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I'm looking at shares of Coinbase in the after hours. They're taking a leg lower, and like you said, Carol, this stock was under pressure but still down one point seven two percent, bouncing around but in the red as we speak. In terms of fourth quarter total revenue that missed estimates, the company expects headcount to grow slightly higher than in Q four. Fourth quarter adjusted IBADA came in below estimates. Fourth quarter adjusted EPs came in at sixty six cents below estimates.
What are you saying, I'm looking at the release looking forward to twenty twenty six. We continue to be optimistic about the long term trajectory of the crypto industry. And they also said it was a strong year in twenty twenty five for Coinbase, both operationally and financially, and so yeah, they say, as regulatory clarity emergence, we believe crypto will update all financial services and Coinbase as well positioned to
capitalize on that transition. So, you know, but connect Start underperformed.
It was down nine percent in twenty twenty five. So even if it was a good year financially for the company, investors didn't reward it.
Yeah, let's see what.
Monique Malema has to say. She's Bloomberg News equities reporter. She's in Toronto, follows this name. Was twenty twenty five a strong year for coinbase and does twenty twenty six should they be Coinbase optimistic about the year and the long term trajectory of the crypto industry at this point in time.
So twenty twenty five was a mixed year for Coinbase. We saw at the start of the year there was a lot of momentum as the Trump administry came in was really embracing crypto, and we saw a huge wave of investment into cryptocurrencies, which benefited Coinbase on their transactions
and trading. But as we've seen crypto prices pullbacks and that record high they hid in October, we've seen that way on coinbas as, shares and We've also seen it way on their revenue as less people are trading on the platforms, which means less transaction revenue and also less volumes.
Monique, what is their bal what does their balance sheet look like? I'm just looking at it, says In January twenty twenty six, we know this. Our board expanded our share and long term debt repurchase authorization by an addicitial two billion dollars. We were mindful of reducing our overall dilution opportunistically.
We are deliberately well.
Capitalized with eleven point three billion in cash and cash equivalents, to weather these cycles and continue to invest in the future of finance.
Is their balance sheet solid?
So analysts do think that their balance sheet is still solid. You know, Coinbase, they are the largest cryptocurrency exchange in the US. There are on much solid fitting compared to some of the smaller crypto firms that are out there. But you know, analysts are also expecting that cryptocurrency is going to continue to kind of see a downturn going through this year. So that's going to continue to weigh on coin Base, even if they can weather it for now.
And we've seen some analysts already pull back their price targets and their estimates for coinbasis earnings for this year and next year.
Yeah, how do you explain the analyst community has just been a brutal to this company over the past few weeks. You had a great article. It was kind of an earning's preview, but also much more than that because it gave the context for what all these analysts are saying about the company recent double downgrade to the company as well. Why are analysts so bearish?
So anamals are really beverish because of the downturn we've seen in crypto markets. Bitcoin is down over forty percent from the higatt hidden October, and that's really weighing across the whole crypto ecosystem. We had an analyst at Lonesse, crispian Heart, say today that they felt that they were foolish for thinking that crypto markets were going to be recovering more quickly than they are, and they're the ones
that did the double downgrade on Coinbase. We've seen six analysts cut their price targets on Coinbase this month alone, so they're really realizing that this downturn we're seeing in crypto people are thinking is not going to be changing anytime soon. They think prices are going to continue to be depressed, and with so much of Coinbase's business at this point being focused on cryptocurrency, they think that's really going to weigh on the company's shares.
What do you think they're going to be kind of hammered on on the call with investors and analysts. I mean, the stock it is still down, but it's pairing some of its deeper losses after it reported earnings. It's still down though, about two point two percent.
Here.
A lot of the focus for analysts has been how was this company going to expand its revenue base. We've seen that coinbas announce last year that they're going to be venturing more into prediction markets, into equities trading, and all these other products that are hoping to diversify the company from being so concentrated in the crypto industry. And that's something analysts think can help kind of balance out some of these declines that are happening in the crypto space.
But they really want to see more gains in those areas, particularly in prediction markets, which has become such a massive market, to really see that there is more longevity and more sustainability outside of this downturn that's in crypto right now, what I.
Don't I mean?
Correct, help me understand this this monique. If stock prices go down to exchanges that have stock suffer because they're still buying and they're still selling. Is the crypto industry different in that the exchanges only do well when the prices go up.
So redactions are transactions, Yeah, transactions are transactions, But for crypto, the difference is that a lot of crypto is sentiment driven. So when crypto prices are depressed, that means that a lot of people in the crypto industry start pulling out. We've seen that that there's been mass liquidations in crypto that we've seen people go to other markets like prediction markets, or to the stock market, or just sitting back when prices become depressed. So it's not just about the fact
that the crypto prices are lower. It's that then that also leads to lower volumes, which isn't necessarily the same in stock markets, even when the stock markets down, people might be switching to other areas of the stock market, versus in cryptos, some people are just choosing to lead.
You know, I'm looking at ogu caref for the write through on Coinbase here in the aftermarket, and she reminds us about rival exchange Gemini space Station, saying this week that it plans to cut up to twenty five percent of its workforce and scale back international operations, so underscoring how these rapidly weaker markets can basically translate into operational pressure. Is there any operational pressure on Coinbase that we know of?
Not that I'm aware of. In terms of the operation pressure, like I'd mentioned, they're really focusing right now on expanding their products so that there's not going to be so much concentration in crypto, and so there will be a focus on the prediction markets, on the equities trading, on options.
But the production markets have their problems too, right, I mean, especially when so much as sports right and sports gambling or gaming if you will, I mean, the gambling guys and the gambling platforms who are highly regulated have got to be looking and say, well, wait a minute, you know, there's got to be some regulation that's going to come in to these prediction markets.
Yes, definitely. It's not an area without its own issues. We know the CFTC had said that they are looking at creating some types of rules or frameworks around prediction markets when it comes to things like sports. But for people who are in this space, the idea of something being a little volatile of operating, you know, somewhat in a bit of an area that hasn't been fully regulated, it isn't out of the ordinary. For crypto you know,
this is something they are used to. They're used to the fact that, you know, even for crypto markets, we're still seeing legislation being debated. So for them, it's not as much of a fear of going into prediction markets with that uncertainty because they've already been for so long having to operate in uncertainty.
Hey, speaking of prediction markets, we're getting DraftKings results. Crossing shares fell as much as fourteen percent in the immediate aftermath of these, now down about nine and a half percent. The company sees twenty twenty six revenue six and a half to six point nine billion dollars that came in below estimates of seven point three to two billion dollars. The twenty twenty sixth revenue outlook miss is what is pushing the stock lower. Fourth quarter revenue did meet estimates,
fourth quarter adjusted Ibada did come in above estimates. Fourth quarter earnings per share coming in above estimates too.
Yeah, and I think it's interesting fourth quarter looking back at the quarter that was monthly unique payers four point eight million. The estimate was five point forty three million, so a.
Little bit below as well as you look.
But that out look as certainly what Scott investors a little bit, a little bit nervous. The stock, by the way, is down twenty seven percent already in twenty twenty six.
Monique Malima, we are going to let you go. She's Equity's reporter for Bloomberg News. She joins us from Toronto. She covers coinbase. She covers the entire crypto industry. Check out her reporting and more on the Bloomberg terminal and at Bloomberg dot Com. Stay with us more from Bloomberg business Week Daily coming up after this.
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Eric Wiener, he walked into our studio.
He's like, what okay, and like you could almost say that every day, but there are days where it's like, oh my god, right, why do you say that though specifically because it's not like everything was down today, No, not at all.
It was a weird day. See we've been having a lot of weird days. Is that it is the AI scare and and it's you have this roving AI worry that's just taking out entire industries at once, sort of a cell now and then see what happens later. So today we saw like logistics stocks get hammered because the company that was the singing machine company and made karaoke equipment now has an AI bot that does logistics and they're taking out you know, billions of dollars in market cap.
From logistic is a real thing. It's a real thing. Okay, well yeah, like what is that? Well it's really strange. So what you have is the idea. You have two ideas that are filtering through the market right now, both related to AI, that seem to be at conflict with each other. You have on one level, big company spending a ton to develop AI, and the market saying, you know, when.
Are we going to start seeing some returns from this? And are you spending too much and is this throwing good money after bat? So they get hit. Then you start seeing some little obscure company that used to make karaoke machines saying we've got an AI bot that is going to fix logistics, and all of a sudden they sell off logistics companies. Now, I don't necessarily know that the market knows exactly how this is going to play out.
They're just thinking that right now, sentiment is so soft that you just get get out, well you can, and then buy back in twenty five percent later.
I want to bring in Bloomberg News senior editor and author of the Everything Risk newsletter, Ed Harrison. He joins us from our Washington dcbureau, and I want to bring you in because you write about risk the Everything Risk newsletter, and it seems like the risk right now is that there's going to be you know that old commercial from Apple, there's an app for that. Well, as soon as there's an AI for that, whatever sector that is sells off. What's going on?
Yeah? Hey, Tim, So remember we were talking a few days ago. I was saying that there was people were de risking ahead of time and that this was building. But we're at an inflection point where we really don't know how that's going to work out. I think Eric is hitting the nail on the head that people are, you know, selling a bit and asking questions later. But obviously if the if the economy holds up, then you
know they can re risk. You know, from where I sit today, this has an algo selling momentum driven.
Feel to it.
When you look at like the mag seven as an example, apples down the most there. There wasn't really any news flow on this, so this is really just the algos, you know, taking the moment some of this trade into small caps, the rotation, et cetera, and then we just have to see, you know, does this have legs as a results of the economy.
Yeah, I'm looking at the VIX too, and we did go a little bit above twenty one today, but we closed just at twenty or just below twenty one. Is that significant, Eric?
Yes?
Yes, I mean that will to feed into what's going on in the equity markets. When you get these selling pressures, you often see the VIX bomp of over twenty. If it holds there, yeah, then it means that there's real sustained fear. But today was one of those days where you know, we had a pretty significant downdraft, so it jumping over twenty twenty isn't and not necessarily holding there isn't exactly you know, a fear gauge.
Is this just a case though things just feeling jittery?
Yes, And then it doesn't take much for people to be like, Okay, maybe logically or fundamentally this doesn't make sense, but.
I'm out that well, that's it. So if you look look at what's going on with the real estate firms or whatever that we're hit by THEAI selling, yeah, this is actually going to help them, like it's not necessarily going to help or financial services, you know, the wealth managers, right, Schwab is going to do well with this. Employees that Schwab may not do well with this because you're going to lose some workers. You're going and your salaries are going to go down, but the stock should do well.
So exactly what the logic is behind this is hard to say. It's really, you know, to paraphrase ad, it's really you know, sell now and sort of wait. And where you start seeing it pop up like in places like in small caps, that's where you start thinking This doesn't exactly make sense because they would normally be risk off too.
So if we move past the sort of day to day market swings here and look at the fundamentals of the US economy, we're getting more data. We got more data this week. We got a jobless report for last month on Wednesday with was weird. We got initial job list claims. Today you are getting a post on the lifelog that together the shows a weakening employment picture. What are you looking at?
Yeah, So what I'm thinking is is that generally we have a decent employment market, but it's weakening. And the number that we saw on Wednesday wasn't reflective of the weakness that we're seeing. Number one, we saw a lot of layoff announcements. Number two, we also saw weather that should be negative for jobs, at least in a temporary sense. And then we've seen two consecutive upticks and initial claims, and we saw continuing claims tick up this past week
as well. All of that speaks to when you look at the BLS data, that these are things that weren't in the actual numbers for January. In fact, on the BLS website they say specifically, none of the weather was in the you know, in our collection period. So the February number is going to be worse, and so we're seeing a little bit that will help in terms of
the jitters, unfortunately, help continue those jitters going forward. The only positive I could say is that we're looking at CPI potentially coming down that's going to be released tomorrow. Two point five percent is demonstrably below three percent. That would be a good number that would help perhaps stop some of the jitters that we're seeing now.
To be fair, and everybody always reminds us, you know, you got to look longer term. S and P was up sixteen percent last year, twenty three percent twenty twenty four, and up twenty four percent in twenty twenty three. Eric, We've talked about these three consecutive years, a very strong gains. I mean, at some point the market.
Takes a little bit of breather.
We've seen this where we'll get a ten percent correction and then it moves to the upside again.
Well that's I mean, in the longer term scheme of things, the market is okay. The concern would be that sentiment has been pretty lousy since October really, so you're starting to see real kind of pain come through when you're talking about employment and you're seeing like what's going on with crypto, You're what the concern there is is that people aren't spending, people aren't investing, Individuals are stepping aside, and that can bleed into a lot of different industries.
So the concern, you know, the idea that like you would have a sluggish year isn't necessarily the problem. It's the reasons behind it. And if we're not getting growth, if jobs aren't there, then this can be more.
Sustained and economic growth.
Yeah, we do have economic growth right now, but the question is what it's measuring, because it's that ky you know. So if we're having economic growth but investors but individuals aren't spending, then the question is how much can like the top twenty percent keep the market of keep the economy afloat two?
Eric's point ed Airbnb shares hire right now. They rose four and a half percent and extended trading. The company's first quarter revenue forecast exceeded the average annal assessment. Is this that top twenty percent that Eric's talking about right here?
Yeah, that case shaped economy is really creating a lot of uncertainty about what's happening. And I would also reiterate
what Eric said about the jitters beginning in October. I thought it was interesting, you know, the vics actually bottomed in the day before Christmas, and so you could the jitters that we had during the shutdown were sort of overtaken by year in a buying into the year end, and then people took a week off between Christmas and New Year's and then suddenly people came in with fresh eyes, and those same sort of concerns that Eric was talking
about that people had during the shutdown October and November have now come back. And then the question is can the top twenty percent actually pull this market along. So far they have, but that retail sales report that we had, you know, causing the question whether that's actually the case.
I want to go back to some of the earnings after the close. Applied materials out and we're seeing the stock rally in a big way in the aftermarket, largest US supplier of chip making equipment giving an upbeat sales forecast for the current quarter, signaling that demand for artificial intelligence and memorysetment conductors are fueling purchases. So ed there is this kind of yin and yang, like we're watching consumers,
we're watching the economy. There's also that AI trade, which in some ways there's the AI scare that is freaking out some sectors, and then there's that spend in AI. You know, when you've got something like this, it just to some extent points to some cross currents in the market. Right, there's some good, there's some bad.
Yeah, And what I would say is is that if you look at it from a very very macro perspective, we have six percent deficits, we have tax cuts coming, and we have massive AI spend. As we've seen the likes of Alphabet, you know, the likes of Amazon say they're going to continue to spend more. They're taking on debt to spend more. Those are tailwinds that are very difficult for you know, barring some sort of macro shop
to overcome. So really, the economy might be slowing, but it's not you know, slowing into anything that should have a sustained negative impact in the near term.
A Matt shares up more than nine percent. Eric wreen Or Bloomberg new Senior Editor, Equities Americas and Bloomberg new Senior editor and author of the Everything Risk newsletter, Ed Harrison, I thank you.
Stay with us. More from Bloomberg Business Week Daily coming up after this.
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I said, we were going all in on the economy this hour. We kind of do that every day, but you know, that's kind of what we do, but we're doing it from a few different angles on that. I want to bring in Stuart Pauli's US and Canada economists for Bloomberg Economics. He joins us here in the Bloomberg Interactive Brokers studio. We want to broaden this out to
the entire world. The economic effect of potential conflicts. Bloomberg Economics team is out with a special report about global risk is called Flashpoint Counting the cost of potential conflicts US China war over Taiwan, the cost of escalation on the Korean Peninsula, war between Russia and Europe, kind of modeling this stuff out. Venezuela is in there as well. In addition to others. We should know the team does right that the human cost of conflict is tragically high.
We recognize that each time we talk about a potential conflict or a conflict, but the economic cost is also rising. If we sit here in the United States, you're in charge of US and Canada economics for Bloomberg economics. If you look around the world, where do you see the biggest risk?
Well, we can think about risk on two different dimensions. We have the probability of risk and then the consequence if something were to become let's say a hot war. Right, So if we were to just think strictly about the consequences of global conflict, really, any conflict that takes place in the South China, see an attempt to control the Taiwan straight on, attempt to control territorial Taiwan would be
the most consequential for the global economy. If we think about semiconductor production, about sixty percent of global semiconductor production takes place in Taiwan. These are the primary inputs to about one fifth of These are the primary inputs to about five percent excuse me of global GDP. Right, So we're thinking about just how much GDP can get dented by shutting down exports of semiconductors from Taiwan. And we're really talking about five point three percentage points of global GDP,
trillions of dollars of economic activity. And if we think about the amount of cargo that just flows through the Taiwan straits, we're talking about a fifth of global shipments. Another two and a half trillion dollars of goods that are shipped through there every year. So again we're talking about trillions of dollars of economic consequential activity that's flowing
through the region. And so of course it's going to matter most if tensions heat up between the two largest geopolitical rivals in the world.
I want to just if I can highlight that you say, you guys say the damage would be global. Taiwan's economy would be decimated, and that you folks estimate China's GDP would fall by eleven percent, the US is by six point six percent in the first year.
In addition to the main actors, the EU.
European Union could have GDP drop by almost eleven percent, India by eight percent, the UK buy more than six percent, and then closer to the fighting, something like South Korea could shave twenty three percent off GDP in Japan fourteen point seven percent. I have to believe we talked about, you know, during the build up of the nuclear arms race,
there was a nuclear deterrence. There has to be to some extent in economic deterrence, that understanding that doing things like this, it's not like you hurt one person, maybe your original or initial foe. Everybody's going to feel it.
That's very true, and it's important that you bring it up because an outright hot war is something that's incredibly improbable because of the economic consequence. We're talking about denting global GDP growth by about ten percent.
Nobody wins there.
Nobody wins there. So what happens along the gradient of outcomes. Let's dial it back and say, okay, what if it's not a hot war. What if China just imposes a blockade on Taiwan and asserts its authority through the Taiwan straight preventing cargo from flowing through. That's still dense global growth by about five percent. Right, So it's the sort of thing where now it becomes a little bit more
economically viable. The deterrence, now we're not talking about a sort of nuclear type deterrence, a mutually assured economic destruction like we were contemplating during the Cold War. Instead, we're talking about more like regional skirmishes or something that's more akin to a proxy war during the Cold War. Five point three percent percentage points of global GDP is nothing to sneeze at, but it's a little bit more of a realistic expectation, and so it does put something alike
China asserting its authority in the South China. See, it makes it a little bit more viable.
Hey, we want to kind of go around the world in the time that we have left with you, and you're going to hang out with us for a little bit until the end of trading here. So we're looking forward to that. But Stuart, the Middle East right now and the build up of resources from the United States in the Middle East. We talked about some of those headlines earlier this week. There's a section in here called the one hundred and eight dollars oil War. How the
Middle East could crash the world economy. How does that happen?
Well, it's so interesting because we think about North American energy independence and we think that, okay, well, maybe the Middle East doesn't play as much of a role as it did in global economics let's say two decades ago. But if we think about energy consumption and where the energy is produced that ends up getting consumed globally, the Middle East is still a major actor. Still about fifteen percent of global energy production is initially sourced from the
Middle East. That's the same as what we saw in the early seventies, right, So the Middle East still the key player globally when it comes to energy production and energy consumption.
Not the US US.
Matters a lot, and it and certainly for our standard of living, which was a phrase that mattered a lot during the Bush Hour. For our standard of living here in the United States, the Middle East is a little bit less relevant. But globally, the Middle East is as relevant today as it was even in the early nineteen seventies. If we think about where conflict can arise, the places that are in control of oil are the places that
matter most. So the conflict in Israel and Gaza didn't matter as much as let's say, the US sending an aircraft carrier toward the Strait of Horror moves for a potential conflict with Iran.
Could what's happening in Venezuela change this equation. We just heard from Chris Wright, the Energy Secretary. He was in he's in Venezuela with an Marie hort Dern. They're talking about the opportunity for US oil companies there. He said he will not the US will not guarantee security. But it seems like this the administration in Venezuela is receptive to US company's increasing output there. Does that change the equation?
Well, so let's just put orders of magnitude on everything, okay, right, So middle are big reserves, They are pretty big reserves. But only about ramping up Venezuela production to where it was, let's say before the Chaves era, would just add about one and a half percentage points to global oil supply. Yeah, right, So that's just one and a half percentage points we're talking about fifteen percent. Coming from the.
Middle East doesn't move the needle in the same way.
Right, So it doesn't move the needle in the same way when we think though about regional trade alliances. It again creates a sort of hemispheric independence from the Middle East. Already, the Western hemisphere is relatively insulated from the goings on in the Middle East, but bringing that additional supply online from Venezuela would do good in the Western Hemisphere.
All right, Stud's going to stay with us because we want tout broaden out our conversation even more and ad a really interesting voice to it as well.
So I want to bring in Steve Moore. He's the co founder of the nonprofit Unleashed Prosperity. He's a former economic and senior at policy advisor to President Trump in twenty sixteen and twenty twenty four. He served as Chief Economists and Distinguished Visiting Fellow at the Heritage Foundation for twelve years. He's the author of a couple books, including Trumpanomics Inside the America First Planned to Revive Our Economy in twenty eighteen and more recently twenty twenty four, The
Trump Economic Miracle. And then in twenty nineteen, President Trump selected Steve Moore for the Federal Reserve Board of Governor more ultimately withdrew from that.
All right. He is also the author of Trumpnomics, Inside the America, First Plan to Revive Our Economy and The Trump Economic Miracle. I think you said that, but we always say it again. So there's a lot going on Steve joining us from Washington, d C. Steve, it's good to have you here. Bloomberg Economics US economist Canada economist Stuart Paul is also with us. You know, we're talking about a lot of issues, and it does feel like when we think about what's going on in the world,
geopolitics largely at play in a big way. We're trying to assess the different trade deals, the different alliances. Ste just laying out if we had problems, certainly in Taiwan or in the area, in terms of what that could be, it could be a ten trillion dollar global economic hit. These are big important things. The world though, is changing. What do you assess when it comes to some of these global alliances, trade or other and how that could
impact the global economy and the US economy? That for me, Yes, that's for you.
So uh.
I mean, let's start with the fact that, you know, we have a very very strong economy right now in the US. It's it's all the all the economic make indicators are pointing north. We have declining inflation, we got really good job report yesterday. We are seeing, you know, a booming stock market over the last a year or so. We're seeing real wage increases for workers. So it's about as good a picture as you can get right now.
And you know Trump was right when he went to Davos and said, if you want to grow, because we're growing much faster than virtually any of our competitor.
Countries, do what we're doing.
Promote lower tax rates, promote energy production in your home country, deregulate, and don't forget that's a huge, huge burst to the economy in terms of increasing the productivity of our of our businesses. So I feel very confident about the economy in twenty twenty six. I think that I don't think we're going to see the fifteen percent growth that Donald Trump said we could see, but I think we could easily grow at three, four or five percent, and those are very positive numbers.
One of the things that I'm thinking about, mister Moore, is that there's sort of a reshuffling of a lot of a reshuffling of the global commercial order. There's a reshuffling of global alliances. There's a reshuffling of military alliances. There's a reconsideration of tax policy, there's a reconsideration of regulatory policy. Big structural changes that have a lot of growing pains.
Yes.
On the other hand, you have the FED, you have the President calling for interest rate cuts perhaps to smooth over some of those growing pains. But all the data that we're seeing so far that you're alluding to is pointing to a relatively resilient US economy. Sure, we didn't see a ton of job growth last year, but it looks like kicking off twenty twenty six really strong. Where do you think that these two different tensions, these two
different things end up shaking out. On the one hand, we have really resilient economic activity right now, but there's a lot of risk in the reshuffling of these major structural factors.
Well, there's no question you're exactly right that Trump does want to It has reshuffled the deck when it comes to bother foreign policy and our trading policy. I'm much more of a conventional Ronald Reagan free trader, and so President Trump knows I don't always agree with him on his trade policies. There's no question that when we had the Liberation Day that that really royal markets and did
cause a temporary reduction in economic output. On the other hand, the one thing that I try to let people understand that don't necessarily understand how Trump operates. Is the guy is a deal maker. That's an obvious point, and he has the way I like to put it is, Look,
the global economy is pretty simple to understand. The United States is the hub of the world economy and every other country as a spoke, and that gives the United States an enormous economic advantage, just as we are so majorly benefited by the fact that we have the world reserve.
Currency and the dollar.
And so Trump is for the first president in my lifetime that is sort of using flexing America's economic muscle to force other countries to do things that are in many cases of their own interests, but also in America's
interests as well. And so what I'm saying is that I don't I'm not a big fan of the trade tariffs that Trump is put into effect, but some of these trade deals that he has delivered, But we don't know for sure yet because it's still early in the game, but it looks like if Trump is even nearly right on this, that they will bring a lot of capital investment in the United States, will see lower terriffts applied on American manufact during and agricultural products and that will
only make America strong.
You mentioned the president is a deal maker. One of the deals that he made in his first term was the US MCA Trade Pact. Our team reporting that the President is privately a musing about exiting that trade pact, according to people familiar with the matter. Earlier today, we heard from White House trade advisor peat In Navarro. He said the North American Trade Pact has significant flaws. He expressed worries about China shipping goods through Mexico and Canada should the US get out of the US MCA.
Now, I'm a big fan of that.
In fact, I mean I was a big fan of NAFTA when it was first talked about on O'ronald Reagan, then then signed into law by Bill Clinton, a Democrat. It's been enormously advantaged to the whole North American continent. It's critically important that we trade with Mexico because for many reasons, we want to make sure that Mexico remains politically stable, and we want to see higher living standards
in Mexico and Canada. Is a lot of people don't realize by the way that Canada Mexico are our biggest trading partners, not China, not Europe, but Canada, Mexico, Nory.
The Bloomberg audience know, Steve.
That's for sure.
So the well I was even surprised, frankly, when I was looking at these statistics. I thought our trade with China might might have been larger than Canada Mexico, but it's not. And so look, you're talking to somebody who is very much in favor of continuing free trade flows
between our three countries. Now it is I think Trump has a legitimate complaint that if we have a free trade deal with Canada Mexico, and then Canada Mexico are bringing in goods from China, and then the China is using them as a port of entry to bring in things to the United States, that's a problem.
But are we doing that? I mean, that's I guess we should know, you know, you know, we have to be careful about what is said right to understand exaust because I think Mexico and Canada understand the importance of an ally the United States, and certainly when it comes comes to China. What do you think, Steve, is the damage though that is being done to the United States on a global level because alliances, the EUS moving on, China's moving on, and I do wonder that those aren't
quick fixes necessarily. Are we being kind of hurt longer term by some of these you know, former allies or allies still in name, but also they're looking elsewhere because they don't love the volatility and instability of this White House.
Yeah, that's a great question.
And the last thing we want to do is send these other nations running into the arms of China. I don't quite get the logic of that, by the way, on the part of the Europeans who've really been saying, well, maybe we'll try it with China. I mean, my goodness, se there's the same countries for the last fifteen years have talked about, you know, climate change being the most important issue on the planet, and here they are running to the country that's the biggest polluter in the world.
So that's a little hypocritical. But look, we want to trade with Europe, we want to trade with Canada.
I think it's do we need to do We need to to keep the US economy you talked about earlier. Yeah, that this economy is doing well, don't we need.
Yes, trade is critically important here.
I believe that, you know, in fact, the one thing I would say that I disagree with Trump about him he thinks that the free trade regime over the last fifty years has been negative for the US. And my own opinion is I don't think there's any country in the world that has benefited more from free trade than the United States. I mean, my goodness, when I first came to Washington in nineteen eighty two, eighty three, the Dow Jones was at a thousand. Now we've got the
Dow Jones at fifty thousand. I mean, we have so dominated the world economy in terms of the competitiveness of our businesses. No other country, not even China, comes close. I mean, our our net worth as a country in terms of our businesses are almost as large as the rest of the world comes about. Yeah, and that's largely because not not just just but that means that trade has actually benefit of the United States, not hurt our workers.
As an economic competitor. I'm sure the US has been a tour to for us. If you ask somebody like JD. Vance whether it's been worth the toll that it's taken, Let's say, on the rust Belt. It seems like he's a little bit unsure. And Scott Best and of course famously has the line that the American dream is not having cheap imports and cheap labor flooding the country. Instead, it's about, you know, having having a job and building
a future. We were just talking about housing affordability. Having a stable job and being able to afford a home one of the things though, that I think about in terms of free trade. So at a minimum, it seems like there's at least a questioning in the White House whether free trade has truly benefited us. What I'd like to hear your opinion on is whether free trade for manufactured goods is different, let's say, than free trade for
input inputs to production. Like we definitely need graphite, we definitely need nickelsthium, copper, things that we don't necessarily have under our feet. Is that different to some extent than trade for cheap manufactured goods that the White House seems to be so upset about.
Well, let's put a little bit political angle on this, because look, as I said before, I think this is a strong economy, but a lot of the American people don't agree with me, Right now if you look at the polling, you know, middle class Americans have a lot of anxiety right there. Now, some of it is many people just don't like Trump, but some of it is, you know, people aren't feeling the love, so to speak, and they're not feeling the positive effects of the kind.
Of statistics that I mentioned. And so.
That's a political problem because we do objectively see a lot of things moving in the right direction. But you're right, you go to these, you know, towns in the Midwest. I grew up in the Midwest, and they're not feeling like it's a sort of shared prosperity.
Well is it because they're not? For Steve, is it not that they're not feeling it. It's the reality of it. It isn't a shared prosperity.
Well maybe not.
I mean, although even the statistics show that, you know, the incomes for even the lowest income groups have been rising. And you can tell I'm kind of flummings by this because it does look from the objective evidence like things
are getting better. But there are there are you know, certainly patches of the country that have not felt the kind of prosperity that other parts of the country, and So that's why it applies to manufacturing jobs, because a lot of Americans believe, you know, we're losing a lot of those old, you know, nineteen seventies, eighties, nineties jobs that that gave people a middle class living.
Now the prob if I may, I mean, what's.
Sort of interesting about this subject, though, is that many of those sort of manufacturing jobs won't even exist in twenty years. I mean, we are moving into a new era of artificial intelligence or robotics. It's you know that just are changing so dramatically and so rapidly, the way we work, the way our businesses worked, the way we play. I mean, how many trucking jobs will we have in twenty years?
Not many?
Yeah, maybe, you know, if the tech there and if the legislation gets there. But I kind of see that happening. We're speaking with Steve Moore. He's the co founder of in Leashed Prosperity's a former Trump economic advisor. He joins us this afternoon from Washington, DC. Also joining us to
Stuart paul Us and Canada economists for Bloomberg Economics. Steve, the president is trying to bolster the shrinking US coal power industry he'll use one hundred and seventy five million dollars in government funds, tax payer money to upgrade six plants and have the Defense Department by power from others.
We had an interesting conversation with our colleague Will Wade, who covers energy here and power at Bloomberg News, and we asked him why the US moved away from cole and I was expecting an answer from him to be honest, that it was about, you know, environmental reasons. But he had one word. He said, money. It's cheaper to use natural gas and have natural gas fired power plants. Is this a bad move by the Trump administration because it's
it kind of goes against the free market forces. Well, that's a tough question too, because it's also intertwined into politics. You know, the the coal is still a fairly important source of our energy, and we get much more energy from coal than we do from green energy, for example, not that muchmore. We get about sixteen percent from coal, and then if you take all renewables together, you get
twenty percent. I'm not sure about those stats, but but the point is that coal is still it's basically, you know, been an important part of our energy mix.
I happen to believe that we should use all.
Forms of our power that are competitive, and coal was made uncompetitive in no small part because of the regulations. But we also all want clean air as well. But I look, I'm not going to count out coal. I don't want government subsidies to call I certainly. I think I'm glad that Trump is getting rid of the Remember those green the green movement grew only because they were lapping up, you know, tens and tens of billions of
dollars from tax payers. They just weren't competitive. So look, my view is very simple on the future of energy. It's the two wins. It's natural gas and nuclear power, and ultimately those are going to be I think the fuels of the future. And that means that in the good news about that is both of those are very clean burning fuels.
Is it possible to have your nukes without subjecties?
Yeah, that's what without news? That is a good question. I don't know the answer to that. I mean, you may know better than I do.
But but because nuclear power has been subsidized. But I think I'm going to go with with the optimistic forecast that we will we will see nuclear power becoming more efficient and more productive and competitive without any government subsidies.
Hey, least times to eve you were with us. This was at the end of the year, before we knew the President would pick Kevin Warsh as his nomination to the Federal Reserve. Is this a good choice in your view? Does this ensure that there will be an independent FED? And I'm assuming you think an independent FED is important?
Yeah.
Look, I told the President early on in this process that I thought that the three people I thought would be the best for that position, where Kevin has Kevin Worsh or Outhro Laffer, And so I'm glad he picked somebody off of that list. I am incredibly excited about Kevin Worsh. He will be independent, and he's a smart guy.
He understands monetary policy. He understands the importance of keeping The most important thing that FED needs to do right now, in my humble opinion, is to keep the dollar strong and stable. And by the way, Trump isn't always in favor of a strong dollar. Sometimes he favors a weaker dollar. I disagree with them on that. I think we clearly benefit from having a st under dollar. And by the way, if you want to afford. You want to have things more affordable, you want the dollar to be stronger and
not weaker. So I think he's got all the right economic instincts and I think he will he will once the Democrats on the you know, because the big committee hearings will be coming up for his Senate approval, and I think he will do very well with that.
I think he will be confirmed and.
It'll be an independent fed just quickly.
I hope. So I think it will look.
I think he's not a political guy for the most part, and so I mean he's a Republican. But I've known Kevin worsh for many years and he will and he's a real professional, and I can't think of any any better really, truly, I think he was about the best choice that we could have.
All right.
Stephen Moore, thank you so much, co founder on Leash Prosperity, former Trump economic advisor joining us from the nation's capital. Stutpaul still here in studio, part of our Bloomberg Economics team. We're counting down to the clothes. Got about a minute. Hear your thoughts on that.
Well, So I think that Kevin Warsh actually runs the risk of being a little bit too political. I think that when we saw an additional half a cut or so priced in upon the announcement that he'd be the nominee, I think that that was markets reconciling this fact that there's going to be a little bit more of a political charge to monetary policy if we were to see somebody like Kevin Walsh. But the Senate Banking Committee members
know this to be true. That's why Senator Tom Tillis is going to prevent that nomination from going forth until we see the DOJ probe into the FED stopped, and we'll see just how much President Trump is devoted to Kevin Walsh as a nominee, because he would have to direct the dj to stop the probe into the FED, something that it doesn't sound like he's been willing to do to this point.
Yeah, we'll see what Tom Tillis and the Senate Finance or Senate Banking Committee rather ends up doing. I do want to point out I'm looking at the US Energy Information Administration data for twenty twenty three. It's the most recent data that's available in terms of total electricity generation here in the US. Because we just had this debate with Steve Moore, sixty percent comes from fossil fuels, sixteen point two camp percent came from coal, and then renewables
accounted for twenty one point four percent of those. Of that twenty one point four percent total generation, more than ten percent came from wind power. Back then hydropower was at five point seven and solar was at three point nine percent. Yes, so we do have we do do more renewables than cole.
Yeah, at least does a film that move good stuff ster Paul, Thank you so much, Thank you really appreciate it. Here is us and Kenada e Commerce, with our Bloomberg Economics team joining us here in our Bloomberg Interactive Broker studio.
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