, given that
there's a you know, three hundred billion dollar trade deficit,
and you know, China is so much more reliant on
the US market than the US is on the China
market in terms of exports. I think we thought that
we had the upper hand, but think it ignored a
(12:22):
couple of important facts. Number one, that we are reliant
on China for some very critical inputs like critical minerals
and rare earths magnets that we need for our technology
and defense industries. And in fact, you know, for thirty
percent of the products that we import from China, we
are reliant on them to seventy percent or more, right,
(12:44):
so we have more close to single source supply a
dependency on China than they do on US. So I
think there's that element is playing out. That being said,
the Chinese economy was struggling before we put the tariffs on.
I think you know, many Chinese factories, low and low
margin factories do consumer electronics and apparel and toys, are
(13:09):
extremely concerned because the US market was really important. And
so I do think there are calls now in China
for the Chinese government to recognize actually that President Trump
did blink last week, and to say take the win
and get to the negotiating table. And we just saw
a really interesting article come out in the Chinese newspaper Unsigned,
(13:32):
which signals that it's coming from the Chinese government that
basically said, you know, go look at Mao's on protracted
war and get hunkered down and stop talking about getting
back to the negotiating table.
Speaker 7 (13:43):
Well, this is the heart of me.
Speaker 6 (13:44):
Yeah, there's a debate going on in China, but this is.
Speaker 2 (13:47):
Brilliant Elizabeth economy. This is the heart of the matter.
As we have experts like you, I think at Leland
Miller China based book of course, the Giants Spence and
Orville Shell. You read the material and you say this
is the voice of the government. Now. In your book
The Third Revolution, you talk about the lion awakens, you
talk about the road forward because of President Trump. Is
(14:10):
the road forward for g radically different now? And does
he have a new power given to him by the
stumbling of President Trump?
Speaker 6 (14:22):
I mean, I think it depends on how long the
president stumbles and in which direction. I mean, I think
there's a stumble, one might say on the tariffs. There's
a stumble on, you know, undercutting investment in our universities.
There's probably a stumble and moving away from you know,
clean energy, which is you know, the choice of most
of the world for the twenty first century. So while
(14:42):
we're looking backwards to the nineteen fifties and the rest
of the world is looking to twenty fifties. I think
there are a number of different stumbles. But it really
we're only one hundred days into this administration and there's
plenty of time for I think, course correction, and it's
really going to depend on people, I think in this industry.
Speaker 2 (15:00):
I got to ask this question, Paul. It's really it's
a really rude, rude question. If the Secretary of Commerce
now took Raymundo manners one oh one, would Howard Lutnik
be a lot more effective if he had the grace
of your former boss at Commerce.
Speaker 6 (15:21):
I don't think it's just a matter of grace. I
think I think there's an essential fundamental understanding of the
way the government works, of the way the economy works,
and an understanding of what American workers and businesses want most.
I think, you know, she brings the whole package. You know,
(15:42):
I'm not exactly sure what Secretary Lutnik is bringing to
the table at this point.
Speaker 2 (15:47):
Well, that was diplomatic exactly, Elizabeth.
Speaker 5 (15:51):
I think about a company like Apple, it's just so
inextrictably linked to China, And then I kind of just
take that out to the overall US. Are the two
sides here really prepared to decouple here? It just seems like,
in this global world, can you really do that? Does
either side really want that?
Speaker 3 (16:11):
You know?
Speaker 6 (16:11):
I think certainly US business, most US business that's engaged
in business, whether exporting or invested manufacturing in China, is
not interested in a complete decoupling. I do think based
on COVID, based on the Russia's invasion of Ukraine, there
has been a shift in many boardrooms in terms of
their understanding of you know, an overdependence on any single source,
(16:33):
in particular China. But I don't think there's an interest
in decoupling. That being said, I think within the US
government there are definitely people at this senior most levels
who wouldn't mind a complete decoupling. And I think, look,
you know, supply chain movement began during the Biden administration.
There was definitely a push to you know, encourage companies
(16:55):
to rethink their China strategy and to begin to manufacture elsewhere.
Under the Trump administration, I think that's you know, ten
you know, magnified tenfold. And I think there are people
who are actually driving toward decoupling. It would include someone
like Peter Navarro in that group, and they do have
the President's here, so you know, I'm not sure where
(17:16):
this you know all is going. I think the administration
is actually divided.
Speaker 2 (17:20):
One final question, doctor Economy, and you mentioned earlier that
the Trump administration is trying to look back to another
time and place. A g platform was to look back
to maw in all the different certitudes of the fifties
and the sixties in China. Do the people of China
want to look back.
Speaker 6 (17:40):
So I would say that Sheijinping looked back politically and
know most people in China don't support the very regressive
and repressive policies that Sheijinping has instituted. On the other hand,
when it comes to innovation and technology, Sheijinping is full
on twenty first century and beyond. And I think that's
(18:01):
what we're seeing, not only in the innovation sector, but
in the deployment of new technologies of robotics and AI.
That's where they're really going to eat our launch if
we don't get our app together. So I think politically, yes,
backwards move, but in terms of tech and innovation, they're
charging one hundred times faster forward than we are.
Speaker 2 (18:20):
Elizabeth Economy, Thank you so much, Hargo's senior fellow the
Hoover Institution.
Speaker 1 (18:30):
You're listening to the Bloomberg Surveillance Podcast. Catch us live
weekday afternoons from seven to ten am Eastern Listen on
Applecarplay and Android Auto with the Bloomberg Business app, or
watch us live on YouTube.
Speaker 2 (18:43):
Thank you Ethan Harris for your support. Legendary at Lehman
at Bank of America. Ethan Harris said, I'll be retired
but I'm not just writing on LinkedIn. Absolutely brilliant, Ethan.
Thank you for the LinkedIn expertise. I love your headline
of a few days ago, two weeks ago. Beatings will
continue until Morell improves. Tell us doctor Harris, how bad
(19:08):
the beatings are for the American consumer.
Speaker 8 (19:12):
Well, one of the amazing things that we've seen in
the last three months is that the negotiating tactic of
the Trump administration is to create uncertainty, to put your
opponent off the balance by talking in very aggressive terms.
This is certainly the way the trade war is playing out.
(19:33):
It's also true for downsizing government and for encouraging immigrants
to self deport. So you've got this kind of shock
and awe approach to trying to change policy. But the
problem is that everyone's hearing this, including business leaders and
consumers and investors, and so it's really bad for the
(19:57):
markets and the economy to have this super aggress talking
to approach. And that's what I mean by the beatings.
It's kind of like, you know, it's if they don't
stop this tactic, we will get.
Speaker 2 (20:10):
The appointed and assigned is Bessant of the hedge fund industry.
Bessant used to work for mister Soros Bessant, who is
Secretary Treasury. Do you believe the secretary can modify the
beatings that will continue until Morell improoves.
Speaker 8 (20:26):
I think he's the best hope for that. I do
think that, uh, he's gotten the ear of the President
pointed out that the way we're heading, you're gonna have
a really bad equity market going forward. And he's I
think the architect of the recent softening of rhetoric. So
(20:48):
he's he's gonna he's helping. And because he comes from
a more moderate background than a lot of the other advisors.
The problem is, of course that I don't think this
is going to end quickly. This back and forth and
threats and counter threats and nasty negotiations. We have to
get used to it. That's this is the new normal
for a while here, and so it's going to continue
(21:11):
to be a big headwind to the economy.
Speaker 2 (21:13):
Surveillance idea, Paul, should we have doctor Harrison every time
I think we're waiting for a press conference?
Speaker 3 (21:18):
I think is brilliant.
Speaker 5 (21:20):
I think we can do that.
Speaker 8 (21:20):
You're gonna have to raise my pay.
Speaker 5 (21:24):
We know some people here, Hey, I mean you do
an undergraduate degree and then a PhD in economics. I'm
guessing you had a class or two on tariffs. Are
there scenarios where tariffs are effective economic policy? And are
we employing them in that way this time?
Speaker 8 (21:41):
Well, I think that there's an agreement among economists that
there are issues with completely free trade that you need
to You want to protect regional economies when there's a
flood of foreign competition coming in, you don't want to
let that just roll over the economy without any support.
And we didn't do that. We didn't support local communities.
(22:02):
So there were problems in the expansion of free trade,
and they're all in. A lot of that was China.
It was China just dumping really cheap stuff on global markets.
So I think that economists would agree that you need
to deal with China and the unfair trade practices of China,
but that's not what they're doing. China should be the focus.
(22:25):
Why are we beating up on Canada and Mexico. We
have a free trade agreement with them, They are closest allies.
Why are we beating up in Europe? Europe's trade is
relatively unfettered with the United States, so it's not the
right way to go about it. The tariffs should be
focused on issues of geopolitics and on unfairness, not this
(22:49):
kind of us against everyone. America alone is not a
good policy.
Speaker 5 (22:55):
Ethan. I think some of the uncertainty that you talk
about that we all kind of are are are hearing
about from companies as they talk about their guidance. Is
it uncertainly as it leads to economic growth or is
it more on the inflation side. Where's the bigger concern
for you?
Speaker 8 (23:11):
Well, I'm actually a bit more worried about the growth
hit here. You know what's happening right now is that
the corporate sector is like a deer in the headlights.
They don't know what to do. I mean, if you're
if you're a corporation that has heavy dealings with the
federal government, that deal has a immigrant workforce that is
(23:34):
involved in trade, all of those sectors are being touched
by high levels of uncertainty. You can't figure out where
to put your next plant if you don't know where
what tariffs are going to be four years from now.
You can't You can't go out and hire workers if
you know that your workplace is going to be rated
(23:56):
any minute and you may end up with serious penalties.
You can't do government. It's anything related to government if
you don't know who's going to be working at the agency.
So it's uh, it's very broad. Uh you know, uncertainty
shock that that just is freezing up activity.
Speaker 2 (24:16):
But this is Ethan Harris rumor as he's retired. I
don't buy it for a minute of Lehman and iconic
at Bank of America out of Scenic Clark University, oldest
university in New English. Yeah, it's out there a big background.
Speaker 8 (24:34):
I'm actually on a golf course right now.
Speaker 2 (24:36):
That's good. Okay, that's good to know Ethan to go
to Ned Phelps, the giant so supportive of what I do.
In his modern word of dynamism, his President Trump broken
America's dynamism.
Speaker 8 (24:53):
I don't think he's broken it, but he certainly puts
some major sand in the gears. You know, there's a
short run problem that we've been talking about, which is
the kind of deer and headlights effect on business activity.
There are other things, though, that are even deeper, fundamental issues,
like what's going to happen to our stem community, our
scientific community going forward. This is the secret sauce of
(25:18):
American capitalism. We have the best tech sector in the world,
we have the best scientists in the world, and we
draw the smartest people in the world into the US
educational system. That's actually a longer run kind of damage
that nobody's really talking about because it seems like a
political fight. But we really need to get the smartest
(25:41):
people in the world to keep coming to the US
because Americans don't seem to want to do science. You
know that we've got too many economists not enough engineers.
But yeah, there's little bits of more permanent effects we
start to play out, and I would point to that
as my number one long run.
Speaker 5 (26:02):
Concern ethan what role, if any, can the Federal Reserve
play in kind of inserting itself in this time of
uncertainty here?
Speaker 8 (26:13):
I mean, they're a steady hand. I think that Pole
is doing exactly what he should do. Keep reiterating that
we're an independent central bank. We don't play politics. We
can't react to what we're seeing right now because there's
too much uncertainty and we don't know whether we're dealing
with an inflation problem or a growth problem. And so
I think they're a steady end on the Tiller here
(26:37):
and that's about all they can do.
Speaker 2 (26:39):
Fold in the fiscal analysis this morning, folks in the
zeitgeist is the two Congresses, one looking for a hurried,
rushed large text program and the other with some patients
to guess what another debt ceiling debate. This debate's different,
doctor Harris, because of our fiscal situation, isn't it.
Speaker 8 (27:00):
Yeah. I think that there's certainly a fiscal hawk wing
of the Republican Party that's making it harder to reach
these budget deals. And the deficit is out of control,
and you look at the proposals on the table. X
cuts are much bigger than the spending cuts. So it's
(27:22):
not like we're in the process of coming to terms
with this, and so it's going to continue to be
a weight around uncertainty in the markets. It may be
starting to affect the bond market. It may be the
bond market is starting to wonder whether there's an adequate
funding for the massive and growing budget deficit, particularly when
(27:44):
you have these trade wars going on. So it's something
we need to keep one eye on. Even though it's
old stuff and we've seen these fights over and over again.
They usually end up okay. But it's the stakes are
higher now, Ethan.
Speaker 2 (28:02):
Let me slip in one final question here, and we
may have to cut you off as we go, but
let's be optimistic. And that is simply the recession call.
You are expert at this, at Lehman Brothers, at the
Bank of America, many are positing a ninety recession. I'll
let you decide. Isn't a huge body of America in
(28:22):
recession right now? No?
Speaker 8 (28:26):
I don't think so. I think we're entering. I don't
think we've tipped into a recession yet, and I do
think it's in the hands of the Trump administration. They
can decide are they going to continue to back off
from shock and awe? And by the way, I think
the best in today will probably try to be assuring
for the markets. If that continues, I think we avoid
(28:49):
a recession. If it doesn't, the damage just builds and
we do get recession. So I'm a two armed economist.
You know, I'm gonna tell you, maybe we get a
recession and maybe we don't.
Speaker 2 (29:00):
Where you retired for one or two days, how did
that work, Ethan? I think it was zero zero.
Speaker 8 (29:08):
Yeah, I never really wanted to fully retire. I love
this stuff. This is amazed time to be an economist,
no question about it.
Speaker 2 (29:16):
I can speak for all of Bloomberg. Ethan Harris, thank
you so much for the output. Again, folks, I can't
state enough the LinkedIn what Microsoft has done there, the
LinkedIn value when you see it in the essays of
Ethan Harris. Thank you so much, doctor Harris for a
brief involving a lot of perspective over at the years.
Speaker 1 (29:36):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Applecarplay 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 2 (29:53):
It is an honor in knowing Mark Kearney for years.
I should state that, And of course mister Kearney did
board work for Bloomberg ELP. I want to state that
as well. We have seen history in Canada. We went
out today and we looked for a voice that understands
(30:13):
completely the modern Canada. David Dodge Queen's University, and of
course Princeton is the esteemed economist of Canada. He's the
former governor of the Central Bank of Canada equivalent to
our chairman of the Federal Reserve. So honored that doctor
Dodge could join us this morning, Doctor Dodge, what does
(30:35):
the new Canada look like?
Speaker 7 (30:39):
Slightly confused, because it's the first time and a very
long time, that you basically got a parliament that has
just the two parties, the minor parties, which have been
very important in being part of governing coalition. We're basically
decimated last night. Mister Corney is now Prime Minister without
(31:07):
a a dominant majority. He's a few seats still, a
few seats short, and so he is going to be governing, governing,
having to govern with his eyes always on his ability
(31:33):
to get the votes in Parliament.
Speaker 2 (31:35):
How will he defend against the abruptness, some would say
rudeness of a request for a fifty first state. I
mean this, this dream of selected Americans goes back easily
into the nineteenth century. David Dodge, How should mister Kearney,
how should Canada push away the idea of a fifty
(31:56):
first state?
Speaker 7 (31:59):
Well, the first thing is the day to day negotiations
which are going to have to take place on trade, uh,
not just the Canada, US, but the three countries in
North American h North American agreement, that's all got to
(32:19):
be redone and that that's kind of a very practical
thing that mister Carney is going to have to focus
on as well, uh, as well the President of Mexico.
And that all becomes really important to understand. Then what
(32:40):
is the role of the United States in terms of
a trade block, if you will, in the world, as
the world seems to be dividing itself in the blocks.
And then what how does North America fit? Because obviously
(33:04):
North America is stronger taken as a whole uh than not.
And so the practical thing is going to be to
discuss with the American administration not just the economic can
trade arrangements, but the security arrangement for North America, which
(33:29):
is particularly important. How we're going to deal with the Arctic,
which is very important. So when you say how will
we deal with it? What we'll start with the practicalities
of dealing with those things that have to be dealt
with on both sides, the American side and ourselves.
Speaker 5 (33:52):
Doctor Dodge. Realistically, what can mister Carney do to try
to reorient the Canadian economy with less reliance on the
US trade.
Speaker 9 (34:02):
Yeah, that that that is the big issue that that
was has been the issue basically since the Great Financial Crisis,
when investment has been.
Speaker 7 (34:14):
Lagging UH in Canada UH and innovation has been lagging UH.
And so that that requires really quite a major reset.
And the difficulty in that reset. It essentially means that
there's going to be a smaller share of GDP UH
(34:37):
is going to go to consumption and a larger share
has to go to investment. And that means for the
ordinary middle class, that means slower growth in consumption UH
in the short run over the next few years in
order to get UH, get productivity up and hence have
(35:00):
growth in the future.
Speaker 2 (35:01):
David Dodge one final question, if we may Ken Dryden
change the perspective of America on Canada not only in
the hockey with the Montreal Canadians, but he changed college
hockey at Cornell as well working as a public official
in Canada. And you know Ken Dryden's well quote in
the Toronto Globe and Mail, we have never been a
(35:23):
big guy like the United States. What does Canada need
to do to defend against the big guy?
Speaker 7 (35:31):
Well, defend the best defense is a good offense, and
that offense has to be to come with a proposition
on trade and security that is good not just for Canada,
but good good for the United States. It has to
be good for both parties, and so that that will
(35:53):
be that will be the issue going forward. And he
Mark Carney is laid out some of the key parameters
in that, and his problem is going to be trying
to ensure that there is some way to manage the
(36:18):
fact domestically that for a period of time the amount
of the average household as for consumption is not going to.
Speaker 2 (36:26):
Grow, right, David, we have to leave it there, of
a doctor Dodge, thank you so much for joining Bloomberg
this morning. David Dodge, of course, the seventh Governor of
the Bank of Canada, thrilled that it could be with
us on some important day north of our border.
Speaker 1 (36:47):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Apple Corplay and Android
Auto with the Bloomberg Business app. You can also watch
us live every weekday on YouTube and always on the
Bloomberg terminal.
Speaker 2 (37:02):
It's the key reason that YouTube is growing, of course,
is Lisa Monteo's newspapers. Let us begin.
Speaker 10 (37:08):
I need some bird chirping again.
Speaker 8 (37:10):
That's what we need to make this go through.
Speaker 10 (37:12):
I want to start with an interesting look at those
buy now, pay later options like apps like after pay Klarna.
So they're popular for luxury ittems like appliances, things like that.
But now there's an interesting take. A new study says
more people are using it for every day items like grocery. Really,
so they're using these leader never used. Tilarna is really popular,
so I know a lot of people who use that.
(37:34):
So it showed that one quarter shoppers have used a
service for groceries. That's up fourteen percent from a year ago.
So more people are doing it. But here's a kicker
forty one percent. So they paid back that loan late
over the past year, so they're using the thank you
for the bird chirping. Now I feel better. They're using
these apps and things like that, but they're not even
(37:54):
paying them back on time too.
Speaker 5 (37:57):
I'm guessing they're high.
Speaker 1 (37:59):
See that's the thing.
Speaker 10 (38:00):
They're popular who for people want to avoid the risks
like with credit cards, are paying interests on a loan.
But the thing is is that it can also lead
to overspending and people are kind of extending their debt
even further because of these and that's the problem with it.
But it just goes an interesting take on like how
inflation is starting to affect people in different ways.
Speaker 2 (38:18):
That one sign huge story and it's not daily, it's percolating. Say,
huge story just on groceries.
Speaker 5 (38:25):
Yeah, that's not next we groceries. Okay.
Speaker 10 (38:27):
Single women across Asia they're opening their hearts and their
wallets for a new mobile dating game. Okay, it's called
Love and Deep Space, and women love the fictional character.
His name is Silas. He's six foot two, red eyes
not blue, twenty eight, he's an arees.
Speaker 2 (38:43):
Okay, does they have a trust fund?
Speaker 10 (38:45):
Does not have a trust fund. But it's not just him,
there's like five love interests. But the thing is the
app is free to download, but women are on this
thing for like four hours a day, and they're spending
not on the game because it's free, but they spend
on the things kind of like how these other video
games you use them for like outfits and you buy
you know, extra money, did it spend on this or
(39:06):
that way? And they're spending like some spend like three
thousand dollars a year, you know, to on all these
like online different things to improve their character. But it's
huge in Asia, Like there's hundreds of women are showing
up to these live events for this game. It's crazy
to me.
Speaker 2 (39:25):
It's the digital you know, this new digital world we're
living in and people are basically running through their charge
card without knowing it and you know they're consuming Yep.
It's it's a you know, forget about the finance of it.
It's a psychology.
Speaker 10 (39:39):
Yes, and they say they like the idea of dating
but not having to deal with a real man.
Speaker 2 (39:45):
It's a fictional guy. It's a fictional guy.
Speaker 8 (39:47):
Yes, okay, yeah, right, there's nothing like that.
Speaker 2 (39:50):
I think there was a diver who called me.
Speaker 10 (39:52):
That, okay, this could be dangerous, so watch out for this.
There's another way to make purchases online and that's for
chat GPT. Open Aye has been trying to extend people
were having more users, so they have the competition from Anthropic,
you know, Alphabet's Google Elon musk Xai. So how it
(40:13):
works is that they have about like five hundred million
active users. So you go on there, you compare, you
can ask to compare different products and it will actually
send you a link and you can click on that
link and go to that person's website and or company's
website and buy the product there. So now it's another
way that you can buy different products off you can
spend money. It makes it like it makes it easy
(40:37):
to buy things.
Speaker 5 (40:39):
So this whole AI thing I think is a existential
threat to Google search business.
Speaker 7 (40:45):
It is.
Speaker 5 (40:45):
I don't understand it. I'm surprised this stock is hanging
in there. Maybe maybe I just don't get it, But man,
I could see a scenario where well, type it into
the Google search. It's just it ain't happening.
Speaker 2 (40:56):
But what you just said is really important. We don't
get it.
Speaker 10 (41:01):
Yeah, we don't wonder because Google just said their search engine,
you know, numbers great.
Speaker 5 (41:06):
I know.
Speaker 10 (41:07):
And you're looking at this and you're saying it doesn't
make sense.
Speaker 2 (41:10):
Whatever, Potato, thanks so much the newspaper. She's off to
look at some Asian data things. I don't understand.
Speaker 1 (41:18):
This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each weekday,
seven to ten am Eastern on Bloomberg dot com, the
iHeartRadio app tune in, and the Bloomberg Business App. You
can also watch us live every weekday on YouTube and
(41:38):
always on the Bloomberg terminal
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Surveillance Podcast. Catch us live weekdays at seven am Eastern
on Apple CarPlay or Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
(00:25):
us live on YouTube.
Speaker 2 (00:27):
A really interesting path to investment management. Russ coster Rich
is out of Brandeis and Boston College Law, also at Columbia.
Really just a wonderful set of academics. We're thrilled at.
Russ Costs could join this morning from Blackrock, where he
has a focus on scientific active equities. Rostcon strance is
(00:51):
science right now is a new study of international investment.
You push against that, you say beware a focus on
international investment.
Speaker 3 (01:01):
Discuss that and more and tom so right now.
Speaker 4 (01:05):
We've had an unusual start to the year, to put
it mildly, and one of the many things that's been
going on which was not expected when we started twenty
twenty five, was this dramatic outperformance of international markets, particularly Europe,
and people will remember that began early in the year,
before we really knew the full extent of the tariffs.
But it's actually continued, albeit at a slower pace. So,
(01:28):
you know, one of the questions we're getting from our
clients frequently with the Global Allocation Fund is should we
be more invested in international? And while I do think
that there's always a good argument for international diversification, it's
not clear to us that that strong outperformance of Germany
of the rest of Europe that began the year can
(01:48):
continue in an environment in which economic growth is slowing.
There's a lot of policy and certainty, and trade is
likely to be very different than it's been for the
past several decades. So we are still of the you
that many of the best companies in a multi assid
portfolio are going to be from the United States.
Speaker 5 (02:06):
So, Russ, how do you think about some of this?
You know, all the headwinds investors are trying to deal
with right now. Has that changed the way you allocate
between stocks and bonds and maybe alternatives? Are you trying
to get at play a little closer to the vest
a little bit more conservative or defensive? How are you
guys playing this?
Speaker 4 (02:25):
Well, that's definitely the case you and we have brought
in our risks. So we had an equity overweight for
most of twenty and twenty four actually much of twenty
three as well. We've brought that closure to home. We've
added a little bit of duration back into portfolio. So yes,
given the uncertainty, we're definitely thinking about where do we
want to bring.
Speaker 3 (02:43):
Risk and where do we want to make our bests.
Speaker 4 (02:45):
But there are a couple of other areas too that
I think go to your question, one of which our
bond's going to work as a hedge.
Speaker 3 (02:51):
Now we've shifted from.
Speaker 4 (02:53):
An environment where for a lot of the last three
years the concern was inflation to more of a concern
about recession. Session is the issue? Then generally bonds work
better and mitigating equity risk. The question is are we
going to get a recession or we can to see
higher inflation in the back of the tariffs. That's one
thing we're wrestling with. The other, which has definitely had
an impact on how we allocate and goes to the
(03:14):
question about alternatives, is gold Right now? The biggest risk
to markets is uncertainty. There's also a risk about whether
or not international investors are going to trim their allocation
to dollar denominated assets. In that environment, we found that
gold is actually very helpful in the portfolio obviously it
record highs. That's another place we've actually been increasing our
(03:37):
bet to over the last three to six months.
Speaker 5 (03:41):
So you know, in terms of fixed income RUSS, is
there any call here to take credit risk or do
you just sit kind of in the three to five
year treasury kind of belly of the curve kind of thing.
Speaker 4 (03:52):
Well, I think it's actually both. I think we do
like the belly of the curve in general. We've been
cautious about the long end of the curve for a
while and it really hasn't done too much so far
year to date. But absolutely we think that credit is
one of the areas you can actually find opportunity. And
the reason is there's a lot of risk on the economy.
But even if we were to get a recession, our
views would be a mode recession. Corporate balance sheets, at
(04:15):
least for large companies, are in good shape. Many of
them turned out their debt back in twenty and twenty one.
In other words, that extended the maturity of their debt
and for the first time in years, really more than
a decade, you can build a portfolio with high quality
credit get seven seven and a half percent. That's looking
pretty good at an environment where equity returns are obviously
(04:37):
more questionable and you get more volatility. So credit is
one of the areas we definitely like in a multi
asset portfolio.
Speaker 2 (04:43):
Russ got to get you into the studio here to
do it much longer, and you a couple more questions
here before we dash to Canada risk costurage like the
Blackrocks Science and Technology Fund. What Tony Kim is doing.
The bottom line is, is what retail loves big tech companies
as well with it AWE as you mentioned the Maelstrom
of the Q one the first one hundred days of
(05:04):
President Trump. Are the persistent cash flows of those science
and technology leaders in Nvidia, Amazon, Microsoft, the rest. Are
they still in place?
Speaker 4 (05:16):
I think so, Tom Now Tony could do much more
adjustice to that question than I Can't sure, but I
think it's the right question because this is something that's
going to become increasingly important. We came into the year
expecting a stronger economy. If we have a weaker economy,
which is almost certain, we're going to focus on companies
that can produce reliable cash flow. And yes, there are
questions about the buildout on AI, but the reality is
(05:40):
many of the companies you mentioned. These are platform companies.
Their profitability is much higher than average, their earnings are
much more.
Speaker 3 (05:48):
Consistent than average.
Speaker 4 (05:50):
This is still an opportunity long term for a lot
of investors. And I said in the beginning, while we
still like the US because we find more of these
companies in the US than other regions, Russ.
Speaker 2 (06:00):
We got to leave it there. I'm so sorry. Russ Costrich.
Please get into her studio. He's got to get into
the studio.
Speaker 4 (06:05):
Sure.
Speaker 2 (06:05):
I mean, you know exactly, Russ. The food court. You'll
love it. Russ Costrich, Black Rock, Thank you.
Speaker 1 (06:11):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Applecarplay 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 2 (06:27):
If she was in Michigan and did a paper or
whatever and it ended up being a book, The River
runs Black, think of what Oppenheimer, Barbie, that's the way
the River Run Black worked. Within the academics on China,
Elizabeth Economy immediately rose to a claim on analysis of
the Pacific Rim. She's followed up with any set of books,
(06:49):
including the World according to China and The Third Revolution.
We know her public service to the nation with Secretary
of Romando at Commerce. She is the Hargro Senior Fellow
co Director US China and World Program. This on the
Left Coast Hoover Institution at Stanford University, Doctor Economy. When
(07:10):
you hear diplomats of China in an organized manner called
the President of the United States for bullying, how do
you translate that?
Speaker 6 (07:21):
I think it's pretty straightforward. Look, I think right now
the two countries aren't a game of chicken, and the
Chinese are waiting for a real signal from President Trump
in the form of dropping the unilateral tariffs or reducing
them substantially. I think actually President Trump did blink last
(07:41):
week when he said that he expected to reduce those tariffs.
But I think the Chinese decided not to recognize that.
At least the Chinese officials decided not to recognize it.
Maybe they saw it more as a wink than a blink,
and they don't trust it. But I think, you know,
it's not just the Chinese, frankly world, and I think
China's being pretty confident in their assessment of President Trump,
(08:04):
and that you know, many other countries are also looking
at the United States in the same way.
Speaker 2 (08:09):
Within the gi real politic. Do they have the power
in the leverage to say to other nations, if you
dance with President Trump, you won't dance with China. Do
they have that power to say that to act on that.
Speaker 6 (08:27):
You know, It's been interesting to me as I've watched
the Chinese go around, first with the charm offensive in
Asia and Europe and then with the more coercive sort
of approach that you just noted. I've been surprised at
the extent to which China has not managed to translate,
you know, the sort of chaotic policy and bullying behavior
(08:49):
of the United States into a sort of a greater
leverage for China itself. I think we saw Australia say,
you know, when China reached out to them, you know, no,
thank you, We're not about to join hands. We saw
Canada do the same. I think the EU is flirting
with China, but you know, they have their own economic
problems with China, and they're also you know, there continue
(09:11):
to be extremely unhappy with China. Support for Russia and Ukraine.
So what I've seen really is that China has not
been able, either through coercive messaging or through sort of
a more positive approach to bring countries to its side.
That being said, I think there are probably some countries,
you know, emerging in middle income economies that are heavily
(09:34):
reliant on China where that kind of coercive tactic is
likely to work. But I think it's important to remember
that while China is the largest trading partner for most
countries in the world, that the US is a larger
export market for most countries in the world, and I
think that's also playing into this.
Speaker 5 (09:53):
So we saw Elizabeth just yesterday up in Canada, we
saw the result of President Trump's kind of verbal attacks
on Canada, fifty first state and all that type of
stuff really united the people of Canada here behind a candidate.
Here is something similar happening in China. Are the people
uniting behind President g on this hey, this nationalism platform?
Speaker 6 (10:18):
Absolutely? I mean, I think the terriffs in that regard
have been a real boon to see jinping into his standing.
I think, you know, previously you saw that there was
a lot of negative sentiment, for example, in social media
and China about the state of Chinese economy, and it
was really directed towards the Chinese government. With the tariffs, basically,
(10:40):
the US has become a scapegoat for all of China's
economic ills, and so there's a rally around the flag
element to what's going on in China. And frankly, I
was in Hong Kong last week, and I will tell
you that there's increasing confidence in China. And I was
at a conference with a lot of leaders from China's
tech sector, and there, you know, they not only feel
(11:03):
that they can get around any kind of export restrictions
or other kinds of tariffs that the US might be
placing on China, but they also just have they're just
looking at the United States and thinking how many own
goals can the US government score here? And so I
just I think that that's what's that is what the
tariffs are triggering, primarily in China.
Speaker 2 (11:25):
A good evening to the Pacific rim on YouTube. Thank
you so much for tuning in with us our conversation
of the month, indeed, perhaps the second quarter. Elizabeth Economy,
Hargrove's senior fellow at the Hoover Institution at Stanford University
here on all of our expertise on China, and now
the America must and will respond. We do this with
(11:47):
reading green and screen. The Secretary Treasury is scheduled to
speak here in twenty minutes. That'll be interesting, Paul.
Speaker 5 (11:54):
Which country has the stronger hand here in negotiations going forward?
Speaker 6 (12:00):
You know, I think to some extent, China has the
stronger hand. I think we had a little bit of
an arrogance on our part because we thought, given that
there's a you know, three hundred billion dollar trade deficit,
and you know, China is so much more reliant on
the US market than the US is on the China
market in terms of exports. I think we thought that
we had the upper hand, but think it ignored a
(12:22):
couple of important facts. Number one, that we are reliant
on China for some very critical inputs like critical minerals
and rare earths magnets that we need for our technology
and defense industries. And in fact, you know, for thirty
percent of the products that we import from China, we
are reliant on them to seventy percent or more, right,
(12:44):
so we have more close to single source supply a
dependency on China than they do on US. So I
think there's that element is playing out. That being said,
the Chinese economy was struggling before we put the tariffs on.
I think you know, many Chinese factories, low and low
margin factories do consumer electronics and apparel and toys, are
(13:09):
extremely concerned because the US market was really important. And
so I do think there are calls now in China
for the Chinese government to recognize actually that President Trump
did blink last week, and to say take the win
and get to the negotiating table. And we just saw
a really interesting article come out in the Chinese newspaper Unsigned,
(13:32):
which signals that it's coming from the Chinese government that
basically said, you know, go look at Mao's on protracted
war and get hunkered down and stop talking about getting
back to the negotiating table.
Speaker 7 (13:43):
Well, this is the heart of me.
Speaker 6 (13:44):
Yeah, there's a debate going on in China, but this is.
Speaker 2 (13:47):
Brilliant Elizabeth economy. This is the heart of the matter.
As we have experts like you, I think at Leland
Miller China based book of course, the Giants Spence and
Orville Shell. You read the material and you say this
is the voice of the government. Now. In your book
The Third Revolution, you talk about the lion awakens, you
talk about the road forward because of President Trump. Is
(14:10):
the road forward for g radically different now? And does
he have a new power given to him by the
stumbling of President Trump?
Speaker 6 (14:22):
I mean, I think it depends on how long the
president stumbles and in which direction. I mean, I think
there's a stumble, one might say on the tariffs. There's
a stumble on, you know, undercutting investment in our universities.
There's probably a stumble and moving away from you know,
clean energy, which is you know, the choice of most
of the world for the twenty first century. So while
(14:42):
we're looking backwards to the nineteen fifties and the rest
of the world is looking to twenty fifties. I think
there are a number of different stumbles. But it really
we're only one hundred days into this administration and there's
plenty of time for I think, course correction, and it's
really going to depend on people, I think in this industry.
Speaker 2 (15:00):
I got to ask this question, Paul. It's really it's
a really rude, rude question. If the Secretary of Commerce
now took Raymundo manners one oh one, would Howard Lutnik
be a lot more effective if he had the grace
of your former boss at Commerce.
Speaker 6 (15:21):
I don't think it's just a matter of grace. I
think I think there's an essential fundamental understanding of the
way the government works, of the way the economy works,
and an understanding of what American workers and businesses want most.
I think, you know, she brings the whole package. You know,
(15:42):
I'm not exactly sure what Secretary Lutnik is bringing to
the table at this point.
Speaker 2 (15:47):
Well, that was diplomatic exactly, Elizabeth.
Speaker 5 (15:51):
I think about a company like Apple, it's just so
inextrictably linked to China, And then I kind of just
take that out to the overall US. Are the two
sides here really prepared to decouple here? It just seems like,
in this global world, can you really do that? Does
either side really want that?
Speaker 3 (16:11):
You know?
Speaker 6 (16:11):
I think certainly US business, most US business that's engaged
in business, whether exporting or invested manufacturing in China, is
not interested in a complete decoupling. I do think based
on COVID, based on the Russia's invasion of Ukraine, there
has been a shift in many boardrooms in terms of
their understanding of you know, an overdependence on any single source,
(16:33):
in particular China. But I don't think there's an interest
in decoupling. That being said, I think within the US
government there are definitely people at this senior most levels
who wouldn't mind a complete decoupling. And I think, look,
you know, supply chain movement began during the Biden administration.
There was definitely a push to you know, encourage companies
(16:55):
to rethink their China strategy and to begin to manufacture elsewhere.
Under the Trump administration, I think that's you know, ten
you know, magnified tenfold. And I think there are people
who are actually driving toward decoupling. It would include someone
like Peter Navarro in that group, and they do have
the President's here, so you know, I'm not sure where
(17:16):
this you know all is going. I think the administration
is actually divided.
Speaker 2 (17:20):
One final question, doctor Economy, and you mentioned earlier that
the Trump administration is trying to look back to another
time and place. A g platform was to look back
to maw in all the different certitudes of the fifties
and the sixties in China. Do the people of China
want to look back.
Speaker 6 (17:40):
So I would say that Sheijinping looked back politically and
know most people in China don't support the very regressive
and repressive policies that Sheijinping has instituted. On the other hand,
when it comes to innovation and technology, Sheijinping is full
on twenty first century and beyond. And I think that's
(18:01):
what we're seeing, not only in the innovation sector, but
in the deployment of new technologies of robotics and AI.
That's where they're really going to eat our launch if
we don't get our app together. So I think politically, yes,
backwards move, but in terms of tech and innovation, they're
charging one hundred times faster forward than we are.
Speaker 2 (18:20):
Elizabeth Economy, Thank you so much, Hargo's senior fellow the
Hoover Institution.
Speaker 1 (18:30):
You're listening to the Bloomberg Surveillance Podcast. Catch us live
weekday afternoons from seven to ten am Eastern Listen on
Applecarplay and Android Auto with the Bloomberg Business app, or
watch us live on YouTube.
Speaker 2 (18:43):
Thank you Ethan Harris for your support. Legendary at Lehman
at Bank of America. Ethan Harris said, I'll be retired
but I'm not just writing on LinkedIn. Absolutely brilliant, Ethan.
Thank you for the LinkedIn expertise. I love your headline
of a few days ago, two weeks ago. Beatings will
continue until Morell improves. Tell us doctor Harris, how bad
(19:08):
the beatings are for the American consumer.
Speaker 8 (19:12):
Well, one of the amazing things that we've seen in
the last three months is that the negotiating tactic of
the Trump administration is to create uncertainty, to put your
opponent off the balance by talking in very aggressive terms.
This is certainly the way the trade war is playing out.
(19:33):
It's also true for downsizing government and for encouraging immigrants
to self deport. So you've got this kind of shock
and awe approach to trying to change policy. But the
problem is that everyone's hearing this, including business leaders and
consumers and investors, and so it's really bad for the
(19:57):
markets and the economy to have this super aggress talking
to approach. And that's what I mean by the beatings.
It's kind of like, you know, it's if they don't
stop this tactic, we will get.
Speaker 2 (20:10):
The appointed and assigned is Bessant of the hedge fund industry.
Bessant used to work for mister Soros Bessant, who is
Secretary Treasury. Do you believe the secretary can modify the
beatings that will continue until Morell improoves.
Speaker 8 (20:26):
I think he's the best hope for that. I do
think that, uh, he's gotten the ear of the President
pointed out that the way we're heading, you're gonna have
a really bad equity market going forward. And he's I
think the architect of the recent softening of rhetoric. So
(20:48):
he's he's gonna he's helping. And because he comes from
a more moderate background than a lot of the other advisors.
The problem is, of course that I don't think this
is going to end quickly. This back and forth and
threats and counter threats and nasty negotiations. We have to
get used to it. That's this is the new normal
for a while here, and so it's going to continue
(21:11):
to be a big headwind to the economy.
Speaker 2 (21:13):
Surveillance idea, Paul, should we have doctor Harrison every time
I think we're waiting for a press conference?
Speaker 3 (21:18):
I think is brilliant.
Speaker 5 (21:20):
I think we can do that.
Speaker 8 (21:20):
You're gonna have to raise my pay.
Speaker 5 (21:24):
We know some people here, Hey, I mean you do
an undergraduate degree and then a PhD in economics. I'm
guessing you had a class or two on tariffs. Are
there scenarios where tariffs are effective economic policy? And are
we employing them in that way this time?
Speaker 8 (21:41):
Well, I think that there's an agreement among economists that
there are issues with completely free trade that you need
to You want to protect regional economies when there's a
flood of foreign competition coming in, you don't want to
let that just roll over the economy without any support.
And we didn't do that. We didn't support local communities.
(22:02):
So there were problems in the expansion of free trade,
and they're all in. A lot of that was China.
It was China just dumping really cheap stuff on global markets.
So I think that economists would agree that you need
to deal with China and the unfair trade practices of China,
but that's not what they're doing. China should be the focus.
(22:25):
Why are we beating up on Canada and Mexico. We
have a free trade agreement with them, They are closest allies.
Why are we beating up in Europe? Europe's trade is
relatively unfettered with the United States, so it's not the
right way to go about it. The tariffs should be
focused on issues of geopolitics and on unfairness, not this
(22:49):
kind of us against everyone. America alone is not a
good policy.
Speaker 5 (22:55):
Ethan. I think some of the uncertainty that you talk
about that we all kind of are are are hearing
about from companies as they talk about their guidance. Is
it uncertainly as it leads to economic growth or is
it more on the inflation side. Where's the bigger concern
for you?
Speaker 8 (23:11):
Well, I'm actually a bit more worried about the growth
hit here. You know what's happening right now is that
the corporate sector is like a deer in the headlights.
They don't know what to do. I mean, if you're
if you're a corporation that has heavy dealings with the
federal government, that deal has a immigrant workforce that is
(23:34):
involved in trade, all of those sectors are being touched
by high levels of uncertainty. You can't figure out where
to put your next plant if you don't know where
what tariffs are going to be four years from now.
You can't You can't go out and hire workers if
you know that your workplace is going to be rated
(23:56):
any minute and you may end up with serious penalties.
You can't do government. It's anything related to government if
you don't know who's going to be working at the agency.
So it's uh, it's very broad. Uh you know, uncertainty
shock that that just is freezing up activity.
Speaker 2 (24:16):
But this is Ethan Harris rumor as he's retired. I
don't buy it for a minute of Lehman and iconic
at Bank of America out of Scenic Clark University, oldest
university in New English. Yeah, it's out there a big background.
Speaker 8 (24:34):
I'm actually on a golf course right now.
Speaker 2 (24:36):
That's good. Okay, that's good to know Ethan to go
to Ned Phelps, the giant so supportive of what I do.
In his modern word of dynamism, his President Trump broken
America's dynamism.
Speaker 8 (24:53):
I don't think he's broken it, but he certainly puts
some major sand in the gears. You know, there's a
short run problem that we've been talking about, which is
the kind of deer and headlights effect on business activity.
There are other things, though, that are even deeper, fundamental issues,
like what's going to happen to our stem community, our
scientific community going forward. This is the secret sauce of
(25:18):
American capitalism. We have the best tech sector in the world,
we have the best scientists in the world, and we
draw the smartest people in the world into the US
educational system. That's actually a longer run kind of damage
that nobody's really talking about because it seems like a
political fight. But we really need to get the smartest
(25:41):
people in the world to keep coming to the US
because Americans don't seem to want to do science. You
know that we've got too many economists not enough engineers.
But yeah, there's little bits of more permanent effects we
start to play out, and I would point to that
as my number one long run.
Speaker 5 (26:02):
Concern ethan what role, if any, can the Federal Reserve
play in kind of inserting itself in this time of
uncertainty here?
Speaker 8 (26:13):
I mean, they're a steady hand. I think that Pole
is doing exactly what he should do. Keep reiterating that
we're an independent central bank. We don't play politics. We
can't react to what we're seeing right now because there's
too much uncertainty and we don't know whether we're dealing
with an inflation problem or a growth problem. And so
I think they're a steady end on the Tiller here
(26:37):
and that's about all they can do.
Speaker 2 (26:39):
Fold in the fiscal analysis this morning, folks in the
zeitgeist is the two Congresses, one looking for a hurried,
rushed large text program and the other with some patients
to guess what another debt ceiling debate. This debate's different,
doctor Harris, because of our fiscal situation, isn't it.
Speaker 8 (27:00):
Yeah. I think that there's certainly a fiscal hawk wing
of the Republican Party that's making it harder to reach
these budget deals. And the deficit is out of control,
and you look at the proposals on the table. X
cuts are much bigger than the spending cuts. So it's
(27:22):
not like we're in the process of coming to terms
with this, and so it's going to continue to be
a weight around uncertainty in the markets. It may be
starting to affect the bond market. It may be the
bond market is starting to wonder whether there's an adequate
funding for the massive and growing budget deficit, particularly when
(27:44):
you have these trade wars going on. So it's something
we need to keep one eye on. Even though it's
old stuff and we've seen these fights over and over again.
They usually end up okay. But it's the stakes are
higher now, Ethan.
Speaker 2 (28:02):
Let me slip in one final question here, and we
may have to cut you off as we go, but
let's be optimistic. And that is simply the recession call.
You are expert at this, at Lehman Brothers, at the
Bank of America, many are positing a ninety recession. I'll
let you decide. Isn't a huge body of America in
(28:22):
recession right now? No?
Speaker 8 (28:26):
I don't think so. I think we're entering. I don't
think we've tipped into a recession yet, and I do
think it's in the hands of the Trump administration. They
can decide are they going to continue to back off
from shock and awe? And by the way, I think
the best in today will probably try to be assuring
for the markets. If that continues, I think we avoid
(28:49):
a recession. If it doesn't, the damage just builds and
we do get recession. So I'm a two armed economist.
You know, I'm gonna tell you, maybe we get a
recession and maybe we don't.
Speaker 2 (29:00):
Where you retired for one or two days, how did
that work, Ethan? I think it was zero zero.
Speaker 8 (29:08):
Yeah, I never really wanted to fully retire. I love
this stuff. This is amazed time to be an economist,
no question about it.
Speaker 2 (29:16):
I can speak for all of Bloomberg. Ethan Harris, thank
you so much for the output. Again, folks, I can't
state enough the LinkedIn what Microsoft has done there, the
LinkedIn value when you see it in the essays of
Ethan Harris. Thank you so much, doctor Harris for a
brief involving a lot of perspective over at the years.
Speaker 1 (29:36):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Applecarplay 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 2 (29:53):
It is an honor in knowing Mark Kearney for years.
I should state that, And of course mister Kearney did
board work for Bloomberg ELP. I want to state that
as well. We have seen history in Canada. We went
out today and we looked for a voice that understands
(30:13):
completely the modern Canada. David Dodge Queen's University, and of
course Princeton is the esteemed economist of Canada. He's the
former governor of the Central Bank of Canada equivalent to
our chairman of the Federal Reserve. So honored that doctor
Dodge could join us this morning, Doctor Dodge, what does
(30:35):
the new Canada look like?
Speaker 7 (30:39):
Slightly confused, because it's the first time and a very
long time, that you basically got a parliament that has
just the two parties, the minor parties, which have been
very important in being part of governing coalition. We're basically
decimated last night. Mister Corney is now Prime Minister without
(31:07):
a a dominant majority. He's a few seats still, a
few seats short, and so he is going to be governing, governing,
having to govern with his eyes always on his ability
(31:33):
to get the votes in Parliament.
Speaker 2 (31:35):
How will he defend against the abruptness, some would say
rudeness of a request for a fifty first state. I
mean this, this dream of selected Americans goes back easily
into the nineteenth century. David Dodge, How should mister Kearney,
how should Canada push away the idea of a fifty
(31:56):
first state?
Speaker 7 (31:59):
Well, the first thing is the day to day negotiations
which are going to have to take place on trade, uh,
not just the Canada, US, but the three countries in
North American h North American agreement, that's all got to
(32:19):
be redone and that that's kind of a very practical
thing that mister Carney is going to have to focus
on as well, uh, as well the President of Mexico.
And that all becomes really important to understand. Then what
(32:40):
is the role of the United States in terms of
a trade block, if you will, in the world, as
the world seems to be dividing itself in the blocks.
And then what how does North America fit? Because obviously
(33:04):
North America is stronger taken as a whole uh than not.
And so the practical thing is going to be to
discuss with the American administration not just the economic can
trade arrangements, but the security arrangement for North America, which
(33:29):
is particularly important. How we're going to deal with the Arctic,
which is very important. So when you say how will
we deal with it? What we'll start with the practicalities
of dealing with those things that have to be dealt
with on both sides, the American side and ourselves.
Speaker 5 (33:52):
Doctor Dodge. Realistically, what can mister Carney do to try
to reorient the Canadian economy with less reliance on the
US trade.
Speaker 9 (34:02):
Yeah, that that that is the big issue that that
was has been the issue basically since the Great Financial Crisis,
when investment has been.
Speaker 7 (34:14):
Lagging UH in Canada UH and innovation has been lagging UH.
And so that that requires really quite a major reset.
And the difficulty in that reset. It essentially means that
there's going to be a smaller share of GDP UH
(34:37):
is going to go to consumption and a larger share
has to go to investment. And that means for the
ordinary middle class, that means slower growth in consumption UH
in the short run over the next few years in
order to get UH, get productivity up and hence have
(35:00):
growth in the future.
Speaker 2 (35:01):
David Dodge one final question, if we may Ken Dryden
change the perspective of America on Canada not only in
the hockey with the Montreal Canadians, but he changed college
hockey at Cornell as well working as a public official
in Canada. And you know Ken Dryden's well quote in
the Toronto Globe and Mail, we have never been a
(35:23):
big guy like the United States. What does Canada need
to do to defend against the big guy?
Speaker 7 (35:31):
Well, defend the best defense is a good offense, and
that offense has to be to come with a proposition
on trade and security that is good not just for Canada,
but good good for the United States. It has to
be good for both parties, and so that that will
(35:53):
be that will be the issue going forward. And he
Mark Carney is laid out some of the key parameters
in that, and his problem is going to be trying
to ensure that there is some way to manage the
(36:18):
fact domestically that for a period of time the amount
of the average household as for consumption is not going to.
Speaker 2 (36:26):
Grow, right, David, we have to leave it there, of
a doctor Dodge, thank you so much for joining Bloomberg
this morning. David Dodge, of course, the seventh Governor of
the Bank of Canada, thrilled that it could be with
us on some important day north of our border.
Speaker 1 (36:47):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Apple Corplay and Android
Auto with the Bloomberg Business app. You can also watch
us live every weekday on YouTube and always on the
Bloomberg terminal.
Speaker 2 (37:02):
It's the key reason that YouTube is growing, of course,
is Lisa Monteo's newspapers. Let us begin.
Speaker 10 (37:08):
I need some bird chirping again.
Speaker 8 (37:10):
That's what we need to make this go through.
Speaker 10 (37:12):
I want to start with an interesting look at those
buy now, pay later options like apps like after pay Klarna.
So they're popular for luxury ittems like appliances, things like that.
But now there's an interesting take. A new study says
more people are using it for every day items like grocery. Really,
so they're using these leader never used. Tilarna is really popular,
so I know a lot of people who use that.
(37:34):
So it showed that one quarter shoppers have used a
service for groceries. That's up fourteen percent from a year ago.
So more people are doing it. But here's a kicker
forty one percent. So they paid back that loan late
over the past year, so they're using the thank you
for the bird chirping. Now I feel better. They're using
these apps and things like that, but they're not even
(37:54):
paying them back on time too.
Speaker 5 (37:57):
I'm guessing they're high.
Speaker 1 (37:59):
See that's the thing.
Speaker 10 (38:00):
They're popular who for people want to avoid the risks
like with credit cards, are paying interests on a loan.
But the thing is is that it can also lead
to overspending and people are kind of extending their debt
even further because of these and that's the problem with it.
But it just goes an interesting take on like how
inflation is starting to affect people in different ways.
Speaker 2 (38:18):
That one sign huge story and it's not daily, it's percolating. Say,
huge story just on groceries.
Speaker 5 (38:25):
Yeah, that's not next we groceries. Okay.
Speaker 10 (38:27):
Single women across Asia they're opening their hearts and their
wallets for a new mobile dating game. Okay, it's called
Love and Deep Space, and women love the fictional character.
His name is Silas. He's six foot two, red eyes
not blue, twenty eight, he's an arees.
Speaker 2 (38:43):
Okay, does they have a trust fund?
Speaker 10 (38:45):
Does not have a trust fund. But it's not just him,
there's like five love interests. But the thing is the
app is free to download, but women are on this
thing for like four hours a day, and they're spending
not on the game because it's free, but they spend
on the things kind of like how these other video
games you use them for like outfits and you buy
you know, extra money, did it spend on this or
(39:06):
that way? And they're spending like some spend like three
thousand dollars a year, you know, to on all these
like online different things to improve their character. But it's
huge in Asia, Like there's hundreds of women are showing
up to these live events for this game. It's crazy
to me.
Speaker 2 (39:25):
It's the digital you know, this new digital world we're
living in and people are basically running through their charge
card without knowing it and you know they're consuming Yep.
It's it's a you know, forget about the finance of it.
It's a psychology.
Speaker 10 (39:39):
Yes, and they say they like the idea of dating
but not having to deal with a real man.
Speaker 2 (39:45):
It's a fictional guy. It's a fictional guy.
Speaker 8 (39:47):
Yes, okay, yeah, right, there's nothing like that.
Speaker 2 (39:50):
I think there was a diver who called me.
Speaker 10 (39:52):
That, okay, this could be dangerous, so watch out for this.
There's another way to make purchases online and that's for
chat GPT. Open Aye has been trying to extend people
were having more users, so they have the competition from Anthropic,
you know, Alphabet's Google Elon musk Xai. So how it
(40:13):
works is that they have about like five hundred million
active users. So you go on there, you compare, you
can ask to compare different products and it will actually
send you a link and you can click on that
link and go to that person's website and or company's
website and buy the product there. So now it's another
way that you can buy different products off you can
spend money. It makes it like it makes it easy
(40:37):
to buy things.
Speaker 5 (40:39):
So this whole AI thing I think is a existential
threat to Google search business.
Speaker 7 (40:45):
It is.
Speaker 5 (40:45):
I don't understand it. I'm surprised this stock is hanging
in there. Maybe maybe I just don't get it, But man,
I could see a scenario where well, type it into
the Google search. It's just it ain't happening.
Speaker 2 (40:56):
But what you just said is really important. We don't
get it.
Speaker 10 (41:01):
Yeah, we don't wonder because Google just said their search engine,
you know, numbers great.
Speaker 5 (41:06):
I know.
Speaker 10 (41:07):
And you're looking at this and you're saying it doesn't
make sense.
Speaker 2 (41:10):
Whatever, Potato, thanks so much the newspaper. She's off to
look at some Asian data things. I don't understand.
Speaker 1 (41:18):
This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each weekday,
seven to ten am Eastern on Bloomberg dot com, the
iHeartRadio app tune in, and the Bloomberg Business App. You
can also watch us live every weekday on YouTube and
(41:38):
always on the Bloomberg terminal
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!