Full Transcript for Traders Watch How CPI and Tariffs Weigh on Markets

reciprocal terrafs. 00:02:51 Speaker 3: Right, that's if that if that's actually implemented early April, that's the kind of the schedule at the moment. Yep, that's that would get you over ten. That would get you over ten on the effective break. 00:03:03 Speaker 4: And what was such an environment due to your GP outlook weaker? 00:03:08 Speaker 3: You know, terriffs do they result in some combination of higher inflation, higher interest rates, or weaker economic growth. Pick your poison. It's you know, if you don't get the inflation, you're going to get the weaker growth. If you don't get the weaker growth, you get the inflation or higher interest rates. Were and all the above is already happening in anticipation of the tariffs, right, I mean you can see inflation expectations are up. The Fed's not moving now, and they're telling us it's because it's economic policy code where or tariffs and growth is slow, and so all the things that we think terifts are going to do, they're doing in the advance of actually the terrft's coming into place, because we're all anticipating it. 00:03:48 Speaker 2: Pauler, good question here. I'm sorry, it comes down to Granularity. Daffodil needs a new pair of Doc Martin Mary Janes at the Zandi house hold. 00:04:01 Speaker 3: It sounds scary leopard. 00:04:03 Speaker 2: I mean, they're ard and their incoming and they're gonna have a terrify them because they're made sure everything. I mean, you know everything. Micro Granular is going to be there. Mark Sandy with Moody's with this. We're gonna talk to him after this inflation report. There's a lift to the market today, Paul might right, it's a tentative lift. 00:04:22 Speaker 4: We were here the same place yesterday Tom before. Yeah, we'll get some of the tweets started coming out. So Mark, just at the inflation reading the CPI, we got a little bit better than expected in terms of lower inflation. We know it's backward looking, but what do you take away from the CPA print today. 00:04:38 Speaker 2: Well, that's on the face of it better. 00:04:40 Speaker 3: You know, it's one of these things where you have to go to the second third significant digit. I mean, I think our estimate was like zero point two five, so it would rounded up two point three. So maybe I don't know what to do the calculation, but you know, that's how much we're parsing the numbers here. But I think bottom line, you know, abstracting from the vague reason the monthly later, we're kind of, as I said earlier, still stuck around three percent, and that's that's where we're going to stay for a while until we get some clarity around and hopefully these tariffs go away, you know, sooner rather than later. 00:05:11 Speaker 2: Mark, where are you going to FED rate cuts through the year? I mean, everybody seems to be threeish guessing, but don't you don't guess, Mark, so you know what you're doing and what they'll do. 00:05:22 Speaker 3: Tell you, Tom, I'm confused. I mean the FED, right, because

what do you do with the tariffs? I mean, it raises inflation, weakens gross how do you respond and they're saying, well, we don't until we get some clarity, any kind of clarity around what's going on and how it's all going to play out. I mean, in my baseline kind of official forecast, I have two rate cuts towards the end of the year. It's going to take, you know, until the second half of the year before they get enough clarity to start moving again. 00:05:48 Speaker 2: But ultimately, you know, I do. 00:05:49 Speaker 3: Think the tariffs are going to be you know, more growth negative than inflation positive. I think at the end of the day, Doctors, and that may mean more rate cuts, Doctors. 00:05:59 Speaker 2: And thank you so much for joining us today. Mark Sandy writing for Moody's always very strong out on Twitter. Look from there for some very important nos. Futures up seventy four, a lift of the market, not going to make too much about it. Paul and I are waiting for the next headline. Long agoing far away. A wonderful person who was a great supporter of mine in the early years and Stan Freeburg was Fred Burston, and he was at the Peterson what became the Peterson Institute. The toughest job was to pick up from Fred, and that is what Adam Posen has done with grace, to say the least. The only one working harder than Adam Posen at the Peterson Institute is Chad Bone, who hasn't a day off since time began. As we look at this trade mess, we're in bonus round. Adam Posen is expert on the German political economic experiment. Doctor Posen, thank you so much for joining us today. If Doug Ehr went up at Dartmouth was to rewrite his history of the tariffs and all, what would Doug Rwin? What would Adam Posen be writing right now? 00:07:07 Speaker 5: Thanks Tom for having me back. And everyone should read Chad Bound and Doug Erwin's new piece and Foreign Affairs that just came out on tariffs. Doug has made the point repeatedly there are charts on THEEPIE website that this is historically unprecedented. You really have to go back one hundred years, ninety plus years to Smooth Hollie to see anything like this in terms of the size scope of tariffs. But even more so, this is much more uncertain. As he's pointed out Chad, Mary Lovely and I in various ways, this is an exercise of discretionary presidential power. I'll leave aside the constitutionality or the issues of politics, but just from an economic point of view. In the past, when there's been large moves of tariffs, it's mostly been in the US because Congress has authorized them. This is being done day to day or as justin Wolfer's joked intra day tariff changes on presidential whim, and that creates even more uncertainty. 00:08:12 Speaker 2: Take them on. 00:08:12 Speaker 5: Doug would say, we're in new territory and it ain't pretty. 00:08:15 Speaker 2: Professor Erwin joining us from Dartmouth will do that on Friday here in Bloomberg Surveillance. Doctor Posen, as simple as I can. Krugman with his Nobel speech would look at the microeconomics of the moment and it'd be a lot of fancy Adam Posen talk. Forget about it. What's the dead weight loss for our audience right now, our audience in Winnipeg, our audience in Wisconsin. What's the dead weight loss given all of this. 00:08:43 Speaker 5: On the order of a thousand plus dollars a year for the average household, higher for lower income households. And that doesn't include the hits to retirement funds or the going forward the lower opportunities because investments getting chilled. Direct hit is on the order of one thousand dollars per household. You could argue if the tariffs get stick or if they put on the across the board tariffs, it gets closer to fifteen hundred to two thousand dollars a household. 00:09:13 Speaker 4: Adam, I'm hearing the recession word more and more over the last several weeks. Is that in your cacus anywhere? 00:09:22 Speaker 5: So I've been saying for a while the OW did. I was expecting a large boom and then fed induced bust under Trump. But I always held out that this was a radical enough program that it was bimodal, meaning again simple talk, it wasn't going to end up in the middle. It was going to be one of two outcomes. I have the recession probability only at like fifteen plus percent, so no different than anybody in a normal time. But what I kept saying, and this may have been a hedge but it turns out to be reality, was if Trump administration overdid it on tariffs, on migration, on fiscal follies, that that would swap us into the tariff rem It xues me into the recession camp. So I've up my recession subjective probability to thirty percent. I still think it's more likely than not we get a boombust. But you throw in the geopolitical shock, which is enormous and which really changes the game for Europe and for everybody. And then you throw in the fact that Doge shutting down environment education USAID. I may not like, but I expected that throwing a miasma of similar uncertainty over all government contracting, all government workforce has huge effects. So, yeah, the recession risk has gone way up. 00:10:43 Speaker 4: From some of President Trump's policy people were starting to hear more and more discussion that what the President is aiming to do is to kind of reshape the US economy to bring more manufacturing back to the US, and some folks are concerned that that's kind of counter intuitive to what we've experienced over the last fifty sixty seventy years of more of a globalization and at least in the US economy, of focus on the services part of the economy. How do you view this potential pology policy shift for the US. 00:11:15 Speaker 5: I view it as a very mistaken policy shift for two reasons. First, in line with what you said, increasing manufacturing employment or literal production within US borders isn't necessarily a good thing. If they want to force Americans to do rare earth's mining or production of generic pharmaceuticals, those are steps

backward for US workers, and so you would either have to vastly overpay, which then makes it totally uncompetitive internationally and totally in inflation for the domestic household, or you're just subjecting American workers to bad jobs that were too well endowed and skilled to do. The second reason, though, is it's just not going to work. My colleague Robert Lawrence, who's at Harvard and Peterson Institute, had a book out last fall called Behind the Curve, which I think established brilliantly that even if you fantasize about going back to nineteen fifty eight and a bunch of guys getting to be big bread owners, breadwinners for their families with no education, which there's reasons you might like that, it's just not going to happen because the total taste of the world and the movement of technology, for me, globalization has made it impossible to create large numbers of manufacturing jobs of that sort. So it's a bad goal and it's not going to work. 00:12:41 Speaker 2: We continue with that imposing the Peterson Instituting and Doug Arwin with us on Friday from Dartmouth. Breek Rona coming up as well from Wellington. Good morning across the nation. Good morning ninety two to nine FM and Boston, and I'm down to ninety nine one FM in Washington, DC as well. Adam, we got a go to on a time here. I want to slip this in. I think it's so important. Robert Zelik is somebody that I think more than anyone, takes our international economics and our sense of constructive globalization and folds it into American business. He's been on fire recently. What's the message you've taken from one of our trade giants? 00:13:22 Speaker 5: I agree, Robert is Bob Zeleik is here out of me and is a statesperson of the longtime ideal for the US, and he integrates diplomacy, history, security economics like nobody. 00:13:40 Speaker 2: Okay, here's a sentence, and here's a sentence. The zero sum logic reverts back to a view in the nineteenth and eighteenth centuries called mercantilism. Is that's from Zelek? Is that where we are this morning? 00:13:54 Speaker 5: Yeah, that is where we are I mean, when you listen to the president, President Trump gives the rant he gave yesterday about Canada was very unfair. You EU is terribly unfair. On and on and on again. I don't presume the talk psychology, but as a matter of economic facts, it's just a completely self polluted view. It's not true on the facts, but it only makes sense if you have the mercantilist blinders on, which means you see trade as negative some not even zero sum. And you see, again going back to the previous comment that only making physical stuff matters, and this is just not true. You can make national security arguments and Bob would allow for this too that specifically referspect to China or given industry like semiconductors. You don't want to have too much concentration risk dependence on a particular thing. Even there though, you don't want to be putting up barriers around. So you're dependent on some American company that happens to be a friend of the president and is overly protected, too big to fail, and makes claims to drop out of the spy or semiconductors don't really work right, so you know, this is a huge step backward where I think Bob is much more articulate than I'm being is the international systemic part of this, right, there is a feedback loop for the US. And this is what I think Trump and his and Bessentin has it. Whether they know it or not, whether they think it's a means to an end or not, I don't know, but they're ignoring that. The US, as I argued in Foreign Affairs a few years ago, was chairman of the club and therefore got to set the rules, got to self deal, got to determine who was members, but it had to behave within some reasonable set of rules and provide the club some benefits. And once the US just says I'm a member and a member who may even leave the club, the club goes on without you. 00:15:55 Speaker 2: YouTube live chat, Thank you out on YouTube. Huge audience this morning. Paul Tom you need a beard like Adam posts. Oh, I mean there it is. Adam's not shaven until the Red Sox are in first place. We'll see when that happens. 00:16:09 Speaker 5: Continued sustainably in first place. 00:16:11 Speaker 4: Sustainably in first place. Hey, Adam, I think most Americans would agree that this US government, federal government is bloated. It's bureaucratic to wants red tape, all that good stuff. 00:16:21 Speaker 6: Is Doge the way to address that not so far. 00:16:26 Speaker 5: I mean, Paul, you're right, most Americans would agree, and there's certainly a point there. I think what I tried to say to people before Doge got started was the issue with government isn't so much waste fraud. It's that because of politics, every task has seventeen key performance indicators, has seventeen different constituencies, and then gets funded to seventy five eighty percent of what it needs to do. That at best, and so what you needed to do, and this is the place where I think announced government reform effort could have been good is saying, let's prioritize. Let's not let the accumulation through the years of individual, little congressional or special interest moves determine our budget, determine our priorities. So again, I'm not in favor of getting rid of education. I'm totally against getting rid of USAID. But in a sense as a process, if they had just come in and said we're taking out this whole department and we're doing this instead, that's okay as a process. It's not okay to create terror across the workforce. It's not okay to make government contractors not get paid for stuff they've already done and not know what they're going to get. It's not okay to blow up whole ecosystems just because they're in government. And most of all, if you did it by priorities things like energy grid, nuclear power experts, air traffic control Noah and NIH directly into world R and D, those things would have been spared because they're directly

helpful to the economy. 00:18:11 Speaker 2: Adam, I got to do an audible here before we let you go. And you know, we all know in academics that you are expert on Germany. Let's go back to June in nineteen sixty three, when time stop President Obama reducts JFK's unbelievable speech in the heart of the Cold War, not ready for my German Paul It. I nailed it, not even close. I got a D minus there, but the professor got hockey tickets, so it worked out. Adam Posen, you are expert on this. Is this a Germany? In this new Germany? With Conrad at an Hour and Villi Brandt, would they recognize it? 00:18:51 Speaker 5: They'd have trouble, and that's a good thing. They would have trouble imagining a Germany that pursues security without being totally reliant in the US. They would have trouble imagining a Germany that does use its fiscal capabilities more more than not. And they would have trouble with the Germany that explicitly is going to rearm. But I think it's the right move for Germany. I mean, you've seen the meme on Twitter Tom that Chancellor Chancellor Merits incoming. Chancellor Merits is shown with the big smartest face and then the blurb is when you realize you can borrow just like any other European country. You know, this is genuine progress. It's sad that it took the threat to NATO and the threat from Russia in the US to make it happen, But I think this is a genuine leap forward as opposed to previous Chancellor Schultz site and Benda changed changing time. This is the real one right now. 00:19:55 Speaker 2: Generous conversation, Thank you so much. Folks. Look at Chad Boone and the rest at Peterson Institute for terrific thought provoking essays in the chaos of where we are now, as we've been saying for days, if not weeks, in this chaos, the bomb market matters ball s the stock market. Yeah, that's simple. Yep. 00:20:14 Speaker 4: We got a pro in here joining us today, Bridge Kurana. He's senior managing director and fixed income portfolio manager at Wellington Asset Management. Joining us here on our Bloomberg and Arrector broker studio. 00:20:24 Speaker 2: Bridge. 00:20:25 Speaker 4: It talks about, first of all, what do you think of the CPI print? Came in a little bit lower than expected? What are you sing in the bond market? 00:20:30 Speaker 7: Yeah, so I'm just going through my notes right now. It was universally positive, I would say, so two things that we're concerning. Last time, core CPI if you take out shelter was almost point five percent month of a month, which was the highest it was in two years. That fell back down to point two percent, so that's good. And then core services, which was what the FED really cares about because that is tied to the labor market, that was point five percent as well. Last month, month of a month print that came down to point three percent month of a month, and that was driven largely by transport and airlines. But point being that, I think this is a welcome sigh of relief for the FED after that very spicy print. I can see why the stock market likes it, because I did think this is coming into this event, this was going to be one of the most impactful CPI prints in the last few years, just because of the equity volatility we've seen. And you know, the market has been somewhat buoyed by the fact that the market's now pricing in almost three cuts for the FED throughout the rest of the year. And so in my mind, it was a very important print, and you know, I'm not surprised stocks like it. 00:21:28 Speaker 2: That was brilliant except Wednesdays were note free at Bloombert Monday, Monday and Tuesday we got notes. Put the damn notes aside. 00:21:39 Speaker 4: So what even what have you been seeing in the bond market over the last several weeks of all this volatility, all the increased trade talk, the uncertainty to economic growth, the uncertainty as it relates to potential impacts on inflation, what's a bond market been saying? 00:21:52 Speaker 7: So you have definitely seen a decline in yields in the US in particular. Actually it's been much higher yields abroad you know, I think the US bond market is really responding to the uncertainty in the economy, the sudden stop you might see from whether or not it's tariff policy, but also immigration as well. And you know, but I think what's interesting to me is that I look at the intersector performance between cyclical stocks and defensive stocks. To me, it's been one of the best leading indicators for bond yields. You know, as the market's worried about the cyclical companies, then bon yields generally generally fall. And you know what's been interesting is is those stocks have been almost thirty five percent off their peaks cycles relative defensives and bond yields are still you know, about forty fifty basis points above where we were in August. And so it has been a notable decline in bond yields. I guess just given the uncertainty in the economic outlook, I would have thought it would have would have been more and particularly at the back end of the curve. Most of the move has been really repricing the FED, which, to be honest, you know, is this is welcome news. But and the market's pricing in three cuts rugh roughly. I think that's pretty fair, But you know, I'm not sure that there's gonna be a lot more than that. 00:23:00 Speaker 2: From December twenty two off the Bloomberg Fixed Income Corporate Total Return Index. What a recovery and price we have. I don't think it's nearly out there in the zeitgeist now at all that it's been price up, yield down for bonds. But we're not back to the price peaks that we saw COVID pre COVID, and we're certainly not back to the Great Moderation vector of success that bonds lived. Do you visualize out there just getting back to the peak of price that we had years ago, or can heaven forbid, get back to the Wellington Pimco vector that we saw in the Great Modervation? Can we see that much appreciation? 00:23:43 Speaker 6: You know? 00:23:44 Speaker 7:

Well, I would say this, you know, it's been a really tough you know, returns for bonds over the last decade. Now, I think it's the worst performance for bonds over you know, a few decades, and on a rank. 00:23:56 Speaker 2: And nobody else will say that. I appreciate. 00:23:58 Speaker 7: Yeah, on a real basis, to an inflation adjusted basis, it's you know, you're back to the mid two thousands in terms of pilt returns for bonds. 00:24:05 Speaker 4: Now, what I. 00:24:06 Speaker 7: Think is is different right now is that, you know, we are in an environment where we've had so much fiscal stimulus since the pandemic. We got to all time low bond yields and now we've had running deficits of six to seven percent, and so the economy hasn't been very responsive to high interest rates because fiscal stimulus has been uncorrelated with the other parts of the economy. And so I guess the point I would make is is we do seem to be moving into an environment where fiscal stimulus is not going to be what it was in the last few years. And then you really bring up the question of whether or not, you know, our real policy rates are are real rates that different than they were, you know, before the pandemic, And I would argue, we're seeing less labor force growth, we're seeing you know, similar productivity growth than we saw pre pandemic. That means that the neutral rate for bonds is not that much higher than we really saw prior to the pandemic, even if we're in a higher inflation regime. 00:25:02 Speaker 2: Did you take notes on that even though note. 00:25:04 Speaker 7: Free, note free, there was no notes involved in that one. 00:25:08 Speaker 4: How much credit risk are you guys taking these station your portfolio and has that changed over the last several weeks and months. 00:25:16 Speaker 7: Well, you know, since I've come on your show last time, I think this is the first time that actually spreads are higher. I still think, you know, but they were coming off of very very low level. So high yield spreads are currently around three hundred and ten basis points. I think that's that's getting to be much more fair levels than we've seen. But once again, as I said, I think that the market's been really focused, and one of the reasons credit spreads have been so tight has been just this amount of fiscal stimulus. And I also think, you know, one you were talking about trade earlier. I do think there's this unappreciated aspect to trade and how much surpluses have been from abroad have really come into US assets, both in US equity markets and US credit markets. And so you know, if we're really trying to change that paradigm of lower trade deficits globally, that does mean it should mean higher risk premium when it comes to credit markets and lower equity valuations. As well, which is what we've started to see, you know, at least in the last month or so. 00:26:13 Speaker 2: Here's Carhana with us. Well, thank you for that fixed income discussion. That's really

good about the ten year struggle that fixed income has had. 00:26:29 Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern. Listen on Apple Karplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube. 00:26:41 Speaker 2: David Sowerby front running Bloomberg Surveillance this morning with the Encorey Advisors, And David, you do the math. The average stock from its peak down twenty percent? David Sowerby, are we in a bear market? 00:26:57 Speaker 6: We're in a correction? For certainly, the market's down ten percent. I like to look at the averager median now it's coming close to a bear market. And if we throw in small and midcaps, the average stock is about twenty five percent off its own fifty two week high, and if you look at investor sentiment, it probably puts us pretty close to a correction slash bear market. 00:27:21 Speaker 4: So David, what are you telling your clients these days? Try to find the names you like because now you can get them at at a lower price. Or are we just kind of sitting on the sidelines here a little. 00:27:30 Speaker 6: Bit, Paul, Maybe this isn't the best CFA term, but you grind through it. The average intra year market sell off for the last seventy five years is about fourteen percent, so or right there or close enough. Now from a contrarian perspective, you can't call a market bottom. But when sentiment gets unduly bearish, and it's there now. If you look twelve months out, eleven out of the last twelve times it's gotten this parish, the market's higher, and the average return over the next twelve months is twenty percent. I don't know if it's going to be twenty percent, but I like those odds, knowing I make my most money when I run against the herd and I'm a contrarion, which is more what you need. 00:28:20 Speaker 2: To be today. 00:28:21 Speaker 4: What types of securities would you maybe dip your toe into and start looking at it this stage. 00:28:30 Speaker 6: It's always got to start with free cash flow on a valuation basis, free cash flow margin. Who's growing the dividend ten percent or better? If you look at the filings for the mutual fund I manage a travel name. Windom is off twenty percent from its fifty two week highs. And we're not talking about five hundred dollars a night midtown prices. We're talking about la Quinta's at one hundred dollars a night. It favors the middle market traveler when has a very strong balance sheet, good recent earnings numbers. There's a travel stock that's down twenty percent from it's fifty two week high. I think that's an example. But if you find the companies that are generating good free cash flow margin above twelve percent, that's a good starting point. 00:29:18 Speaker 2: David. 00:29:18 Speaker 4: We got some interesting and maybe troubling earnings news yesterday from a couple of industries. Won the airline industry, companies across the board cutting their

forward outlook. We had a broad based retailer like Cohal's do the same. 00:29:32 Speaker 2: What's your view? 00:29:33 Speaker 4: That kind of reflects that maybe the consumer is weakening a little bit due to some of the recent uncertainties out there. 00:29:39 Speaker 2: How do you view the consumer, Paul? 00:29:41 Speaker 6: I think the addag in my career as an investor is that is never underestimate the health of the US consumer. That they defy gravity. And if you look at household balance sheets, what the average mortgage rate is at around four percent consumer free cash flow after they pay their bills, I think it's still a better than average time to be a consumer. What they don't like, what businesses don't like as well, is uncertainty. 00:30:08 Speaker 2: Yep. 00:30:08 Speaker 6: And that's an overused term in the last two weeks. But I was at an investment conference last week. Five hundred companies presented the ones I say it in on. Everybody got asked the tariff question. Eight out of ten said it leads to uncertainty and it's probably a hit directly or indirectly on earnings. 00:30:26 Speaker 2: David Sorby with us this morning with the enquirs, we continue all right now with them. A good conversation here and as you mentioned the Wyndham wh down the cap, we're not going to do apple with David. David, you have a vista like no one we speak to into Michigan and over to Windsor, Ontario, up into Ontario and then down the Mississippi River down into Kentucky, down the interstates as well. Translate the angst you see on our auto tariff war. 00:31:00 Speaker 6: The auto companies have been very specific to the administration that this is a bad policy. A hit violates the free trade agreement, whether it's NAFTA, US Mexico Canada Free Trade Agreement. It violates long term strategies for supply chains. The car companies are in much better shape today, Tom, because they are better capital allogators, better generators, are free cash. We're not helping them by instituting tariffs and what ultimately gets passed through to the consumer, and the number of weeks you'll have to devote income to to pay for a new car. It's not good for the manufacturing renaissance that's been taking place in my home state of Michigan for several years. 00:31:47 Speaker 4: Being in Michigan, David, give us a sense of just kind of what the folks up in that part of the country, how they're feeling about the trade. I guess we have to call it a war skirmish between the US and Canada. You guys are right geographically on the front lines. 00:32:02 Speaker 6: There may be the only guest in Bloomberg who can go south to Canada or Windsor Now. Now, no surprise, Michigan is the largest trading state with Canada, particularly Ontario. We're building this spectacular Gordy Howbridge from Detroit to Windsor. We'll have fewer passengers and freight hauling if we if we make these tariffs more permanent. It's just simply bad econ one win one. I wish the President would channel more Ronald Reagan or Bill Clinton and unfortunately not channel his Herbert Hoover when it comes to trade. 00:32:44 Speaker 2: David, give me an auto company or a manufacturing company down south of Detroit that you think has been pretty beat up right now, you mentioned Windham Okays Hotels. Great, but you know I'm thinking borg Warner, except borg Warner hasn't done anything for a decade. Give me. Give me an auto company gets sour be ready that's been beat to death. 00:33:04 Speaker 6: I think, though I don't own it, I think GM is interesting. GM had a very good investor day not too long ago where they talked about capital allocation, less cap x on evs, more growth, returning it to the shareholder, better free cash flow for GM. I know it's the biggest name of the group, but I think GM is doing some very good things from a capital allocation standpoint. 00:33:33 Speaker 2: Okay, that's great, and you know I get it from the from COVID. They're doing double digit return, They're up nineteen percent off the mat of COVID, but the tenure track record single digit. Do you see a new capital discipline there where we can look for nominal GD plus x beeps out of auto in Canada and America? 00:33:54 Speaker 6: You can if you if you adopt the right policy. And I think the car companies are much better at spending their free cash than they were when they were making silly acquisitions decades ago, and now more importantly returning cash to the shareholder, either with buybacks or dividend growth, where maybe too much cap X was thrown into autonomous vehicles and electric vehicles, which consumers are reluctant to buy. 00:34:23 Speaker 4: Tom. We're getting close to the opening day, which means we have to ask David Sowery about the Atlanta Braves and investing in the Atlanta Braves top. David, what do you think? 00:34:32 Speaker 6: Well, it's a name I gave you a couple of weeks ago. We still own it. It's the John Malone spin out. Like so many successful John Malone spinouts, he's been buying the stock. It's not just the team, it's the franchise, it's the stadium, it's mixed use retail. It's a small cap under followed stock, and I've always thought that you make your best money in under followed, spin out, small and campstocks. 00:35:01 Speaker 2: David Sawerby, thank us so much for the enquirps. Appreciate that note, particularly earlier this morning that we saw from David Sawerby on the average SMP from its individual peak is down twenty percent as well. 00:35:13 Speaker 1: 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, joining star. 00:35:31 Speaker 2: Kelly Cox to get the markets open. Here, we'll come back with her as well. Chief market strategist Rid OL's Wealth Management Kelly. I can't stand you write

a research note which I'm forced to read. It's so smart, and the problem I got is you break down this idiocy around the two hundred day moving average, which I don't believe in, folks, Just so you got it. What do we get wrong about in the media about the certitude of analyzing the two hundred day moving average. 00:36:00 Speaker 8: Well, Tom, I'm on the other side. I actually think that there is some signal around the two hundred day. And I want to be clear, I'm not a technician. I don't look at many lines on charts, but when you're looking at the major moving averages, there has been a lot of resistance and support around the two hundred day, especially in selloffs, and unfortunately we broke it. We actually broke it on Monday. So I call it the danger zone. I think that might be a little dramatic at this point because I'm trying. I would love to see the stock market or the S and P reclaim that, but for the moment, now that we are below the two undred day, I'm a little more worried about where. 00:36:31 Speaker 2: This could go. 00:36:32 Speaker 4: Times. You may recall Calli as a proud graduate of the University of North Carolina and her tar Heels are playing today against Notre Dame in the ACC Tournament at two thirty, So if you're planning on getting in touch with Callie around that time, she may not be a mill Calli. 00:36:48 Speaker 8: Yeah, I knew this was coming. I knew this was coming, and these are important games. We got to make it to March. 00:36:53 Speaker 4: Madness got to make it so yeah, and I think the networks went North Carolina there as well. CALLI the last several weeks on this selloff here hasn't seemed orderly to you, reasonable to you part of a maybe a healthy pullback in a market that maybe wants to work higher if earning's come through. How do you think about the last couple of weeks of training. 00:37:13 Speaker 8: I think it has been a bit orderly, but in a disorderly way. And what I mean by that is that we've seen the bulk of losses in tech stocks. I mean, tech coming into this year has had an extounding two year run, which was great. You know, if you're a tech investor, you were happy up until the beginning of this year. But we've seen a lot of those textures that have done so well roll over in the past few weeks. And to me, that says that there's a bit of a cooling off here. It's not necessarily the sell off we're seeing as a necessarily a reflection of fundamentals. But at the same time, what worries me is that we are seeing some weakening and some cracks widening in the job market. So in a way. I like the fact that this has been a little disorderly. And again I'm not I don't love a sell off where you know, are sore turning and our anxiety is rising. But the fact that it's been a little uneven has comforted me a bit. 00:38:05 Speaker 2: I remember the comedy of we're in an intermediate bullmarket or intermediate trend and all that. Kelly Cox, have we broken the bullmarket? I don't you know. I'm not hearing that within the zeitgeist is the bullmarket over. 00:38:20 Speaker 8: I don't think you can say that until we see layoff surge definitively, Because I mean, Tom, you're an order of history like I am. You know that barrel markets often overlap with economic recessions, and if you're waiting for a recession, you need to watch for signals in the job market. And I don't quite I don't think we're seeing that yet, even though the trend is turning that way. You know, we might be where we were several months ago, where hiring is coming down, but companies may hold on to workers not necessarily lay them off. 00:38:48 Speaker 4: In mass Kelly, one of the questions is do we buy the dip? And I saw a city they're trading us out with their note. They're saying, don't buy the dip. But it was almost between the lines. Just yet, we're not quite there. How do you guys think about it? 00:39:03 Speaker 8: Well, we serve long term clients as at Hold, so our job is a little bit easier here. I mean, over time, we've seen over and over again that dips it's been smart to step in and buy the dips, especially around this negative ten percent correction level. But again, our clients are looking for over years and years and years, and of course we believe that the story for the US economy can still thrive because markets ultimately grow on earning's economy and innovation. But at this moment, if you're looking over the next week or month or so, I would get a little more defensive. 00:39:35 Speaker 2: Here. 00:39:36 Speaker 8: We're still trying to figure out what this policy story could look like. We're trying to figure out the extent of the job market damage. We got data today is showing inflation is still quite tame. I just wouldn't try to be a hero in this environment. I wouldn't be the one trying to make big bull trades. 00:39:51 Speaker 2: You say you've got a long term perspective, Kelly as well helping here with the utilization of bonds. We've got people saying, finally, bonds here value, do you buy it? Or does equities? Is there still enough growthiness inequities? 00:40:06 Speaker 8: Well, I think at this moment again, if you're looking over the coming weeks and months, you'll probably find some comfort in buying up those quality bonds. Right I'd say we're in a classic growth scare right now. We haven't seen a full slate of data that proves that. You know, we're in a full blown economic crisis, but the trends are turning the wrong way. And when you're in an economic downturn, treasuries are the classics sanity hedge, and they've proven to be that during this growth scare. So within the fixed income market, look at quality, maybe look a little bit longer term. We haven't seen that hedging activity be as strong as it has in past growth scares. But at the same time, you know, treasuries have risen on the back of the cell off. 00:40:48 Speaker 4: So kell, how do you think about valuation here? Again, we've had this a little bit of a correction. You're roughly a

ten percent pull back in y s and P five hundred. Is there a valuation call to be made here or you don't even kind of go there again. And I know you guys are long term, but a lot of folks should. They tend to look for some entry points, and evaluation is one of the data points they look at. 00:41:08 Speaker 8: Right I think valuation matters a little bit less in this environment, and valuation matters, but you have to view it in context. I mean, right now, the S and P's valuation is still quite high historically, but a lot of that is because we've seen TEX shares do so well over the past two years, and unsurprisingly they're the part of the market that's been selling off the hardest. So I think if you're taking any lessons from valuation here, it's to, you know, look toward those stocks that are a little more fairly valued in this environment, stocks that hug their earnings a little bit closer than you know, the tech and growth shares of the world. We believe in value a lot at rid Holts because we try to prioritize stability and consistency. But I think right now, the lesson is, you know, not to take valuation at its face, but to look within your portfolio and understand where there are valuation differences. 00:41:56 Speaker 2: Kelly, thanks so much, Kelly Cox. Rid Holts manages to greatly appreciate it. 00:42:06 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Coarclay, and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal. 00:42:21 Speaker 2: This is an important conversation right now. Leland Miller has been a little busy. He's a China beaige book and he has been advising on China economics to the Trump administration. In a broad sense. He's not able to talk about those specifics, but we're thrilled he could be with us today. Leland, you are adult at guessing China GDP. Is it a legit five percent? Absolutely not, But it doesn't matter. 00:42:48 Speaker 9: I mean, you know, they come out with the numbers and say it's you know, whatever numbers they have, and they say it's five percent. The market buys it. You get two op eds from somebody saying we're skeptical. We're skeptical, but each and every day time, the market basically buys whatever they put out, regardless of the evidence. So we're going to see more of that into the future. 00:43:06 Speaker 2: Are we going to see more tip for tat within a zero sum economics that we will definitely see. 00:43:13 Speaker 9: I mean, we were entering trade war time. Obviously, there's tariffs coming from every direction, and I think it's important to to separate what's happening with China from what's happening with the rest of the world, because I think there's a different discussion around economic imbalances in China, which which are not even the focus of the current tariff. So, you know, there's a there's a Mexico Canada strategy that they're working on, there's a broader world strategy in terms of restructuring economic relationships and in figuring out the you know, lessening the trade surplus. And then there's China. And I think the China discussion is the one that we've yet to have, and it's going to go to several different directions. Whether it's you know, Trump going to to China at first trying to get a trade deal and then going another direction. We don't know yet, but that but that's what that's the one that's to come. 00:44:00 Speaker 4: Leland, how do you think China views a potential trade work with the US. Do they feel like they have leverage here? Position of strength? How do you think they view it? 00:44:11 Speaker 9: They definitely don't have a position of strength, But I think they're in better position than they were last time around. I think all the announcements that we've heard for what the last six eight months from Beijing about bigger fiscal stimulus, more monetary firepower. You know, there's a lot of people who said, oh, look, you know, big things are going to happen to the Chinese economy because of that. None of that has actually happened. You know, if you look at what this is all getting ready for a worst case scenario with Trump, and so they're ready to do bigger fiscal spending. They're ready to use the monetary spigots that they need to in a smaller way. We're not talking about the Bazuka unless it's a break the glass emergency, and so they're getting ready. They haven't done much yet, but I think that they're prepared in a way they weren't last time. 00:44:55 Speaker 2: If things get. 00:44:55 Speaker 4: Really bad, Leland, I kind of look at some of these big Chinese technology I'll use Ali Baba as an example of sixty five percent year to eat. I use that as kind of a proxy for how Western investors look at China. Is there reason to be optimistic here about China looking at a stock like Ali Baba. 00:45:14 Speaker 9: Well, I think you're right that that's how a lot of people use it. That wouldn't be my lens. I think that you could have a couple of companies in the tech sector doing really well, the deep seeks, they Ali Baba's, you know, the ten cents, whatever it might be, and those stocks are going up, and people are excited about Ai proliferating around around China. That has absolutely no correlation with broader stocks, and the broader stock market has no correlation whatsoever with the real economy. So you can see some companies doing better. I don't think that has anything to do with the Chinese economy red large, even if investors want that to be a signal for you. 00:45:46 Speaker 2: On your community. This Morning across this Nation, Good Morning Canada as well. Leland Miller China Beige Book, an extended conversation you're specifically trans Pacific on YouTube. Good Morning, Good Evening across the Pacific. We're out at Bloomberg Podcasts. Subscribe to Bloomberg Podcasts Leland Miller educate us on the nonsense of bilateral art make a

deal negotiations. We are multilateral. I studied at the altar of William Klein at the Peterson Institute. Let's just take Vietnam. How does Vietnam fold into our nonsensical bilateral debates. 00:46:28 Speaker 9: Well, I think by nonsensical what you're referring to is the obsession by some over bilateral trade deficits. And the problem with that is you can have restrictions against one country, but what you're really worried about is what the grands, the grand totality of all the trade flows are. So if you know if you have if you have restrictions on China, and China is setting things to Vietnam and Vietnam to the United States and it balances somehow, then then that's much less of a worry than if you have a situation where you have amounting trade surplus overall. So, because this is becoming very important because we're in an era of tariffs, We're an era of transhipping around tariffs. We're in an issue in which the more we go at China, the more they're going to be setting up shop in third party countries. So it's it's very important people understand that there shouldn't be too much of an obsession with bilateral trade flows. You can watch it, but it's the multilateral situation's the vitality that's really important. 00:47:24 Speaker 2: Leland. 00:47:24 Speaker 4: Do you think President She would welcome a meeting with President Trump face to face to talk about broader trade issues, maybe just issues outside of economics. Is that something you think could happen in the next I don't know, six months or so. 00:47:39 Speaker 2: Yeah. 00:47:39 Speaker 9: I know will welcome it because he's been sending signals to many of us in the in the in the in the business community here in the United States that that that there all systems go. They want to talk. So yes, I think they want to talk very badly. But the preconditions on that will be you can't bear us as you can't surprise us. We need to know what's in store for the next six months so that President She doesn't walk into a trapt. So there are preconditions on the meeting. 00:48:04 Speaker 2: Leila Miller, I want to trades delicately here, but I think it's an important conversation for this nation. This morning, Trump one was a light heeiser trade made out of the crucible of Robert Leittheiser's brutal childhood in Eastern Ohio. He saw Eastern Ohio crushed. What is Trump too trade theory compared to what it was in Trump won? 00:48:34 Speaker 9: Well, I think Trump trade theory is very similar. I think Trump trade practice is diverging a little. 00:48:40 Speaker 2: Bit from the theory so far. 00:48:43 Speaker 9: Look the first term, it's correct, it was very different in a lot of ways than this Trump second term. And that Trump was constantly looking for victories. You know, he renegotiated NAFTA, he renegotiated Chorus, he negotiated a trade deal with with China. These were victories. He was using tariffs for the most part as negotiating leverage towards an outcome. The goal in the second term is very different, and markets have refused to believe this. They they've they've you know, maybe they do now with the market doing what it's doing. But the Trump administration and the President himself, wants to restructure economic relationships in a lasting way. He wants to shift the whole paradigm and so set up a wall around the United States, cut taxes for domestic manufacturers uh and incentivize industries to come home. And so because of this, there is much more of an intention to go at all these different blocks and countries and go after trade surplus countries and try to write the economic relationship and bring some of these industries back home. So the idea is much bigger than than Trump term one. This is this is something they want to leave a legacy on in terms of just redefining the way America does business around the world. 00:49:57 Speaker 4: And Leland, is there a valid concern that someone marketplace are reflecting today in asset prices, that that policy that you just articulated, uh may result in slower economic growth and certainly higher inflation. 00:50:13 Speaker 9: This is something that that that that we've spoken about a lot. People are usually binary on this. If you put tariffs in place, it's a disaster. If you put tariffs in place, it's fantastic, you know, and usually onto extremes. 00:50:25 Speaker 2: Neither of those is right. 00:50:26 Speaker 9: You can you can have tariffs in a certain in certain circumstances in different regimes, but you have to seek with them right. So you have to make sure that you're not going you know, you if you don't want prices to rise, you have to have substitutability. If you want. If you want things to be gradual and there not to be a market reaction, then you can't go at rival production centers and hike tariffs, you know, at both of them at the same time. You need to have an out. I think what's worrying markets right now is if Trump is really trying to have a trade policy that changes all these economic relationships around the world, especially via tariffs. 00:50:58 Speaker 2: There needs to be a. 00:50:59 Speaker 9: Place where it's foundational place to build, and that has traditionally been the new U S MCA countries. It hasn't just been the United States. I think this antagonism with Mexico and Cana has gotten people worried that prices are going to rise because there you can't just bring everything home to the United States. 00:51:15 Speaker 2: I'm the leakage. I sound like Steve Roach a million years ago, the external externalities and the leakage out of a constructed Trump system of trade. Leland Miller isn't the singular leakage diminished economic growth that one day flips to a deflationary or at least disinflationary vector. 00:51:39 Speaker 9: I don't think anything is baked in. I think all of it's about having a strategy and then sequencing it right. So you know, if you look at the EU, everyone's panicked about how we're going to go to war with the EU if this was if this is done in a very sensible way, and you know the end result of this is that Germany is pressured into releasing the It's fiscal breaks that use spending more, it's defending itself more, it's funding more innovation, it has a broader capital marketing, and people are going to be looking back at a couple of years and saying this is a net win for the United States and a net win for Europe. Now that doesn't mean how it's going to be executed. It's going to work that way, but in theory there you know this, there's no there's no necessarily bad outcome here. 00:52:21 Speaker 2: Leland, thank you. Let's do it tomorrow. L Chavas book greatly appreciated. 00:52:25 Speaker 1: 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 Easter and 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 always on the Bloomberg terminal