May 6, 2025 • 48 mins
Watch Tom and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Surveillance hosted by Tom Keene & Paul SweeneyMay 6th, 2025
Featuring:
1) Torsten Slok, Chief Economist at Apollo, joins for an extended discussion on tariffs, the outlook for the US economy, a potential recession in 2025, and this week's Fed meeting. Global stocks fell today due to concerns about the trade war's impact on companies and the world economy. Recent optimism fueled by US trade concessions is fading, and markets are bracing for an economic slowdown, with investors reducing exposure to the US and expecting fewer Federal Reserve interest-rate cuts.
2) Jeffrey Rosenberg, Portfolio Manager: Systematic Multi-Strategy Fund at BlackRock, offers his outlook for the US economy, signals from the bond market, and long/short strategies as investors weigh how to play stocks and bonds. Investors are coming around to the view that the Fed won’t cut interest rates as early or as deeply as earlier anticipated. While it’s expected to leave interest rates on hold this week, money markets have pushed back the timing of the first reduction to July and see three cuts by year-end, rather than the four they had expected a week ago.
3) Joe Mazzola, Head Trading and Derivatives Strategist at Charles Schwab, talks about client activity, where investors are playing risk in markets, and what concerns they're expressing amid growing economic uncertainty. While the spot VIX index has fallen to near where it was before stocks slumped on tariff fears in early April, the VIX futures curve is signaling concerns that the market turbulence may return.
4) Zohran Mamdani, NYC Mayoral Candidate and NYC assemblyman, discusses his candidacy for mayor, his proposed policies, and whether Democratic Socialists like him are a key piece of the future of the national Democratic platform. According to one Democrat - NY House Rep. Pat Ryan - Democrats must take more risks to counter the GOP power trifecta successfully or they could face an extended stint on the sidelines.
5) Lisa Mateo joins with the latest headlines in newspapers across the US, including reports on the fashion and fundraising from the Met Gala and a WSJ exclusive on the Trump administration holding schools responsible for students paying back their loans.
See omnystudio.com/listener for privacy information.
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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):
He's got a huge impact on American economics. Tour duty
at Deutsche Bank of Great Acclaim and then wandered over
to Apollo Global Management to brief the troops there on
a not even a daily basis, almost an hourly basis.
His morning short, three paragraph note is a must read
on Global Wall Street. Torsten Sluck joins, this morning, what'd
(00:49):
you write this morning? So?
Speaker 3 (00:52):
What was this morning? Oh? This was about what has
happened after Liberation Day? And two things have happened after
Liberation Day. This is just an observation naming that if
you look at the weekly data for contensus earning expectations,
they have come down quite significantly, both for Q two
and Q three for this and P five hundred. So
the first thing that has happened is a downward revisions
to earnings. The second thing that has happened is that
(01:13):
we normally have a very tight colation between correlation between
interest rates and the dollar, and that correlation actually also
broke down after Liberation Day. So now the dollar is
trading not so much on interest rates but on other factors.
Speaker 2 (01:26):
Yeah, and Pacific rim dynamics. We'll get into that later
on the show. Folks, some of those currencies continue painful.
This morning, Janahatsias, the Goldman Sachs publishes out on an
inventory dynamic at two percent plus Q two GDP, do
you see like a normal growth for this second quarter?
Speaker 3 (01:45):
What is very unusual about the second quarter is that
we're coming from a place where we had significant front
loading of purchases among consumers, and we had significant inventory
build among corporates simply because people were preparing for April second,
which happens to be the second day in the second quarter,
namely when tariff, of course began to cut kick in.
(02:07):
So the conclusion is there are some fairly significant bumps
when it comes especially to the inventory part of GDP
and to the import part of GDP in the first
and the second quarter.
Speaker 4 (02:17):
On the consumer confidence basis, we're seeing consumer confidence get
hit as a result of tariff policy. Still though in
the hard data we're not necessarily seeing it hit there,
when do we see it hit?
Speaker 3 (02:27):
So Barclays yesterday had a very important note that looked
just like several others at the high frequency data, and
what they are seeing in the daily data is that
we're beginning to see a slow down for high end consumers,
especially when it comes to airline bookings, hotel reservation, recreational
travel more broadly, and also higher end durable goods. So
(02:48):
one way of looking at this is that you should
ultimately expect to see, especially those that are now impacted
by the stock market correcting, you should begin to see
them begin to slow down their consumer spending. And that
is exactly what the data is show. So yes, it
is still early in terms of when tariffs were implemented,
with still only a few weeks in. But the longer
this shock persists, the higher is the risk of course
(03:10):
that this is going to drag down also hot data, what.
Speaker 4 (03:13):
Is the risk there? I mean, I mean contextualize this
for us because the president yesterday we heard from Bill Ackman.
You said, okay, I want to see one hundred and
eighty day pause. Now I want to see this ninety
day pause extended to one hundred and eighty days. At
what point, in your view do you see the damage
from these policies actually becoming something that's entrenched rather than temporary.
Speaker 3 (03:32):
Well, and that's a very important question toom because what
I think is going on is that companies are actually
already responding to turiffs. And what do I mean by that, Well,
if you look at the surveys from the regional fits,
they are showing the new orders is collapsing. Excuse me,
they're showing that kapex plans are collapsing, and they're showing
that prices paid are going up. This is the definition
of taflation. That means that there's going to be slower sales,
(03:56):
that's going to be more increasing prices. And this is
happening on the corporate side. Consubas have not quite yet
seen this, but it's coming. Especially with the significant slowdown
in the number of containers coming from Chinese to the US.
That means that the inventory will in the next few weeks,
in my view, we will begin to see emptyholves. I
don't even know how we're having this discussion. Of course,
if we get normally thirty thousand containers from China coming
(04:18):
in and were no longer get Thirsdy and thirty thousand
containers from China coming in. Of course we'll begin to
see MPT sholves. Sin stoll Is.
Speaker 2 (04:23):
Tim mentioned some Centovic folks sent for Paul Sweeney's and
they Tim mentioned there's a rationalization going out among the
leads over t tariff theory.
Speaker 5 (04:33):
You and I read Ricardo cover to cover. There's no rationalization.
Speaker 2 (04:37):
Either tariff theory of a pseudo McKinley doesn't work, or
you believe it it's gonna work.
Speaker 5 (04:44):
There's no in between, right.
Speaker 3 (04:46):
And that's why. And in some sense you could take
exactly of this, as in the model that you and
I would have talked about for years, Tom, that if
this shock is temporary and if it lasts a week,
we would all say, okay, this was a week. Now
we go back to normal, right, but give it this
shock as one hundred fort five percent, and so far
it feels quite permanent. We will say, well it's permanent.
You got to adjust to a new equilibrium and that
new equlibrium. It will have the consequence that prices are
(05:08):
higher and sales are low.
Speaker 5 (05:09):
Well, what's a shift? Can I go Nerd right now?
Speaker 4 (05:12):
Please go Nerd?
Speaker 5 (05:13):
Kruman we're going.
Speaker 2 (05:13):
Wank right now, there's a dead weight loss in this
Euclidean calculus. Exactly there's a shift who allocates the dead
weight loss policy or brute economics.
Speaker 3 (05:25):
So exactly when that dead weight loss has to be allocated?
The very important simple way of thinking about that is
that does that have to be allocated to firms taking
a decline in their earnings or does it have to
be instead allocated to consumers basically facing higher prices. So,
put in very plain english, the container arrives in Los Angeles,
someone needs to pay the tariff. Is that tariff now
(05:48):
passed one hundred percent unto consumers? Is it passed fifty
percent unto consumers? Is it only past twenty five percent
unto consumers? So companies will take a hit on their
earnings if it's not passed on one hundred percent to consumers.
So that weight laws, that cost of higher teriffs has
to be born by someone, and if it is not corporates,
it will ultimately be the consumer.
Speaker 4 (06:08):
I mean, it seems politically companies don't want to be
public about increasing prices as a result of these tariffs.
Speaker 3 (06:14):
So would you.
Speaker 4 (06:15):
Argue that at this point it looks like companies are
going to absorb this or they're going to try to
pass it along to consumers in a way that's not
necessarily prominent.
Speaker 3 (06:24):
So that's why one way of answering that question is
to simply look at what a company is actually doing.
And for example, from the Dallas Fit, the Field del
f Fit, the New York FED, the Cancer City FED,
the price is paid component, in other words, what a
company is saying in terms of what is the price
that I'm paying for goods that are inputs in my production.
And if they answer is price is paid is growing
up and that the moment price is paying is skyrocketing
(06:46):
because company is saying I'm paying more. And if I'm
paying more, then I'm saying in this survey from the FAT,
the prices are going up. So that's not a political
discussion or political statement, it's just the facts that companies
are saying they're paying more. So as a result of that,
we should expect it happens to be the case when
that together with the CPI inflation, that that will be
lifting inflation eventually.
Speaker 5 (07:04):
Let's shift to the FED meeting.
Speaker 2 (07:05):
For those of you on your community crass nation, what
a joy with apollowed Global Management. Turston slock with us,
good morning on YouTube. Thank you so much for the
interest in YouTube. Really really appreciate it. It's sort of
like a new media for me and it's winning. I
mean for stun of it. It was like, you know, yeah,
we can do YouTube.
Speaker 3 (07:22):
Right YouTube. You're twenty years old at this more.
Speaker 5 (07:24):
What does a cappuccino cost in Brooklyn?
Speaker 3 (07:27):
Probably about five.
Speaker 5 (07:28):
Five bucks and maybe you stretch out to eight bucks
for something.
Speaker 4 (07:31):
We Earnest Torston knows he's a Brooklyn guy.
Speaker 3 (07:33):
Are you a Brooklyn guy too, Brooklyn Heights?
Speaker 5 (07:37):
You know, Lisa, we are just you guys.
Speaker 3 (07:39):
Are you guys are out numbers Brooklyn?
Speaker 6 (07:41):
They don't have the cappuccino in Brooklyn. They have the
flat white.
Speaker 3 (07:44):
Is that not correct?
Speaker 5 (07:46):
Correct?
Speaker 2 (07:47):
We got to get to the FED meeting because we
have to talk to Touriston about the parliamentary crisis in Germany
as well. I'm calling this FED meeting the ex post
squared meeting, and that I got two ex posts. I
got a massive weight to see what inflation will do,
and at the same time I got a separate, discrete
massive weight to see what labor will do. Are they
(08:10):
summed are they discrete or is one more important than
the other?
Speaker 3 (08:13):
Absolutely, because if you look back, including on the employment
report last Friday, things are not that bad. In the
hot data, it looks like things are still okay, So hey,
why should the Fed change anything? But when you look
forward and you begin to worry about containers coming in
is collapsing. If you look at also all the stresses
in trucking earnings in this earning season. If you look
across the bond and the anecdotes coming from Southwest Airlines
(08:36):
saying we're already in a recession, she totally is saying
that traffic is weaker, PepsiCo saying that snack sales are weaker.
Across the board, a lot of the forward looking indicators,
including the fact that companies are not providing forward guidance,
are telling you a very different story. So to your point, Tom,
if you begin to think about what this means for
the FAT, it does imply that the backward looking and
the rear mirror eraror picture here is looking very different
(08:59):
from if you look through the front mirror here, where
things look much weaker.
Speaker 4 (09:02):
So from a policy perspective, or at least from a
communications perspective, how does JA Powell thread that needle tomorrow?
For the American public.
Speaker 3 (09:09):
I think he will continue to look backwards and say, hey,
the data is actually still okay, the economy is still
performing fine. The th repult was actually okay. Inflation has
not really started moving up, so we are still in
weight and see mode. The biggest risk, of course, is
that if corporate America really is frozen as a result
of uncertainty, then the quick question is what comes after frozen?
(09:29):
And of course the fear is that after frozen comes recession.
So then J. Powell is called in this difficult dilemma
of saying, hey, if I look back, everything looks fine.
But if I look ahead and I know that things
are frozen on the corporate side, the risk a frozen
is going to create a drop off in the economy.
Speaker 5 (09:43):
People don't know.
Speaker 2 (09:43):
It's because we cut away from it at the end
of the press conference. But at the end of the
press conference they always sing kumba ah do that.
Speaker 5 (09:50):
And this year they're gonna say this, this meeting, they're
gonna sing a let of go.
Speaker 4 (09:53):
Is that why I see Michael McKee practicing.
Speaker 2 (09:55):
Practicing You know this week it's going to let it
go go.
Speaker 4 (09:58):
Please frozen, the frozen reference for everybody in the cheap
seats hey tourist in Okay. If we think about the
FED moving forward from a policy perspective, stagflation is the
sort of the worst case scenario here. And what we've
learned is they essentially have to say, okay, when it
comes to the dual mandate, we have to decide what's
more important. Is more important attacking prices or is it
(10:19):
attacking employment? What do you see moving forward? If we
do enter a stagflationary environment.
Speaker 3 (10:23):
That's absolutely right, tim and we are absolutely in stackflation.
If you look at the quantifications from the Yale Budget
lab from the pen Warton Budget Model, from the Text
Foundation from the Pierce Institute, they find that inflation over
the next twelve months will go up by one percentage point.
So if we have inflation going up, they FETCH would
be hiking. But if at the same time we have
less economic activity, the FETCH would be cutting. So executory
point which one is what's really most interesting also about
(10:46):
this discussion is that the dot plot is actually revealing
that they're leaning towards looking at growth, because the dot
plot is saying that the next move is a cut.
So if that's the case, we have our answer right
there that they're fed things that in a stackflation scenario,
the focus should be on growth. And that's of course
where the author pans and the pul Volca discussions will
come in, because is that a mistake if inflation is
not to go Remember a Copeca today's two point eight
(11:08):
and if we add one percent of that we get
to three point eight. Can you pee counting if inflations
will go up to to three point eight? That gets
a really really complex decision.
Speaker 5 (11:16):
Can we do a surveillance audible?
Speaker 3 (11:18):
Let's do a surveillance.
Speaker 5 (11:18):
We'll now doing audible for those of you. Good afternoon
in Europe. I was flabber guested towards the slock.
Speaker 2 (11:25):
I can take long nominal GDP in Italy and make
the statement Italy's gone nowhere in a decade or fifteen years.
I was thunderstruck it the household networth, not poverty, but
lassitude of Germany and that they don't own equities, they
don't own this, they don't own real estate.
Speaker 5 (11:44):
I was.
Speaker 2 (11:45):
I don't think our listeners in America understand the lack
of wealth creation in Germany.
Speaker 3 (11:51):
Am I right, as you know. I'm from then, Michael.
Originally I did wait for a Jolemen bank for fifteen years.
But you're absolutely right. There's some very very important differences
between household net worth in Germany and in the US.
In the US, there's a significant allocation, of course to
your home and also to your stock market portfolio, either
through your four one K or through direct holdings of equities.
In Germany that's really different. All your equities and all
(12:14):
your fixed income is held by an institution named a
pension fund, So that means that there is a different
relationship to financial markets. There's a different relationship into interest rates,
and likewise in the housing market. A lot of people
in the housing market are rent us, so they don't
own the homes. So that's why the way you think
about assets, both financial assets and housing assets is very
different in Germany relative to what is in the US.
Speaker 4 (12:36):
I want to know about an economic indicator that I
think we should invent here, Tom. I get a text
message last Friday morning from a friend of mine, former colleague,
works at a mainstream publication. It's not a business publication.
It says, do you have Torsten Slocks contact information? Where
are we in the economic cycle when these are the
guys who are looking for touristed they are you know,
(12:56):
they are looking for tortona, a crisis.
Speaker 2 (12:58):
And end of the FED meaning let's remember the vix
is on a twenty five level as well.
Speaker 5 (13:04):
Post miracle, is there a new Germany or just a
Germany that doesn't know itself?
Speaker 3 (13:10):
There is absolutely a new Germany. It is very very
important the decision that was made now about a month
or two ago, where the German government decided to spend
five hundred billion on infrastructure and unlimited on defense. I
mean unlimited. That's a pretty big amount. That's a very
significant sale win to growth for the next several years.
Speaker 5 (13:26):
I gotta get this in Focus land Out.
Speaker 2 (13:28):
The morning after Putin I called him up, I begged
him to come on Focus land Out. Led with the
fiscal stimulus of Europe that had to come, he stated,
Europe finally has to grow up and start popping nomenal
GDP is it there now?
Speaker 3 (13:42):
And in that sense, it's very very important that because
we both have the US now slowing down for a
number of different reasons, but partly because of the way
the trade will has been implemented. But at the same time.
We now have Europe beginning to accelerate. Normody in FX,
there's only one part of the leg of the trade
that's moving, but here you actually had both pots moving
at the same time. So that's why my tail when
coming to European growth at the same time while the
(14:03):
US is slowing down.
Speaker 5 (14:04):
This is great. Sorry Peter Fisher years ago.
Speaker 2 (14:07):
Torston, for those of you on radio, Tourst's land in
a Luftanza airplane at Frankfurt.
Speaker 5 (14:12):
Here he's got his hands out and all that. You
see it on YouTube. On radio, it doesn't play, but
we'll just make it up as we go. Turston's luck.
Speaker 2 (14:19):
Thank you so much for joining us today the extended
conversation to get things going as well.
Speaker 5 (14:25):
He is with Apollo Global Management.
Speaker 1 (14:32):
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 (14:44):
Jeffrey Rosenberg joins us out of Tepper Carnegie Mellon and
of course all of his great work at Blackrocker. Are
thrilled we could get a Prefred brief here this morning.
I guess it's gospel out of Carnegie Mellon this distinction
between risk and certainty, Jeff Rosenberg explain the difference between
(15:05):
risk and I'm trying to measure it and the unmeasurable
uncertainty discussed that.
Speaker 7 (15:11):
Yeah, Yeah, I mean it's it's Frank Knight uncertainty. And
the difference is risk, which we study a lot, you know,
proxy with standard deviation of returns, is you know, some
way of measuring it, and Frank Knight uncertainty is just
unmeasurable uncertainty. And I think, yeah, that's what we're dealing
with with the with the policy uncertainty, trade and tariff uncertainty.
(15:33):
It's really unmeasurable. And so we're you know, having a
nice little rebound from the April you know, Liberation Day surprises,
and you know, we're we're not out of the woods
in terms of the uncertainty here. And that's that's it's
it's tough to measure, and that's what that kind of
academic concept captures.
Speaker 2 (15:52):
Jeff Rosenberg, You and I have an acclaim for Ian
Lingoln and BMO capital market. He has a vector after
all of this towards disinflation for a ten year full
faith and credit that goes from a four point thirty
ish to a three sixty five ish. Do you agree
that a disinflation vectors in place or is that just
there's just not enough information to come up with that call.
Speaker 7 (16:16):
You know, I think there's just a lot of confounding
factors there when you try to map disinflation into yield movements,
and which yield movements are we talking about, because you know,
if we're talking about kind of a growth scare in
the context of tariffs, it's it's tough to see the
(16:36):
initial disinflationary about. It's more looking inflationary. And I think
that's part of this kind of unmeasurable uncertainty here. And
if it is measurable, it's really about this, and we're
going to hear about this tomorrow. It's about the tension
between kind of the growth slowdown impact from tariff and
uncertainty and the inflationary impact. And yes, it may be transitor.
(17:00):
It'll be interesting to see if he uses that word.
Quite a loaded word given our history to describe the
terror of impact on inflation. But you could get through
the first order round of place increases and come out
the back of it with more of an economic slowdown
that becomes kind of overall DIT's inflation area. I think
(17:22):
that would be actually an easier playbook because it's a
more familiar playbook and it doesn't press on the conflict
between the dual mandate that is so much in focus today,
and I think it'll be the focus of tomorrow's Q
and A about you know, there's a very unfamiliar situation
where the FED is navigating between conflicting objectives inflation and growth.
Speaker 2 (17:43):
That's why Tim I'm calling it x post squared. That's
it's like two strands of ex post which do we
weigh down in a conflicted really.
Speaker 4 (17:51):
Captures So let's add that to the econ one on
one textbook.
Speaker 5 (17:53):
I would.
Speaker 4 (17:55):
The medium chef, I'm wondering about the what's in right now?
From your view? Do you think the uncertainty of the
situation is actually priced in? Given that we saw at
least on the equity side, nine days of gains uh
in a row interrupted yesterday.
Speaker 7 (18:13):
Yeah, It's it's really an interesting, you know question, because
what's was priced in? They you know, at the beginning
of April, right after the first round of announcements was
obviously a very negative reaction. Uh, you know, and and
we've unwound that, and we've more than unwounded and and
and equities across many indices and measures have kind of
rebounded and they're above their their April lows. The dollar
(18:37):
is not. So that's kind of interesting. That's the piece
that is is kind of hung out here with still
a little bit of risk premium in it. But you
can't really look at with his rebounded markets and say, well,
we're really pricing anything then, And uh, you know, that's
in the initial kind of reaction. If you take a
little bit longer framework and you look at, you know,
(18:59):
what's price in, you know, go back to kind of
the pre election market pricing in a Trump win, and
what you had was basically from kind of September all
the way through to about mid February, a real Trump
growth premium that was priced in. And what we unwound
(19:20):
effectively is we kind of unwound the Trump growth premium.
You know, we priced in a lot more kind of
bad left tail outcomes in terms of recession that we've
kind of priced out. So now you look at where
we're sitting and It's kind of like we've just unwound
the Trump growth premium, but we haven't priced in anything
in terms of what you've seen in economic forecasts and
(19:41):
recession odds going up. Not really priced into anything in
the capital market.
Speaker 2 (19:46):
Jeffrey Rosenberg with us and continues with us. He is
with Blackrock this morning. Good morning on your commute decrastination,
Android Auto, Good morning hearing more and more about the
Google technology that they're using everyday. Good morning on Apple
card Play as well, various exem Thank you for listening
and Spotify much more around the world than I ever
could think too.
Speaker 4 (20:06):
Jeffrey Rosenberg. We spoke, as Tom said earlier to Apollo
or to Torston Slaka over at Apollo earlier today, and
we asked them specifically about what the Federal Reserve is
going to be considering today and then tomorrow when we
hear from Jay Powell. How do you look at how
they thread that needle communicating not just to businesses and
(20:26):
two Americans that you know they're really watching not just
the soft consumer sentiment data but also the stronger than
I think a lot of people expected, hard data that
we continue to see.
Speaker 7 (20:39):
Yeah, and I'm not sure Towrston wrote about this or
certainly people are talking about the kind of typical pattern
when you get a shock to the system like the
one that we had, is the soft survey based data
starts to erode reflective of that shock on more of
a forward looking basis, because you're asking people in real time,
(21:01):
what are your expectations going forward that erodes before the
hard data does. Now, what we're coming off of here,
of course, is that following the soft data in the
most last in the most recent decline in soft data
was a really bad you know, strategy, because the soft
data ended up not being validated in the hard data.
So we have this period in time. It's typical where
(21:22):
you have the break between soft data and hard data.
And now what we're going to look for and what
the FED we'll talk about is does it show up
in the hard data. What's critical for FED policy is
they're not going to be forecast dependent here. They're not
going to forecast and move policy based on the soft data.
They're going to wait, and by waiting, they will be late,
and they're going to be happy to be late. Well,
(21:45):
whether financial markets are happy that they're late, that'll be
a different question.
Speaker 5 (21:48):
Could you make a dot on a dot plot right now?
Speaker 7 (21:53):
Well, you know they have to kind of make the
dot on dot plot. It'll be interesting to see how
those those e al. But again it's this kind of
difficulty of you know, waiting for the data.
Speaker 5 (22:04):
So, yeah, I'm old enough.
Speaker 2 (22:05):
Jeff Rosenberg, young turk that he is, and Tim at
least they have no clue.
Speaker 5 (22:08):
Folks.
Speaker 2 (22:09):
We used to sit in like second grade and there'd
be an air raid siren, like, you know, five blocks away,
and you'd have to practice getting under your desk because
that's what you did.
Speaker 5 (22:19):
And then, yeah, Jeff.
Speaker 8 (22:21):
Rose or Tom, I'm actually old enough for that, really exactly,
Jeff Rosenberg, duck and cover in the yield portfolio of
our clients that don't want to own Nvidia.
Speaker 5 (22:32):
I mean, how do you duck and cover? The only
thing you do is buy money market funds, right.
Speaker 7 (22:37):
Well, you can do some other thing. It's a great analogy,
Tom Duckett, I may have to use that duck and cover.
Where do you duck and cover in your fixed income portfolio?
I mean the big thing, and this is what we've
been harping on for a long time. We call it,
you know, the new conundrum, right, The new conundrum is
sort of the old conundrum was green Span was raising
rates and long term rates were falling. Now the new
(22:57):
conundrum is the opposite direction. Powell maybe cutting rates, saw
this last year cutting rates in the short end, long
term rates going up. So this disconnect in long term
interest rates don't necessarily follow the Fed's short term interest
rates in this environment, and that's one of the consequences
of stagflation. So for Duck and cover, what does it
mean for your portfolio? It means you got to really
(23:19):
be careful about thinking where in the fixed income market
am I getting the protection of my desk in the
elementary school? Where am I getting protection in my portfolio
the fixed inco market. It may not be in the
back end the way it was when you had that,
you know, to the earlier question, the clear disinflationary alignment
for monetary policy. So you can kind of hide out
in the front end, you know, cash, you can move
(23:41):
out the curve a bit. Two years, five years, you know,
we looked for alternative forms of diversification, ways of engineering
negative correlation, and we like that in our strategies. So
you got to be a little bit more kind of
forward looking not backward looking playbook that the long end,
the thirty year is going to be a great heads here.
Speaker 4 (24:00):
I want to be backward looking a little bit and
go to a month ago when everybody was really, you know,
for lack of a better term, freaking out about what
the bond market was doing. I believe the President said
that bond market got a bit quote yippie Jeffrey, Yeah,
not again a technical term. I do wonder though, is
the bond market now behaving the way the bond market
(24:21):
is supposed to behave or is that is what we
saw thirty days ago. Is that something we can say, Okay,
that happened and now we need to move forward and
everything is fine.
Speaker 7 (24:31):
Well, you know, is the bond market behaving the way
it's supposed to be behaving? God, that's a We could
spend a lot of time on what those words being
supposed to be behaving, right, because it's all about like,
what's the role of free market capitalism, what's the role
of financial markets, what's the role of pricing, and what's
the role of financial repression? To countervail those models of
(24:55):
how our system works, and so what we had, you know,
whether it was explicit or employe sit in the post
GFC world is we had a very large active balance
sheet by global central banks, and that kind of took
away a lot of the old bond market vigilanteism. And
so I kind of I've got a piece coming out shortly,
(25:16):
and I brought back, you know, the famous James Carville line.
You know, I want to if I if I die,
I want to come back as the bond market because
they can intimidate everybody, you know, And you think about
when he said that that was back pre GFC, pre
an environment where you had such large central bank balance
sheets kind of really truncating the ability of the financial
markets to signal through pricing disagreements around policy. You go
(25:39):
back to the Liz Trust moment in the UK and
we started to see some emergence or re emergence of
this older form of bond market behavior. Whe was that
that's you know, what bond markets are supposed to do
depends on you know, what school of thought you subscribe to.
But yes, I think it's really notable that in that
April time period that long term interest rates went up
(26:00):
when short term interest rates went Now, you've got to
take that observation and dwell on it for a little bit,
and the conclusion you need to make. This isn't your
last twenty years bond market. It may be that pre
GFC bond market that we're starting to see reemerge here.
Speaker 5 (26:16):
Jeff, thank you so much.
Speaker 2 (26:17):
Jeffrey Rosenberger, Black Rock in preparation for a fed reading.
Speaker 1 (26:20):
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 (26:37):
It'd be nice to know what people are actually doing
right now. There's a huge split between institutional with some
affiredness out there and rech out. I guess the stereotype
of the story. As they're buying, they're strong, they're there forever,
with some going into cash. Joe Mazzola's expert at this
had a trading and derivatives, a strategy of Charles Schwab.
(27:00):
Really about what people are doing in Chwab just simply
what are they doing?
Speaker 9 (27:04):
Well, Tom, It's it's not really that much different than
what we saw on the institutional side, at least at
the beginning of the month, I can say because it
was all a real big drop in stacks, the biggest
drop that we've seen since March twenty twenty, you know
COVID time, so a fourteen percent drop in the number
from March into April.
Speaker 3 (27:25):
The I would say the biggest.
Speaker 9 (27:26):
Amount of selling was really that first week. It's kind
of across the board equity outflows. On the seventh we're
pretty strong, and I think something that was a little
bit different than maybe what we've seen in the past
was the idea that there wasn't as much maybe dip
buying as we'd seen. So yes, we did see some
(27:47):
inflows on the eighth and then but then the ninth,
when we had that you know, that nine percent kind
of rally off the bottom, we did see clients trim
and that I found that pretty interesting to see.
Speaker 4 (27:58):
That's, you know, I thought I thought that dip buyers
were there, I thought, and I thought the flows were
really going into the S and P five hundred index funds.
Speaker 9 (28:05):
So that's interesting. So one of the big differences that
we saw normally when we come across our list of
our top ten buys usually maybe one maybe two of
them are ETFs, this time four. So so what we
saw was concentrated buying between about maybe three or four symbols.
Netflix is always on top, and that was that was
(28:26):
excuse me in videos always on top. Excuse me in
video was always on top. It was interesting about that.
That was eight to one over the second place stock,
which was Amazon, so real big buying in video. Amazon
was second, Tesla was third, but then four of the
other top ten were ETFs, so that was interesting. It
was either you shift it within the small little sliver
(28:48):
of names or you broaden out of lot. What were
the etfsh spiders? So they were they were the index funds.
Speaker 4 (28:54):
Okay, So does that tell you that the is there
is there commentary about the state of the econ me,
the state of cash balance there that retail investors still
have money to play with to put to work, and
that's a good sign, I think so.
Speaker 9 (29:06):
I think I think some of the liquidation that we
saw at the beginning, like I said, it kind of
it tailed off a little bit at the end, but
we didn't see the heavy buying. I think part of
that and I think this is an interesting topic. It's
kind of margin balances. So when you see a liquidation
day like we saw on April seventh, what you normally
see is a rotation into something like fixed and income
(29:27):
mutual funds. You didn't see that as much, probably because
of margin calls, is you know, it would be my
guess on that one. But margin balance has really started
to decline towards the end of the month. So what
that means to me is that there wasn't necessarily heavy selling.
It's just you didn't see them loading the boat back
as they're kind of getting back into the market.
Speaker 2 (29:45):
This is gospel for me, folks, the asymmetric tendency of
this where there's a bit an ask and like when
things are going down, what you learn the hard way
is the.
Speaker 5 (29:55):
Bid falls away.
Speaker 2 (29:57):
That's right, Was there a essence of Lizzie's was there
as And I don't feel the emotion of Catharsis with
that empty pivot in my stomach.
Speaker 5 (30:09):
Oh, the bid just walked away. We're rationalizing it.
Speaker 9 (30:12):
So here's something as interesting. We get this question all
the time. People will say, well, you know, what makes
a market right? Are people stepping away? And what I
think is people are just kind of lowing their bids
and they're waiting for that opportunity. The other thing we saw,
guys was what I found was really interesting is we
started to see a lot of premium selling in the
options market. So maybe Tom, maybe that's a way that
(30:35):
clients are getting back into it by saying, Okay, maybe
we'll sell some puts down here. The Vix's trading sixty
as it kind of trickled its way back to you know,
twenty by the end of the month. Premium selling, whether
it was selling spreads, whether it was selling puts, is
a way to maybe buy the dip a little bit cheaper.
That was something that we saw with our retail clients.
Speaker 4 (30:51):
Were the same people who were selling in the beginning
of the month buying later in the month. Do you
have that data, Well, what we can do is we
can kind of break it down. So one of the
things that we noticed is we broke it down by generation. Okay,
and you know, my generation Gen X, right, we came
in a little bit more heavily loaded up in terms
(31:11):
of margin and in terms of equity allocations. So they
kind of peeled back a little bit just because they
were a little bit more exposed. Some of the other generations,
Millennials and you know, the generation above, they didn't come
in as exposed, so they did a little bit more buying.
So what we really saw was that the people that
had more heavy equity allocations and even a little bit
(31:34):
more option allocations in the term of long options, those
are the ones that started to peel things back. People
that weren't as exposed they started to add when they
had that cash available.
Speaker 2 (31:42):
The trade balance just came out and I'm doing Yeah,
I can do it on the Bloomberg. I've got a
thing where I can do it. I can't count the sigh,
Joe Mazzola with us right now. The trade balance on
trend back to two thousand and seven twenty ten is
you know, after the crisis, has been on a trend
of a greater trade balance, and then it fell out
(32:03):
of bed with COVID came back, and now it's really
fallen out of bed to a huge negative. Statistic survey
was one thirty seven billion, which is a ginormous number,
and it came in actually at one hundred and forty billion,
and Joe Mazzola, let's count one, two, three, four or five.
I can't even I gotta I gotta use my finger one,
(32:24):
the surveillance finger one, two, three, four, five, six eight.
We are out eight standard deviations on the trade balance.
You and I have never seen this, Schwab clients have
never seen this, have they?
Speaker 4 (32:41):
It's front loading.
Speaker 9 (32:41):
I mean, you know that would that would kind of
be My assumption is that while there's so much indecision
around what the trade war is going to offer, whether
it's businesses, whether it's you know, retail clients that are
that are making their purchases in advance while we're waiting
for this to happen.
Speaker 3 (32:56):
It's heart.
Speaker 9 (32:57):
I mean the hard part is we you know, we
talk about businesses and how it will affect their p
and ls and how that that affects, you know, what
they're doing in terms of their profit margins, but it
hits the retail as well too. At some point they
need to figure out with their monthly budgets, how are
they going to allocate those if they if their expectations
are their prices will go up going forward. And we've
seen that, You've seen it in the Michigan consumer sentiment numbers.
(33:18):
You've seen these expectations for inflation. So what do you do.
You buy it when you can, not when you have to.
And that's kind of what we're seeing.
Speaker 4 (33:24):
Is that your view that prices are going to go
up moving forward.
Speaker 9 (33:27):
I mean, that's I think at least that's where we're
at right now until there's some type of pivot from
what we're seeing.
Speaker 4 (33:33):
It was interesting hearing from Jane Frasier City Group CEO yesterday.
She she basically said what she's seeing clients do right now,
and these we're not We're talking huge businesses right at
U City Bank, they're taking a break. They're just not
making the investments they're they're at a standstill. They're waiting
for clarity, and that's a real concern.
Speaker 2 (33:53):
You will have to see it. I mean, I mean,
Matt Winkler just sends me in Matt when he gets
angry at me, he sends me love notes. What did
you say under a Bloomberg News sounds of a brilliant
essay by Noah Smith, who's just smart, smart, smart, And
you know all the certitudes out there now, and one
of the great certitudes.
Speaker 3 (34:09):
Of gloom is woe is me.
Speaker 2 (34:12):
Imports are overwhelming exports and a lot of people, including me,
take a simplistic math on that where when you have
imports come in, they do strange stuff like investment just
as you mentioned or inventor is the math, folks, is
not as simple as what you hear from a lot
(34:33):
of people. And that's how you get to the uncertainty
like in Young Hatzi is this note from Goldman Sex
or Joe all of a sudden, Hatzias is Q two
it two point x percent abonomic growth.
Speaker 4 (34:45):
Sure, I think those are all very feasible numbers. And
here's what I think we need to look at is
the idea that we prospered pretty well in the United
States even with the trade imbalance. And you know, you
can look not to get political, you can look at
any any sense that you want. But we've benefited from
low price goods.
Speaker 2 (35:03):
Joe Mazzola, Lizzie Saunders, Kathy Jones, what a great team
at Charles Shrub Joe, thank you so much.
Speaker 1 (35:14):
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 (35:29):
Zorah and Memdani came out of an experience in New York.
This absolutely original and I live this with afterthought.
Speaker 5 (35:39):
You heard me talk about afterthought.
Speaker 2 (35:41):
Afterthoughts elementary school. Her first grade class had eleven languages
and you have to live it to understand it was
absolutely extraordinary experience. I treasure the experience of what they did.
This is on the Upper Side school five twenty eight.
(36:01):
I believe it was up in the nineties. Zori m
donnie lived this as well, much more in Queens and
of course his Bank Street Elementary School, and then went
on to great academic acclaim at Boden and now runs
for mayor with a decidedly left strategy. Zoren, thank you
so much for joining Bloomberg and Bloomberg Surveillance today. How
(36:25):
are you going to move to the center to compete
and win? How do you go from a more left
socialist structure a more strident progressive structure in capture centrist votes.
Speaker 10 (36:39):
With as many Bloomberg interviews as possible.
Speaker 5 (36:42):
That's a right answer.
Speaker 2 (36:44):
Okay, continue, you can stay.
Speaker 10 (36:49):
It's a real pleasure to be here, you know. I
think I think one of the key ways is explaining
how the crises that we are speaking about, whether it's
on affordability and understanding it with regards to housing, or
childcare or public trands. That these are crises that are
affecting New Yorkers wherever they identify politically, whether on the
left or in the center, or even on the right.
(37:09):
And I've found that while I don't believe there's an
ideological majority in our city of any one political persuasion,
I do think there's a majority of New Yorkers who
have been left behind by the economic policies of this
mayoral administration and of politics today. And this is what
this campaign seems to confront in the politics that requires
no no translation.
Speaker 4 (37:30):
I can see it now though at you know, sort
of to Tom's question, the painting of you as a
democratic socialist or even a socialist, how do you avoid
the label or do you embrace the label? Do you
make it so centrist or not scared away by that?
Speaker 10 (37:50):
I embrace the label because ultimately I do identify myself
as a democratic socialist, and I think, you know, I
think that the thing that New Yorkers hate more than
a politician they disagree with is one that they cannot trust.
And I think it's important to be honest about how
we're coming to this politics and also what that label
means to me, which is ultimately that each and every
New Yorker has what they need to live a dignified life,
(38:12):
and that it's city government's responsibility to provide that. And
I think we have a general consensus on many of
those building blocks in our society, whether it's public education
or libraries or sanitation. But then there are certain places
where we tend to believe that these are necessary parts
of living a dignified life, and yet we allow people
to be priced out of it. And I think housing
(38:33):
is one of the most obvious examples of that.
Speaker 4 (38:35):
So let's talk about that. What is your policy for
increasing affordability and increasing supply of housing, because no question,
that is the issue supply of housing. That is why
it's expensive.
Speaker 10 (38:45):
Here, absolutely, And I think what we're seeing is that
when you ask New Yorkers if they were to pick
one of the many crises they're facing in their life,
it's the housing crisis that tends to predominate. And I
think that what we need to do. There are a
few things we need to do in terms of allowing
the private market to play a more significant role in
the construction of additional housing supply. That includes ending the
(39:06):
requirement to build parking lots when we're constructing housing. That
means increasing density around mass transit hubs. That means upzoning
wealthier neighborhoods that have historically not contributed to housing production.
What makes our campaign distinct is in tandem with that,
I also believe that the public sector has a role
to play in building immediately affordable housing. And the reason
(39:27):
I say immediately, sorry, please.
Speaker 5 (39:30):
The time that we've got, I got to get in
two themes.
Speaker 2 (39:33):
The reality is labors going down in flames in the
United Kingdom, and there is a wealth exit from the
United Kingdom. If we have Mayor Mamdani, do we get
a wealth exit from New York City? No?
Speaker 10 (39:50):
I think what we actually get is an end to
the exodus we're seeing right now of working in middle
class New Yorkers leading our city in the hopes of
finding a place where their dollar can go a little
bit further. And what we know is that it's housing,
its childcare, its general cost of living. And so often
when I speak about our campaign to make the city
more affordable, to freeze the rent to make buses fast
(40:12):
and free, to deliver universal childcare. Sometimes it's framed oppositional
to that of let's say, business interests, But oftentimes when
I speak to business owners, one of their primary concerns
is how to retain their employees in a city that's
so expensive. And I think that these are proposals that
will make the city up not only more affordable, but
also more livable because there are so many knock on
(40:35):
consequences of having a city that's out of reach. There's
a real sense of almost permanent anxiety that the workers
are living in. And this addressed is that.
Speaker 2 (40:44):
One of the great themes right now of all the
twenty eight flavors of candidates we've spoken to is crime,
and the great theme is how do we rEFInd three
thousand New York Police Department officers? Are you in support
of state in increasing the number of police officers.
Speaker 5 (41:04):
In New York City?
Speaker 10 (41:06):
So I'm in support of stabilizing And I've said time
and again that I think the ultimate concern has to
be delivering public safety, and police have a critical role
to play in that. Yet what we're doing right now
is relying on them for almost every failure of the
social safety net a reliance which is preventing them from
doing their actual jobs. And we can see the results
of that in our inability to increase our clearance rates
(41:29):
for the major seven categories of crime. And so what
we've put forward as a proposal is to create a
Department of Community Safety that would tackle the mental health crisis, homelessness,
gun violence, hate violence, and victim services, doing so in
a manner that's aggressively pursuing evidence based policies that have
proven successful elsewhere in the country, and allowing police to
(41:49):
focus on their actual jobs.
Speaker 4 (41:51):
Free buses, increased childcare, more housing. How do you pay
for it all?
Speaker 10 (41:57):
So, I think there are a few key ways. We've
put forward a revenue posal that seeks to raise about
ten billion dollars a year. Now, about nine billion of
that comes from increased taxes on five billion from the
most profitable corporations in New York State. We would tax
the top level of corporate tax would match that of
New Jersey, where across the river they have an eleven
point five percent top corporate tax rate. Here in New
(42:19):
York we have a seven point twenty five percent top
corporate tax rate. And then we'd raise four billion dollars
by raising income taxes on the top one percent of
New Yorkers, the New Yorkers who make a million dollars
a year or more, by a flat two percent increase.
It would just be about to your voice.
Speaker 2 (42:34):
I've got to get this in zot and we're out
of time, but this is too important. You are on
a crusp of the national resurgence of a democratic party.
Is your voice the Senator from Vermont and other voices,
is a general woman from the Bronx. Is that the
future of the Democratic Party, or is the future of
the Democratic Party centrist more towards a tradition from the
(42:56):
last century.
Speaker 10 (42:58):
You know, I would argue that that my voice, and
the voice that of so many others that you've cited,
whether Senator Sanders or Congressman Acostia Quartees, is very much
still in the tradition of the Democratic Party. And I
think so much of what we are also speaking about
is seeking to learn the lessons, whether it's of the
New Deal or also in New York City, specifically of
Little Flower mayor Fierro LaGuardia and how the public sector
(43:21):
was so critical in providing dignity and working people's lives,
and we're seeking to bring that back because too many
working class New Yorkers and Americans rightfully feel that they've
been betrayed and left behind, and it's time for us
to deliver that which they have so long been denied.
Speaker 2 (43:35):
Next time you're on, We're talking cricket zortin, ma'm dini.
Thank you so much, greatly appreciated.
Speaker 1 (43:40):
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 listen
live on Amazon Alexa from our flagship New York station.
Just say Alexa play Bloomberg eleven thirty.
Speaker 5 (43:57):
Let's go right now to the newspaper? Is Lisa much?
Speaker 6 (44:02):
I'm not going to start there, Okay, let's start it.
Speaker 2 (44:04):
So.
Speaker 6 (44:04):
A record amount of money was raised at the gala
last night, huge one, yes, huge, thirty one million dollars,
the biggest gross seventy seven year history of the event.
It doesn't reflect, though, the seven figure costs of staging
the gallop, but that's still a big figure to begin with.
I want to get to the fashion because that's what
it's all about. At the met gala, right, you mentioned Zandaiya,
(44:24):
so I had we have a couple of pictures if
you're watching on YouTube. So it was this all white
pants suit custom Louis Vatan screaming. I totally with the
hat on top of it. I could totally see myself
with that A big focus to on men's fashion because
that was a big thing for it. So you had
Tom's favorite, Pharrell Williams. He was there, cousdom Louis Vatan,
(44:46):
Tiffany jewelry on top of it, so he was looking Tiffany.
Speaker 2 (44:52):
I mean, yes, it's never too early for Mother's Day.
And I got the Tiffany Titan by Pharrell Farrell whatever
you're pronounce said sixteen thousand, five hundred.
Speaker 3 (45:02):
It's a bargain.
Speaker 5 (45:03):
It's a bargain for Mother's Day.
Speaker 7 (45:05):
That's correct.
Speaker 5 (45:06):
Screams value.
Speaker 3 (45:07):
It does.
Speaker 5 (45:08):
Also, I thought Usher was great.
Speaker 3 (45:10):
Usher looked like, yes, Usher did.
Speaker 6 (45:13):
But a bad Bunny set out stood out to me
because it was so colorful, like you know, everything everybody
else had.
Speaker 2 (45:18):
Bunny stood out to me because he's the only one
at the damn event that listens to Bloomberg's surveillance.
Speaker 4 (45:23):
He's the only one who gets in touch. They all listen,
they all watch. He's the only one who reaches out.
Speaker 5 (45:26):
I keep it very quiet.
Speaker 2 (45:28):
We are humbled, you know, I don't time for a
story now, but humbled by the number of people in
entertainment that listen to what we do.
Speaker 5 (45:37):
Early morning la as well.
Speaker 6 (45:38):
Continued John Cena.
Speaker 3 (45:40):
Too, we listened to John Cena. John, I thought you
were great.
Speaker 5 (45:44):
Chicago.
Speaker 6 (45:47):
Okay, so we've been talking a lot. Yesterday we talked
about President Trump's plan to place tariffs right on movie
productions made outside of the US. So actor John Boyd said,
he is a plan to fix Hollywood.
Speaker 7 (45:58):
So I want to.
Speaker 6 (45:58):
Quickly break it down. This a great art and Bloomberg
he presented it over the weekend to the President. Federal
incentives for US theater owners to upgrade their facilities, because
you know, the theaters are the ones who have been
struggling a lot. So that was one of them changes
to the tax code to encourage investment in US firms,
job training initiatives. Tariffs on films produced overseas, so that
(46:18):
still was in there, but filmmakers who co produce foreign
companies are allowed to obtain their credits for US spending.
So those are some of the things he brought about.
The President said he supports the plan. He's going to
meet with industry executives that we talked about this yesterday too,
so that meeting is going to be coming up. But
you had California Governor Gavin Newsom calling for federal tax
credits at least seven and a half million dollars.
Speaker 2 (46:40):
From a theoretical standpoint, tax credits are more surgical, more
immediately successful than the silliness of tariffs. But I don't
see tim, I don't see tax credits working within a
hugely entrepreneurial entertainment basis where failures is.
Speaker 5 (47:00):
This is not like making a lum can No.
Speaker 4 (47:02):
I mean when you have a when you produce a film,
you're making a big bet. You're putting money down that
you know, you think it's going to actually be successful
in the theaters or on demand, and the hit rate
isn't necessarily great.
Speaker 5 (47:14):
Tie into the metcale.
Speaker 4 (47:15):
Let's tie it.
Speaker 2 (47:16):
Anna Sawa looked lovely like z India, Iraq and the
White and Anna there was Shogun.
Speaker 5 (47:22):
Shogun was a success.
Speaker 4 (47:23):
Shows it was made in like three geographies including Canada. Right,
wasn't there a big shogun was in Canada too.
Speaker 5 (47:30):
Yeah, Vancouver. The X Files started that. You know, you
can tell by the.
Speaker 4 (47:34):
Trees Port Moody located near Vancouver.
Speaker 6 (47:39):
Squeeze in here, Oh, squeeze in because you're a big
education So I want to put this out there. This
was an exclusive of the Wall Street Journal. Trump administration.
They've been talking about these different threats to colleges universities.
Speaker 7 (47:50):
Now.
Speaker 6 (47:50):
They it's kind of like an ultimatum, I guess, but
they're saying if former students don't pay back the loans,
then future students might not get any of themselves.
Speaker 5 (47:59):
So that was just came about Lisa Mateo in the newspapers.
Thank you so much.
Speaker 1 (48:04):
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
(48:25):
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):
He's got a huge impact on American economics. Tour duty
at Deutsche Bank of Great Acclaim and then wandered over
to Apollo Global Management to brief the troops there on
a not even a daily basis, almost an hourly basis.
His morning short, three paragraph note is a must read
on Global Wall Street. Torsten Sluck joins, this morning, what'd
(00:49):
you write this morning? So?
Speaker 3 (00:52):
What was this morning? Oh? This was about what has
happened after Liberation Day? And two things have happened after
Liberation Day. This is just an observation naming that if
you look at the weekly data for contensus earning expectations,
they have come down quite significantly, both for Q two
and Q three for this and P five hundred. So
the first thing that has happened is a downward revisions
to earnings. The second thing that has happened is that
(01:13):
we normally have a very tight colation between correlation between
interest rates and the dollar, and that correlation actually also
broke down after Liberation Day. So now the dollar is
trading not so much on interest rates but on other factors.
Speaker 2 (01:26):
Yeah, and Pacific rim dynamics. We'll get into that later
on the show. Folks, some of those currencies continue painful.
This morning, Janahatsias, the Goldman Sachs publishes out on an
inventory dynamic at two percent plus Q two GDP, do
you see like a normal growth for this second quarter?
Speaker 3 (01:45):
What is very unusual about the second quarter is that
we're coming from a place where we had significant front
loading of purchases among consumers, and we had significant inventory
build among corporates simply because people were preparing for April second,
which happens to be the second day in the second quarter,
namely when tariff, of course began to cut kick in.
(02:07):
So the conclusion is there are some fairly significant bumps
when it comes especially to the inventory part of GDP
and to the import part of GDP in the first
and the second quarter.
Speaker 4 (02:17):
On the consumer confidence basis, we're seeing consumer confidence get
hit as a result of tariff policy. Still though in
the hard data we're not necessarily seeing it hit there,
when do we see it hit?
Speaker 3 (02:27):
So Barclays yesterday had a very important note that looked
just like several others at the high frequency data, and
what they are seeing in the daily data is that
we're beginning to see a slow down for high end consumers,
especially when it comes to airline bookings, hotel reservation, recreational
travel more broadly, and also higher end durable goods. So
(02:48):
one way of looking at this is that you should
ultimately expect to see, especially those that are now impacted
by the stock market correcting, you should begin to see
them begin to slow down their consumer spending. And that
is exactly what the data is show. So yes, it
is still early in terms of when tariffs were implemented,
with still only a few weeks in. But the longer
this shock persists, the higher is the risk of course
(03:10):
that this is going to drag down also hot data, what.
Speaker 4 (03:13):
Is the risk there? I mean, I mean contextualize this
for us because the president yesterday we heard from Bill Ackman.
You said, okay, I want to see one hundred and
eighty day pause. Now I want to see this ninety
day pause extended to one hundred and eighty days. At
what point, in your view do you see the damage
from these policies actually becoming something that's entrenched rather than temporary.
Speaker 3 (03:32):
Well, and that's a very important question toom because what
I think is going on is that companies are actually
already responding to turiffs. And what do I mean by that, Well,
if you look at the surveys from the regional fits,
they are showing the new orders is collapsing. Excuse me,
they're showing that kapex plans are collapsing, and they're showing
that prices paid are going up. This is the definition
of taflation. That means that there's going to be slower sales,
(03:56):
that's going to be more increasing prices. And this is
happening on the corporate side. Consubas have not quite yet
seen this, but it's coming. Especially with the significant slowdown
in the number of containers coming from Chinese to the US.
That means that the inventory will in the next few weeks,
in my view, we will begin to see emptyholves. I
don't even know how we're having this discussion. Of course,
if we get normally thirty thousand containers from China coming
(04:18):
in and were no longer get Thirsdy and thirty thousand
containers from China coming in. Of course we'll begin to
see MPT sholves. Sin stoll Is.
Speaker 2 (04:23):
Tim mentioned some Centovic folks sent for Paul Sweeney's and
they Tim mentioned there's a rationalization going out among the
leads over t tariff theory.
Speaker 5 (04:33):
You and I read Ricardo cover to cover. There's no rationalization.
Speaker 2 (04:37):
Either tariff theory of a pseudo McKinley doesn't work, or
you believe it it's gonna work.
Speaker 5 (04:44):
There's no in between, right.
Speaker 3 (04:46):
And that's why. And in some sense you could take
exactly of this, as in the model that you and
I would have talked about for years, Tom, that if
this shock is temporary and if it lasts a week,
we would all say, okay, this was a week. Now
we go back to normal, right, but give it this
shock as one hundred fort five percent, and so far
it feels quite permanent. We will say, well it's permanent.
You got to adjust to a new equilibrium and that
new equlibrium. It will have the consequence that prices are
(05:08):
higher and sales are low.
Speaker 5 (05:09):
Well, what's a shift? Can I go Nerd right now?
Speaker 4 (05:12):
Please go Nerd?
Speaker 5 (05:13):
Kruman we're going.
Speaker 2 (05:13):
Wank right now, there's a dead weight loss in this
Euclidean calculus. Exactly there's a shift who allocates the dead
weight loss policy or brute economics.
Speaker 3 (05:25):
So exactly when that dead weight loss has to be allocated?
The very important simple way of thinking about that is
that does that have to be allocated to firms taking
a decline in their earnings or does it have to
be instead allocated to consumers basically facing higher prices. So,
put in very plain english, the container arrives in Los Angeles,
someone needs to pay the tariff. Is that tariff now
(05:48):
passed one hundred percent unto consumers? Is it passed fifty
percent unto consumers? Is it only past twenty five percent
unto consumers? So companies will take a hit on their
earnings if it's not passed on one hundred percent to consumers.
So that weight laws, that cost of higher teriffs has
to be born by someone, and if it is not corporates,
it will ultimately be the consumer.
Speaker 4 (06:08):
I mean, it seems politically companies don't want to be
public about increasing prices as a result of these tariffs.
Speaker 3 (06:14):
So would you.
Speaker 4 (06:15):
Argue that at this point it looks like companies are
going to absorb this or they're going to try to
pass it along to consumers in a way that's not
necessarily prominent.
Speaker 3 (06:24):
So that's why one way of answering that question is
to simply look at what a company is actually doing.
And for example, from the Dallas Fit, the Field del
f Fit, the New York FED, the Cancer City FED,
the price is paid component, in other words, what a
company is saying in terms of what is the price
that I'm paying for goods that are inputs in my production.
And if they answer is price is paid is growing
up and that the moment price is paying is skyrocketing
(06:46):
because company is saying I'm paying more. And if I'm
paying more, then I'm saying in this survey from the FAT,
the prices are going up. So that's not a political
discussion or political statement, it's just the facts that companies
are saying they're paying more. So as a result of that,
we should expect it happens to be the case when
that together with the CPI inflation, that that will be
lifting inflation eventually.
Speaker 5 (07:04):
Let's shift to the FED meeting.
Speaker 2 (07:05):
For those of you on your community crass nation, what
a joy with apollowed Global Management. Turston slock with us,
good morning on YouTube. Thank you so much for the
interest in YouTube. Really really appreciate it. It's sort of
like a new media for me and it's winning. I
mean for stun of it. It was like, you know, yeah,
we can do YouTube.
Speaker 3 (07:22):
Right YouTube. You're twenty years old at this more.
Speaker 5 (07:24):
What does a cappuccino cost in Brooklyn?
Speaker 3 (07:27):
Probably about five.
Speaker 5 (07:28):
Five bucks and maybe you stretch out to eight bucks
for something.
Speaker 4 (07:31):
We Earnest Torston knows he's a Brooklyn guy.
Speaker 3 (07:33):
Are you a Brooklyn guy too, Brooklyn Heights?
Speaker 5 (07:37):
You know, Lisa, we are just you guys.
Speaker 3 (07:39):
Are you guys are out numbers Brooklyn?
Speaker 6 (07:41):
They don't have the cappuccino in Brooklyn. They have the
flat white.
Speaker 3 (07:44):
Is that not correct?
Speaker 5 (07:46):
Correct?
Speaker 2 (07:47):
We got to get to the FED meeting because we
have to talk to Touriston about the parliamentary crisis in Germany
as well. I'm calling this FED meeting the ex post
squared meeting, and that I got two ex posts. I
got a massive weight to see what inflation will do,
and at the same time I got a separate, discrete
massive weight to see what labor will do. Are they
(08:10):
summed are they discrete or is one more important than
the other?
Speaker 3 (08:13):
Absolutely, because if you look back, including on the employment
report last Friday, things are not that bad. In the
hot data, it looks like things are still okay, So hey,
why should the Fed change anything? But when you look
forward and you begin to worry about containers coming in
is collapsing. If you look at also all the stresses
in trucking earnings in this earning season. If you look
across the bond and the anecdotes coming from Southwest Airlines
(08:36):
saying we're already in a recession, she totally is saying
that traffic is weaker, PepsiCo saying that snack sales are weaker.
Across the board, a lot of the forward looking indicators,
including the fact that companies are not providing forward guidance,
are telling you a very different story. So to your point, Tom,
if you begin to think about what this means for
the FAT, it does imply that the backward looking and
the rear mirror eraror picture here is looking very different
(08:59):
from if you look through the front mirror here, where
things look much weaker.
Speaker 4 (09:02):
So from a policy perspective, or at least from a
communications perspective, how does JA Powell thread that needle tomorrow?
For the American public.
Speaker 3 (09:09):
I think he will continue to look backwards and say, hey,
the data is actually still okay, the economy is still
performing fine. The th repult was actually okay. Inflation has
not really started moving up, so we are still in
weight and see mode. The biggest risk, of course, is
that if corporate America really is frozen as a result
of uncertainty, then the quick question is what comes after frozen?
(09:29):
And of course the fear is that after frozen comes recession.
So then J. Powell is called in this difficult dilemma
of saying, hey, if I look back, everything looks fine.
But if I look ahead and I know that things
are frozen on the corporate side, the risk a frozen
is going to create a drop off in the economy.
Speaker 5 (09:43):
People don't know.
Speaker 2 (09:43):
It's because we cut away from it at the end
of the press conference. But at the end of the
press conference they always sing kumba ah do that.
Speaker 5 (09:50):
And this year they're gonna say this, this meeting, they're
gonna sing a let of go.
Speaker 4 (09:53):
Is that why I see Michael McKee practicing.
Speaker 2 (09:55):
Practicing You know this week it's going to let it
go go.
Speaker 4 (09:58):
Please frozen, the frozen reference for everybody in the cheap
seats hey tourist in Okay. If we think about the
FED moving forward from a policy perspective, stagflation is the
sort of the worst case scenario here. And what we've
learned is they essentially have to say, okay, when it
comes to the dual mandate, we have to decide what's
more important. Is more important attacking prices or is it
(10:19):
attacking employment? What do you see moving forward? If we
do enter a stagflationary environment.
Speaker 3 (10:23):
That's absolutely right, tim and we are absolutely in stackflation.
If you look at the quantifications from the Yale Budget
lab from the pen Warton Budget Model, from the Text
Foundation from the Pierce Institute, they find that inflation over
the next twelve months will go up by one percentage point.
So if we have inflation going up, they FETCH would
be hiking. But if at the same time we have
less economic activity, the FETCH would be cutting. So executory
point which one is what's really most interesting also about
(10:46):
this discussion is that the dot plot is actually revealing
that they're leaning towards looking at growth, because the dot
plot is saying that the next move is a cut.
So if that's the case, we have our answer right
there that they're fed things that in a stackflation scenario,
the focus should be on growth. And that's of course
where the author pans and the pul Volca discussions will
come in, because is that a mistake if inflation is
not to go Remember a Copeca today's two point eight
(11:08):
and if we add one percent of that we get
to three point eight. Can you pee counting if inflations
will go up to to three point eight? That gets
a really really complex decision.
Speaker 5 (11:16):
Can we do a surveillance audible?
Speaker 3 (11:18):
Let's do a surveillance.
Speaker 5 (11:18):
We'll now doing audible for those of you. Good afternoon
in Europe. I was flabber guested towards the slock.
Speaker 2 (11:25):
I can take long nominal GDP in Italy and make
the statement Italy's gone nowhere in a decade or fifteen years.
I was thunderstruck it the household networth, not poverty, but
lassitude of Germany and that they don't own equities, they
don't own this, they don't own real estate.
Speaker 5 (11:44):
I was.
Speaker 2 (11:45):
I don't think our listeners in America understand the lack
of wealth creation in Germany.
Speaker 3 (11:51):
Am I right, as you know. I'm from then, Michael.
Originally I did wait for a Jolemen bank for fifteen years.
But you're absolutely right. There's some very very important differences
between household net worth in Germany and in the US.
In the US, there's a significant allocation, of course to
your home and also to your stock market portfolio, either
through your four one K or through direct holdings of equities.
In Germany that's really different. All your equities and all
(12:14):
your fixed income is held by an institution named a
pension fund, So that means that there is a different
relationship to financial markets. There's a different relationship into interest rates,
and likewise in the housing market. A lot of people
in the housing market are rent us, so they don't
own the homes. So that's why the way you think
about assets, both financial assets and housing assets is very
different in Germany relative to what is in the US.
Speaker 4 (12:36):
I want to know about an economic indicator that I
think we should invent here, Tom. I get a text
message last Friday morning from a friend of mine, former colleague,
works at a mainstream publication. It's not a business publication.
It says, do you have Torsten Slocks contact information? Where
are we in the economic cycle when these are the
guys who are looking for touristed they are you know,
(12:56):
they are looking for tortona, a crisis.
Speaker 2 (12:58):
And end of the FED meaning let's remember the vix
is on a twenty five level as well.
Speaker 5 (13:04):
Post miracle, is there a new Germany or just a
Germany that doesn't know itself?
Speaker 3 (13:10):
There is absolutely a new Germany. It is very very
important the decision that was made now about a month
or two ago, where the German government decided to spend
five hundred billion on infrastructure and unlimited on defense. I
mean unlimited. That's a pretty big amount. That's a very
significant sale win to growth for the next several years.
Speaker 5 (13:26):
I gotta get this in Focus land Out.
Speaker 2 (13:28):
The morning after Putin I called him up, I begged
him to come on Focus land Out. Led with the
fiscal stimulus of Europe that had to come, he stated,
Europe finally has to grow up and start popping nomenal
GDP is it there now?
Speaker 3 (13:42):
And in that sense, it's very very important that because
we both have the US now slowing down for a
number of different reasons, but partly because of the way
the trade will has been implemented. But at the same time.
We now have Europe beginning to accelerate. Normody in FX,
there's only one part of the leg of the trade
that's moving, but here you actually had both pots moving
at the same time. So that's why my tail when
coming to European growth at the same time while the
(14:03):
US is slowing down.
Speaker 5 (14:04):
This is great. Sorry Peter Fisher years ago.
Speaker 2 (14:07):
Torston, for those of you on radio, Tourst's land in
a Luftanza airplane at Frankfurt.
Speaker 5 (14:12):
Here he's got his hands out and all that. You
see it on YouTube. On radio, it doesn't play, but
we'll just make it up as we go. Turston's luck.
Speaker 2 (14:19):
Thank you so much for joining us today the extended
conversation to get things going as well.
Speaker 5 (14:25):
He is with Apollo Global Management.
Speaker 1 (14:32):
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 (14:44):
Jeffrey Rosenberg joins us out of Tepper Carnegie Mellon and
of course all of his great work at Blackrocker. Are
thrilled we could get a Prefred brief here this morning.
I guess it's gospel out of Carnegie Mellon this distinction
between risk and certainty, Jeff Rosenberg explain the difference between
(15:05):
risk and I'm trying to measure it and the unmeasurable
uncertainty discussed that.
Speaker 7 (15:11):
Yeah, Yeah, I mean it's it's Frank Knight uncertainty. And
the difference is risk, which we study a lot, you know,
proxy with standard deviation of returns, is you know, some
way of measuring it, and Frank Knight uncertainty is just
unmeasurable uncertainty. And I think, yeah, that's what we're dealing
with with the with the policy uncertainty, trade and tariff uncertainty.
(15:33):
It's really unmeasurable. And so we're you know, having a
nice little rebound from the April you know, Liberation Day surprises,
and you know, we're we're not out of the woods
in terms of the uncertainty here. And that's that's it's
it's tough to measure, and that's what that kind of
academic concept captures.
Speaker 2 (15:52):
Jeff Rosenberg, You and I have an acclaim for Ian
Lingoln and BMO capital market. He has a vector after
all of this towards disinflation for a ten year full
faith and credit that goes from a four point thirty
ish to a three sixty five ish. Do you agree
that a disinflation vectors in place or is that just
there's just not enough information to come up with that call.
Speaker 7 (16:16):
You know, I think there's just a lot of confounding
factors there when you try to map disinflation into yield movements,
and which yield movements are we talking about, because you know,
if we're talking about kind of a growth scare in
the context of tariffs, it's it's tough to see the
(16:36):
initial disinflationary about. It's more looking inflationary. And I think
that's part of this kind of unmeasurable uncertainty here. And
if it is measurable, it's really about this, and we're
going to hear about this tomorrow. It's about the tension
between kind of the growth slowdown impact from tariff and
uncertainty and the inflationary impact. And yes, it may be transitor.
(17:00):
It'll be interesting to see if he uses that word.
Quite a loaded word given our history to describe the
terror of impact on inflation. But you could get through
the first order round of place increases and come out
the back of it with more of an economic slowdown
that becomes kind of overall DIT's inflation area. I think
(17:22):
that would be actually an easier playbook because it's a
more familiar playbook and it doesn't press on the conflict
between the dual mandate that is so much in focus today,
and I think it'll be the focus of tomorrow's Q
and A about you know, there's a very unfamiliar situation
where the FED is navigating between conflicting objectives inflation and growth.
Speaker 2 (17:43):
That's why Tim I'm calling it x post squared. That's
it's like two strands of ex post which do we
weigh down in a conflicted really.
Speaker 4 (17:51):
Captures So let's add that to the econ one on
one textbook.
Speaker 5 (17:53):
I would.
Speaker 4 (17:55):
The medium chef, I'm wondering about the what's in right now?
From your view? Do you think the uncertainty of the
situation is actually priced in? Given that we saw at
least on the equity side, nine days of gains uh
in a row interrupted yesterday.
Speaker 7 (18:13):
Yeah, It's it's really an interesting, you know question, because
what's was priced in? They you know, at the beginning
of April, right after the first round of announcements was
obviously a very negative reaction. Uh, you know, and and
we've unwound that, and we've more than unwounded and and
and equities across many indices and measures have kind of
rebounded and they're above their their April lows. The dollar
(18:37):
is not. So that's kind of interesting. That's the piece
that is is kind of hung out here with still
a little bit of risk premium in it. But you
can't really look at with his rebounded markets and say, well,
we're really pricing anything then, And uh, you know, that's
in the initial kind of reaction. If you take a
little bit longer framework and you look at, you know,
(18:59):
what's price in, you know, go back to kind of
the pre election market pricing in a Trump win, and
what you had was basically from kind of September all
the way through to about mid February, a real Trump
growth premium that was priced in. And what we unwound
(19:20):
effectively is we kind of unwound the Trump growth premium.
You know, we priced in a lot more kind of
bad left tail outcomes in terms of recession that we've
kind of priced out. So now you look at where
we're sitting and It's kind of like we've just unwound
the Trump growth premium, but we haven't priced in anything
in terms of what you've seen in economic forecasts and
(19:41):
recession odds going up. Not really priced into anything in
the capital market.
Speaker 2 (19:46):
Jeffrey Rosenberg with us and continues with us. He is
with Blackrock this morning. Good morning on your commute decrastination,
Android Auto, Good morning hearing more and more about the
Google technology that they're using everyday. Good morning on Apple
card Play as well, various exem Thank you for listening
and Spotify much more around the world than I ever
could think too.
Speaker 4 (20:06):
Jeffrey Rosenberg. We spoke, as Tom said earlier to Apollo
or to Torston Slaka over at Apollo earlier today, and
we asked them specifically about what the Federal Reserve is
going to be considering today and then tomorrow when we
hear from Jay Powell. How do you look at how
they thread that needle communicating not just to businesses and
(20:26):
two Americans that you know they're really watching not just
the soft consumer sentiment data but also the stronger than
I think a lot of people expected, hard data that
we continue to see.
Speaker 7 (20:39):
Yeah, and I'm not sure Towrston wrote about this or
certainly people are talking about the kind of typical pattern
when you get a shock to the system like the
one that we had, is the soft survey based data
starts to erode reflective of that shock on more of
a forward looking basis, because you're asking people in real time,
(21:01):
what are your expectations going forward that erodes before the
hard data does. Now, what we're coming off of here,
of course, is that following the soft data in the
most last in the most recent decline in soft data
was a really bad you know, strategy, because the soft
data ended up not being validated in the hard data.
So we have this period in time. It's typical where
(21:22):
you have the break between soft data and hard data.
And now what we're going to look for and what
the FED we'll talk about is does it show up
in the hard data. What's critical for FED policy is
they're not going to be forecast dependent here. They're not
going to forecast and move policy based on the soft data.
They're going to wait, and by waiting, they will be late,
and they're going to be happy to be late. Well,
(21:45):
whether financial markets are happy that they're late, that'll be
a different question.
Speaker 5 (21:48):
Could you make a dot on a dot plot right now?
Speaker 7 (21:53):
Well, you know they have to kind of make the
dot on dot plot. It'll be interesting to see how
those those e al. But again it's this kind of
difficulty of you know, waiting for the data.
Speaker 5 (22:04):
So, yeah, I'm old enough.
Speaker 2 (22:05):
Jeff Rosenberg, young turk that he is, and Tim at
least they have no clue.
Speaker 5 (22:08):
Folks.
Speaker 2 (22:09):
We used to sit in like second grade and there'd
be an air raid siren, like, you know, five blocks away,
and you'd have to practice getting under your desk because
that's what you did.
Speaker 5 (22:19):
And then, yeah, Jeff.
Speaker 8 (22:21):
Rose or Tom, I'm actually old enough for that, really exactly,
Jeff Rosenberg, duck and cover in the yield portfolio of
our clients that don't want to own Nvidia.
Speaker 5 (22:32):
I mean, how do you duck and cover? The only
thing you do is buy money market funds, right.
Speaker 7 (22:37):
Well, you can do some other thing. It's a great analogy,
Tom Duckett, I may have to use that duck and cover.
Where do you duck and cover in your fixed income portfolio?
I mean the big thing, and this is what we've
been harping on for a long time. We call it,
you know, the new conundrum, right, The new conundrum is
sort of the old conundrum was green Span was raising
rates and long term rates were falling. Now the new
(22:57):
conundrum is the opposite direction. Powell maybe cutting rates, saw
this last year cutting rates in the short end, long
term rates going up. So this disconnect in long term
interest rates don't necessarily follow the Fed's short term interest
rates in this environment, and that's one of the consequences
of stagflation. So for Duck and cover, what does it
mean for your portfolio? It means you got to really
(23:19):
be careful about thinking where in the fixed income market
am I getting the protection of my desk in the
elementary school? Where am I getting protection in my portfolio
the fixed inco market. It may not be in the
back end the way it was when you had that,
you know, to the earlier question, the clear disinflationary alignment
for monetary policy. So you can kind of hide out
in the front end, you know, cash, you can move
(23:41):
out the curve a bit. Two years, five years, you know,
we looked for alternative forms of diversification, ways of engineering
negative correlation, and we like that in our strategies. So
you got to be a little bit more kind of
forward looking not backward looking playbook that the long end,
the thirty year is going to be a great heads here.
Speaker 4 (24:00):
I want to be backward looking a little bit and
go to a month ago when everybody was really, you know,
for lack of a better term, freaking out about what
the bond market was doing. I believe the President said
that bond market got a bit quote yippie Jeffrey, Yeah,
not again a technical term. I do wonder though, is
the bond market now behaving the way the bond market
(24:21):
is supposed to behave or is that is what we
saw thirty days ago. Is that something we can say, Okay,
that happened and now we need to move forward and
everything is fine.
Speaker 7 (24:31):
Well, you know, is the bond market behaving the way
it's supposed to be behaving? God, that's a We could
spend a lot of time on what those words being
supposed to be behaving, right, because it's all about like,
what's the role of free market capitalism, what's the role
of financial markets, what's the role of pricing, and what's
the role of financial repression? To countervail those models of
(24:55):
how our system works, and so what we had, you know,
whether it was explicit or employe sit in the post
GFC world is we had a very large active balance
sheet by global central banks, and that kind of took
away a lot of the old bond market vigilanteism. And
so I kind of I've got a piece coming out shortly,
(25:16):
and I brought back, you know, the famous James Carville line.
You know, I want to if I if I die,
I want to come back as the bond market because
they can intimidate everybody, you know, And you think about
when he said that that was back pre GFC, pre
an environment where you had such large central bank balance
sheets kind of really truncating the ability of the financial
markets to signal through pricing disagreements around policy. You go
(25:39):
back to the Liz Trust moment in the UK and
we started to see some emergence or re emergence of
this older form of bond market behavior. Whe was that
that's you know, what bond markets are supposed to do
depends on you know, what school of thought you subscribe to.
But yes, I think it's really notable that in that
April time period that long term interest rates went up
(26:00):
when short term interest rates went Now, you've got to
take that observation and dwell on it for a little bit,
and the conclusion you need to make. This isn't your
last twenty years bond market. It may be that pre
GFC bond market that we're starting to see reemerge here.
Speaker 5 (26:16):
Jeff, thank you so much.
Speaker 2 (26:17):
Jeffrey Rosenberger, Black Rock in preparation for a fed reading.
Speaker 1 (26:20):
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 (26:37):
It'd be nice to know what people are actually doing
right now. There's a huge split between institutional with some
affiredness out there and rech out. I guess the stereotype
of the story. As they're buying, they're strong, they're there forever,
with some going into cash. Joe Mazzola's expert at this
had a trading and derivatives, a strategy of Charles Schwab.
(27:00):
Really about what people are doing in Chwab just simply
what are they doing?
Speaker 9 (27:04):
Well, Tom, It's it's not really that much different than
what we saw on the institutional side, at least at
the beginning of the month, I can say because it
was all a real big drop in stacks, the biggest
drop that we've seen since March twenty twenty, you know
COVID time, so a fourteen percent drop in the number
from March into April.
Speaker 3 (27:25):
The I would say the biggest.
Speaker 9 (27:26):
Amount of selling was really that first week. It's kind
of across the board equity outflows. On the seventh we're
pretty strong, and I think something that was a little
bit different than maybe what we've seen in the past
was the idea that there wasn't as much maybe dip
buying as we'd seen. So yes, we did see some
(27:47):
inflows on the eighth and then but then the ninth,
when we had that you know, that nine percent kind
of rally off the bottom, we did see clients trim
and that I found that pretty interesting to see.
Speaker 4 (27:58):
That's, you know, I thought I thought that dip buyers
were there, I thought, and I thought the flows were
really going into the S and P five hundred index funds.
Speaker 9 (28:05):
So that's interesting. So one of the big differences that
we saw normally when we come across our list of
our top ten buys usually maybe one maybe two of
them are ETFs, this time four. So so what we
saw was concentrated buying between about maybe three or four symbols.
Netflix is always on top, and that was that was
(28:26):
excuse me in videos always on top. Excuse me in
video was always on top. It was interesting about that.
That was eight to one over the second place stock,
which was Amazon, so real big buying in video. Amazon
was second, Tesla was third, but then four of the
other top ten were ETFs, so that was interesting. It
was either you shift it within the small little sliver
(28:48):
of names or you broaden out of lot. What were
the etfsh spiders? So they were they were the index funds.
Speaker 4 (28:54):
Okay, So does that tell you that the is there
is there commentary about the state of the econ me,
the state of cash balance there that retail investors still
have money to play with to put to work, and
that's a good sign, I think so.
Speaker 9 (29:06):
I think I think some of the liquidation that we
saw at the beginning, like I said, it kind of
it tailed off a little bit at the end, but
we didn't see the heavy buying. I think part of
that and I think this is an interesting topic. It's
kind of margin balances. So when you see a liquidation
day like we saw on April seventh, what you normally
see is a rotation into something like fixed and income
(29:27):
mutual funds. You didn't see that as much, probably because
of margin calls, is you know, it would be my
guess on that one. But margin balance has really started
to decline towards the end of the month. So what
that means to me is that there wasn't necessarily heavy selling.
It's just you didn't see them loading the boat back
as they're kind of getting back into the market.
Speaker 2 (29:45):
This is gospel for me, folks, the asymmetric tendency of
this where there's a bit an ask and like when
things are going down, what you learn the hard way
is the.
Speaker 5 (29:55):
Bid falls away.
Speaker 2 (29:57):
That's right, Was there a essence of Lizzie's was there
as And I don't feel the emotion of Catharsis with
that empty pivot in my stomach.
Speaker 5 (30:09):
Oh, the bid just walked away. We're rationalizing it.
Speaker 9 (30:12):
So here's something as interesting. We get this question all
the time. People will say, well, you know, what makes
a market right? Are people stepping away? And what I
think is people are just kind of lowing their bids
and they're waiting for that opportunity. The other thing we saw,
guys was what I found was really interesting is we
started to see a lot of premium selling in the
options market. So maybe Tom, maybe that's a way that
(30:35):
clients are getting back into it by saying, Okay, maybe
we'll sell some puts down here. The Vix's trading sixty
as it kind of trickled its way back to you know,
twenty by the end of the month. Premium selling, whether
it was selling spreads, whether it was selling puts, is
a way to maybe buy the dip a little bit cheaper.
That was something that we saw with our retail clients.
Speaker 4 (30:51):
Were the same people who were selling in the beginning
of the month buying later in the month. Do you
have that data, Well, what we can do is we
can kind of break it down. So one of the
things that we noticed is we broke it down by generation. Okay,
and you know, my generation Gen X, right, we came
in a little bit more heavily loaded up in terms
(31:11):
of margin and in terms of equity allocations. So they
kind of peeled back a little bit just because they
were a little bit more exposed. Some of the other generations,
Millennials and you know, the generation above, they didn't come
in as exposed, so they did a little bit more buying.
So what we really saw was that the people that
had more heavy equity allocations and even a little bit
(31:34):
more option allocations in the term of long options, those
are the ones that started to peel things back. People
that weren't as exposed they started to add when they
had that cash available.
Speaker 2 (31:42):
The trade balance just came out and I'm doing Yeah,
I can do it on the Bloomberg. I've got a
thing where I can do it. I can't count the sigh,
Joe Mazzola with us right now. The trade balance on
trend back to two thousand and seven twenty ten is
you know, after the crisis, has been on a trend
of a greater trade balance, and then it fell out
(32:03):
of bed with COVID came back, and now it's really
fallen out of bed to a huge negative. Statistic survey
was one thirty seven billion, which is a ginormous number,
and it came in actually at one hundred and forty billion,
and Joe Mazzola, let's count one, two, three, four or five.
I can't even I gotta I gotta use my finger one,
(32:24):
the surveillance finger one, two, three, four, five, six eight.
We are out eight standard deviations on the trade balance.
You and I have never seen this, Schwab clients have
never seen this, have they?
Speaker 4 (32:41):
It's front loading.
Speaker 9 (32:41):
I mean, you know that would that would kind of
be My assumption is that while there's so much indecision
around what the trade war is going to offer, whether
it's businesses, whether it's you know, retail clients that are
that are making their purchases in advance while we're waiting
for this to happen.
Speaker 3 (32:56):
It's heart.
Speaker 9 (32:57):
I mean the hard part is we you know, we
talk about businesses and how it will affect their p
and ls and how that that affects, you know, what
they're doing in terms of their profit margins, but it
hits the retail as well too. At some point they
need to figure out with their monthly budgets, how are
they going to allocate those if they if their expectations
are their prices will go up going forward. And we've
seen that, You've seen it in the Michigan consumer sentiment numbers.
(33:18):
You've seen these expectations for inflation. So what do you do.
You buy it when you can, not when you have to.
And that's kind of what we're seeing.
Speaker 4 (33:24):
Is that your view that prices are going to go
up moving forward.
Speaker 9 (33:27):
I mean, that's I think at least that's where we're
at right now until there's some type of pivot from
what we're seeing.
Speaker 4 (33:33):
It was interesting hearing from Jane Frasier City Group CEO yesterday.
She she basically said what she's seeing clients do right now,
and these we're not We're talking huge businesses right at
U City Bank, they're taking a break. They're just not
making the investments they're they're at a standstill. They're waiting
for clarity, and that's a real concern.
Speaker 2 (33:53):
You will have to see it. I mean, I mean,
Matt Winkler just sends me in Matt when he gets
angry at me, he sends me love notes. What did
you say under a Bloomberg News sounds of a brilliant
essay by Noah Smith, who's just smart, smart, smart, And
you know all the certitudes out there now, and one
of the great certitudes.
Speaker 3 (34:09):
Of gloom is woe is me.
Speaker 2 (34:12):
Imports are overwhelming exports and a lot of people, including me,
take a simplistic math on that where when you have
imports come in, they do strange stuff like investment just
as you mentioned or inventor is the math, folks, is
not as simple as what you hear from a lot
(34:33):
of people. And that's how you get to the uncertainty
like in Young Hatzi is this note from Goldman Sex
or Joe all of a sudden, Hatzias is Q two
it two point x percent abonomic growth.
Speaker 4 (34:45):
Sure, I think those are all very feasible numbers. And
here's what I think we need to look at is
the idea that we prospered pretty well in the United
States even with the trade imbalance. And you know, you
can look not to get political, you can look at
any any sense that you want. But we've benefited from
low price goods.
Speaker 2 (35:03):
Joe Mazzola, Lizzie Saunders, Kathy Jones, what a great team
at Charles Shrub Joe, thank you so much.
Speaker 1 (35:14):
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 (35:29):
Zorah and Memdani came out of an experience in New York.
This absolutely original and I live this with afterthought.
Speaker 5 (35:39):
You heard me talk about afterthought.
Speaker 2 (35:41):
Afterthoughts elementary school. Her first grade class had eleven languages
and you have to live it to understand it was
absolutely extraordinary experience. I treasure the experience of what they did.
This is on the Upper Side school five twenty eight.
(36:01):
I believe it was up in the nineties. Zori m
donnie lived this as well, much more in Queens and
of course his Bank Street Elementary School, and then went
on to great academic acclaim at Boden and now runs
for mayor with a decidedly left strategy. Zoren, thank you
so much for joining Bloomberg and Bloomberg Surveillance today. How
(36:25):
are you going to move to the center to compete
and win? How do you go from a more left
socialist structure a more strident progressive structure in capture centrist votes.
Speaker 10 (36:39):
With as many Bloomberg interviews as possible.
Speaker 5 (36:42):
That's a right answer.
Speaker 2 (36:44):
Okay, continue, you can stay.
Speaker 10 (36:49):
It's a real pleasure to be here, you know. I
think I think one of the key ways is explaining
how the crises that we are speaking about, whether it's
on affordability and understanding it with regards to housing, or
childcare or public trands. That these are crises that are
affecting New Yorkers wherever they identify politically, whether on the
left or in the center, or even on the right.
(37:09):
And I've found that while I don't believe there's an
ideological majority in our city of any one political persuasion,
I do think there's a majority of New Yorkers who
have been left behind by the economic policies of this
mayoral administration and of politics today. And this is what
this campaign seems to confront in the politics that requires
no no translation.
Speaker 4 (37:30):
I can see it now though at you know, sort
of to Tom's question, the painting of you as a
democratic socialist or even a socialist, how do you avoid
the label or do you embrace the label? Do you
make it so centrist or not scared away by that?
Speaker 10 (37:50):
I embrace the label because ultimately I do identify myself
as a democratic socialist, and I think, you know, I
think that the thing that New Yorkers hate more than
a politician they disagree with is one that they cannot trust.
And I think it's important to be honest about how
we're coming to this politics and also what that label
means to me, which is ultimately that each and every
New Yorker has what they need to live a dignified life,
(38:12):
and that it's city government's responsibility to provide that. And
I think we have a general consensus on many of
those building blocks in our society, whether it's public education
or libraries or sanitation. But then there are certain places
where we tend to believe that these are necessary parts
of living a dignified life, and yet we allow people
to be priced out of it. And I think housing
(38:33):
is one of the most obvious examples of that.
Speaker 4 (38:35):
So let's talk about that. What is your policy for
increasing affordability and increasing supply of housing, because no question,
that is the issue supply of housing. That is why
it's expensive.
Speaker 10 (38:45):
Here, absolutely, And I think what we're seeing is that
when you ask New Yorkers if they were to pick
one of the many crises they're facing in their life,
it's the housing crisis that tends to predominate. And I
think that what we need to do. There are a
few things we need to do in terms of allowing
the private market to play a more significant role in
the construction of additional housing supply. That includes ending the
(39:06):
requirement to build parking lots when we're constructing housing. That
means increasing density around mass transit hubs. That means upzoning
wealthier neighborhoods that have historically not contributed to housing production.
What makes our campaign distinct is in tandem with that,
I also believe that the public sector has a role
to play in building immediately affordable housing. And the reason
(39:27):
I say immediately, sorry, please.
Speaker 5 (39:30):
The time that we've got, I got to get in
two themes.
Speaker 2 (39:33):
The reality is labors going down in flames in the
United Kingdom, and there is a wealth exit from the
United Kingdom. If we have Mayor Mamdani, do we get
a wealth exit from New York City? No?
Speaker 10 (39:50):
I think what we actually get is an end to
the exodus we're seeing right now of working in middle
class New Yorkers leading our city in the hopes of
finding a place where their dollar can go a little
bit further. And what we know is that it's housing,
its childcare, its general cost of living. And so often
when I speak about our campaign to make the city
more affordable, to freeze the rent to make buses fast
(40:12):
and free, to deliver universal childcare. Sometimes it's framed oppositional
to that of let's say, business interests, But oftentimes when
I speak to business owners, one of their primary concerns
is how to retain their employees in a city that's
so expensive. And I think that these are proposals that
will make the city up not only more affordable, but
also more livable because there are so many knock on
(40:35):
consequences of having a city that's out of reach. There's
a real sense of almost permanent anxiety that the workers
are living in. And this addressed is that.
Speaker 2 (40:44):
One of the great themes right now of all the
twenty eight flavors of candidates we've spoken to is crime,
and the great theme is how do we rEFInd three
thousand New York Police Department officers? Are you in support
of state in increasing the number of police officers.
Speaker 5 (41:04):
In New York City?
Speaker 10 (41:06):
So I'm in support of stabilizing And I've said time
and again that I think the ultimate concern has to
be delivering public safety, and police have a critical role
to play in that. Yet what we're doing right now
is relying on them for almost every failure of the
social safety net a reliance which is preventing them from
doing their actual jobs. And we can see the results
of that in our inability to increase our clearance rates
(41:29):
for the major seven categories of crime. And so what
we've put forward as a proposal is to create a
Department of Community Safety that would tackle the mental health crisis, homelessness,
gun violence, hate violence, and victim services, doing so in
a manner that's aggressively pursuing evidence based policies that have
proven successful elsewhere in the country, and allowing police to
(41:49):
focus on their actual jobs.
Speaker 4 (41:51):
Free buses, increased childcare, more housing. How do you pay
for it all?
Speaker 10 (41:57):
So, I think there are a few key ways. We've
put forward a revenue posal that seeks to raise about
ten billion dollars a year. Now, about nine billion of
that comes from increased taxes on five billion from the
most profitable corporations in New York State. We would tax
the top level of corporate tax would match that of
New Jersey, where across the river they have an eleven
point five percent top corporate tax rate. Here in New
(42:19):
York we have a seven point twenty five percent top
corporate tax rate. And then we'd raise four billion dollars
by raising income taxes on the top one percent of
New Yorkers, the New Yorkers who make a million dollars
a year or more, by a flat two percent increase.
It would just be about to your voice.
Speaker 2 (42:34):
I've got to get this in zot and we're out
of time, but this is too important. You are on
a crusp of the national resurgence of a democratic party.
Is your voice the Senator from Vermont and other voices,
is a general woman from the Bronx. Is that the
future of the Democratic Party, or is the future of
the Democratic Party centrist more towards a tradition from the
(42:56):
last century.
Speaker 10 (42:58):
You know, I would argue that that my voice, and
the voice that of so many others that you've cited,
whether Senator Sanders or Congressman Acostia Quartees, is very much
still in the tradition of the Democratic Party. And I
think so much of what we are also speaking about
is seeking to learn the lessons, whether it's of the
New Deal or also in New York City, specifically of
Little Flower mayor Fierro LaGuardia and how the public sector
(43:21):
was so critical in providing dignity and working people's lives,
and we're seeking to bring that back because too many
working class New Yorkers and Americans rightfully feel that they've
been betrayed and left behind, and it's time for us
to deliver that which they have so long been denied.
Speaker 2 (43:35):
Next time you're on, We're talking cricket zortin, ma'm dini.
Thank you so much, greatly appreciated.
Speaker 1 (43:40):
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 listen
live on Amazon Alexa from our flagship New York station.
Just say Alexa play Bloomberg eleven thirty.
Speaker 5 (43:57):
Let's go right now to the newspaper? Is Lisa much?
Speaker 6 (44:02):
I'm not going to start there, Okay, let's start it.
Speaker 2 (44:04):
So.
Speaker 6 (44:04):
A record amount of money was raised at the gala
last night, huge one, yes, huge, thirty one million dollars,
the biggest gross seventy seven year history of the event.
It doesn't reflect, though, the seven figure costs of staging
the gallop, but that's still a big figure to begin with.
I want to get to the fashion because that's what
it's all about. At the met gala, right, you mentioned Zandaiya,
(44:24):
so I had we have a couple of pictures if
you're watching on YouTube. So it was this all white
pants suit custom Louis Vatan screaming. I totally with the
hat on top of it. I could totally see myself
with that A big focus to on men's fashion because
that was a big thing for it. So you had
Tom's favorite, Pharrell Williams. He was there, cousdom Louis Vatan,
(44:46):
Tiffany jewelry on top of it, so he was looking Tiffany.
Speaker 2 (44:52):
I mean, yes, it's never too early for Mother's Day.
And I got the Tiffany Titan by Pharrell Farrell whatever
you're pronounce said sixteen thousand, five hundred.
Speaker 3 (45:02):
It's a bargain.
Speaker 5 (45:03):
It's a bargain for Mother's Day.
Speaker 7 (45:05):
That's correct.
Speaker 5 (45:06):
Screams value.
Speaker 3 (45:07):
It does.
Speaker 5 (45:08):
Also, I thought Usher was great.
Speaker 3 (45:10):
Usher looked like, yes, Usher did.
Speaker 6 (45:13):
But a bad Bunny set out stood out to me
because it was so colorful, like you know, everything everybody
else had.
Speaker 2 (45:18):
Bunny stood out to me because he's the only one
at the damn event that listens to Bloomberg's surveillance.
Speaker 4 (45:23):
He's the only one who gets in touch. They all listen,
they all watch. He's the only one who reaches out.
Speaker 5 (45:26):
I keep it very quiet.
Speaker 2 (45:28):
We are humbled, you know, I don't time for a
story now, but humbled by the number of people in
entertainment that listen to what we do.
Speaker 5 (45:37):
Early morning la as well.
Speaker 6 (45:38):
Continued John Cena.
Speaker 3 (45:40):
Too, we listened to John Cena. John, I thought you
were great.
Speaker 5 (45:44):
Chicago.
Speaker 6 (45:47):
Okay, so we've been talking a lot. Yesterday we talked
about President Trump's plan to place tariffs right on movie
productions made outside of the US. So actor John Boyd said,
he is a plan to fix Hollywood.
Speaker 7 (45:58):
So I want to.
Speaker 6 (45:58):
Quickly break it down. This a great art and Bloomberg
he presented it over the weekend to the President. Federal
incentives for US theater owners to upgrade their facilities, because
you know, the theaters are the ones who have been
struggling a lot. So that was one of them changes
to the tax code to encourage investment in US firms,
job training initiatives. Tariffs on films produced overseas, so that
(46:18):
still was in there, but filmmakers who co produce foreign
companies are allowed to obtain their credits for US spending.
So those are some of the things he brought about.
The President said he supports the plan. He's going to
meet with industry executives that we talked about this yesterday too,
so that meeting is going to be coming up. But
you had California Governor Gavin Newsom calling for federal tax
credits at least seven and a half million dollars.
Speaker 2 (46:40):
From a theoretical standpoint, tax credits are more surgical, more
immediately successful than the silliness of tariffs. But I don't
see tim, I don't see tax credits working within a
hugely entrepreneurial entertainment basis where failures is.
Speaker 5 (47:00):
This is not like making a lum can No.
Speaker 4 (47:02):
I mean when you have a when you produce a film,
you're making a big bet. You're putting money down that
you know, you think it's going to actually be successful
in the theaters or on demand, and the hit rate
isn't necessarily great.
Speaker 5 (47:14):
Tie into the metcale.
Speaker 4 (47:15):
Let's tie it.
Speaker 2 (47:16):
Anna Sawa looked lovely like z India, Iraq and the
White and Anna there was Shogun.
Speaker 5 (47:22):
Shogun was a success.
Speaker 4 (47:23):
Shows it was made in like three geographies including Canada. Right,
wasn't there a big shogun was in Canada too.
Speaker 5 (47:30):
Yeah, Vancouver. The X Files started that. You know, you
can tell by the.
Speaker 4 (47:34):
Trees Port Moody located near Vancouver.
Speaker 6 (47:39):
Squeeze in here, Oh, squeeze in because you're a big
education So I want to put this out there. This
was an exclusive of the Wall Street Journal. Trump administration.
They've been talking about these different threats to colleges universities.
Speaker 7 (47:50):
Now.
Speaker 6 (47:50):
They it's kind of like an ultimatum, I guess, but
they're saying if former students don't pay back the loans,
then future students might not get any of themselves.
Speaker 5 (47:59):
So that was just came about Lisa Mateo in the newspapers.
Thank you so much.
Speaker 1 (48:04):
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
(48:25):
always on the Bloomberg terminal
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