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He's dubbed himself tariff man, tariff, tariff, tariff. I am a tariff man.
To me.
The most beautiful word in the dictionary is tariff. Build your plant in the United States and you don't have any tariffs.
That is, of course President elect Donald Trump. On the campaign trail, he's pledged to impose extra large tariffs on imports from China and medium sized ones for the rest of the world. If he had his way, the US would hark back to a nineteenth century Gilded Age model of small government funded largely by tariffs instead of income taxes, in which American barons of industry think about the people. Like Elon Musk during that time, built vast well thanks
to protectionism and the privilege of limited competition. That rollout, though may be dramatic and bumpy. Sean Don and his Bloomberg New Senior economics writer. He writes about what a tariff rollout could look like for Business Week. Check it out at Bloomberg dot com and also on the Bloomberg terminal.
He joins us from our Washington, DC bureau. So, Sean, if we go back to the first Trump administration, what can we learn about how Trump could roll out tariffs when it comes when he gets an office on January twentieth.
Yeah, so, I think the first thing we learned from the first Trump administration is that yes, he does deliver on his promises, and yes there will be tariffs, but it's all the details that matter. And to get to those details, you're going to go through a period of chaotic policy making where you're going to see have some pretty heated debates between his advisors who often come from
pretty different philosophical camps. And we are starting to see, we're less than a week out from the election, or just a week out from the election, a similar dynamic start to materialize.
We'll talk to us two about the people that Trump is surrounding himself with. He by his own description, is tariff man, but he's also appointing and considering people who seem to share his views. You think about Robert Lighthouser Lightheiser, for example, potentially returning to his post.
Right, So if Trump is tariff man, then his ideological advisor is Robert Litthheiser.
Right.
He is the guy who actually has the plan to deliver tariffs. He is a trade lawyer with decades in the business, decades of being a contrarian in Washington and acting as a protectionist, calling for a rebalancing of US tariffs with the world and for a crackdown on China. He's written a whole book in the last four years laying out a plan for how to tackle China and take on trade policy. And he's you're kind of true believer.
But the kind of dynamic we're watching very carefully now is where he actually ends up in Trump's cabinet, or if he ends up in the cabinet at all, or if he ends up in a kind of advisory role that may have less power inside the White House, and
who else ends up in the cabinet. One of the things we saw in the first Trump administration was a Wall Street guy in the Treasury in Stephn Minouchin, who pushed back against a lot of the tariff policy and the protectionist ideas that were being pushed by people like
Robert Leitheiser. That's one of the reasons Robert Leitheiser has spent the last few months quietly trying to position himself to move into a post like the Treasury or the Commerce Department, which may have more power than the old US Trade Representative's office, which he inhabited during the first Trump administration.
Sean, what's pretty incredible. We're already starting to see companies make announcements about potential price increases as a result of tariff's. One of the most read stories on the Bloomberg terminal this afternoon is about Stanley Blackendecker. They make craftsmen into walt tools. They're considering raising prices in response to higher tariffs that they expect to be imposed by President elect
Donald Trump's administration. The company's CEO actually said in a call last month, it's unlikely that they're going to move a lot back to the US because it's not cost effective to do so, and there are questions about whether we even have the labor to actually do that in this country. The idea with some of these tariffs would be to move production back to the United States, but as we're seeing now that's not necessarily feasible for a lot of these companies.
Yeah, and Stanley Black and Decker in that call, the CEO was saying that they started drafting a plan in the spring for Trump victory and possible tariffs, and they're
not alone among companies to do that. We know that a lot of CEOs and businesses around the world, not just here in the United States, have been planning for this for months now, and also have had a lot of practice through the first Trump and mist also the pandemic and all the supply chain realignment that happened there the Biden administration and the push to kind of repatriate big production in semiconductors and electric vehicles, and the whole
industrial policy push to encourage that. CEOs businesses today are very good at dealing with these things, and they've been kind of flexing those muscles for a while, and so they're in a different position than they were before twenty sixteen when Donald Trump was first elected. And there is a very real argument that the Stanley blackendecor seed is presenting there. In terms of the availability of labor, We've
just had a couple of years. We're one of the big complaints from businesses is they don't have the workers to staff the factories that they're building and so on. And that's not going to change suddenly if Donald Trump moves into the White House, and especially not if he starts cracking down on immigration and deporting people.
Right, well, let's talk a little bit more about that, because Tim I don't know if you know, but I am kershow called Open Interest nine to eleven am daily on Bloomberg Television, and Matt Miller has, to his credit, been obsessed with this question what happens to the labor market and what happens to inflation if we do see those types of mass deportations. Sean, what have you found in your research and your reporting so far?
Yeah, So, Look, there's a lot of agreement among economists that tariffs add to costs for consumers and so that that will feed into inflation. And there's a lot of agreement from economists that if you start deporting people and reducing the number of people moving into the country and the labor force, that you're going to exacerbate some of the demographic challenges that the United States already has with all the baby boomers who are moving out of the workforce,
and so on over the next few years. I think of the world today in one of the framings I think is the world is now engaging in the people wars.
Right.
Population is one of the great economic forces and one of the great economic advantages that the United States has had for many, many many years as a place that attracts immigrants. If you look at China now, it's got a declining population, It's got an aging population. Japan for years has been dealing with an aging population, Germany's dealing with an aging population, and so on. Within the United States, the places that are growing fasts are the places that
are gaining population. The places that are in real trouble economically are those aging counties that just can't hang on to people. And when investors are looking to put a new factory into place, the first question they ask is where are the people? Where are my workers going to be? So, you know, all of these things coexist and they kind of collide, and that means we're going to see potentially
more inflation. We're also going to see more strain in the labor market, and overall, perhaps a big hit to American competitiveness in the world.
Sean, thanks so much for joining us. Really appreciate taking the time This afternoon, Everybody check out Sean's story. It's at Bloomberg dot com slash BusinessWeek. You can also read it on the Bloomberg terminal, all about the way that Donald Trump potentially will roll out tariffs come January when he does take office for a second time.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Applecarplay and and Broud Auto with a Bloomberg Business app, or watch US live on YouTube.
Well, Baguya Technology shares are taking a turn lower today. They were down at one point as much as forty percent. This after the company's third quarter network volume missed the average analyst estimates. Paguy is a fintech company that takes loans that lenders rejected, analyzes them using AI. It then consolidates them to sell to institutional investors. It counts Visa, Ally, Sofi, Us Bank, Klarna among its different partners. We've got with
us gaul Krubiner, the company CEO. He joins us here in the Bloomberg BusinessWeek Studio. I want to talk a little bit about your view because you have a great idea of what the health of the consumer is, the economy, what things are looking like. But before that I got to talk about we were Bloomberg. I want to talk about the stock price you guys reported earlier today. What's going on with the stock today? Do you think investors are missing the big picture?
Definitely, So thank you very much for having me today. I think the stock price is a different conversation as the stock price valied in and a little bit because of what you've just described, maybe took a shakeout. But the really interesting pieces were the businesses and the fundamentals and from that prospective, Pagay ahead a record record revenues and even record network volume and maybe just to drill
down for one second of what the company does. So think about it that we are using an AI to help different lendos as the one you just described, Ali Bank so far and many others US Bank to help them serve their consumers. So so far we have helped these different organizations to provide loans to over two million customers, customers that, as you mentioned, would have otherwise been declined.
So think about the fact that we helped two million Americans get a twenty four billion dollars of additional loans that otherwise would not be able to get it through their banks. And all of that with the power of AI and machine learning that is driving all of that.
Just ask a simple question, how many of those loans go bad?
Though?
How much risk do you take on?
So the reality is that these type of boroels are actually good boroels. They are paying and paying well. So you think about something in the ranges of four to eight percent of an annual loss. And in today's situation of the financial situation in the US, if you don't have a perfect FICO, you don't get a loan. The regulatory environment that exists on the banks is making it very hard for them to provide loans to very good
consumers that would otherwise pay back. And that's where Pagaya comes in, helping the banks to provide these credit to their customers which they sow needing in these days.
What are the rates on those loans?
So usually the rates could vary from a twelve percent and up until twenty the way to think about it, it's usually two to five percent lower than credit card rates. So usually people that are taking personal loans are actually refining or reducing the rates when they are moving from the very high credit cards into a personal loan, which is much more predictable and steady, into they know what they are paying over the monthly mails.
So then who provides the capital to fund those loans?
That's exactly the interesting point. So have you heard about private credit?
We talked a lot about so much, right talk, So think.
About Pagaya as the intelconnect between the balance sheets of the private credit into the distribution channels of the banks. So many of the consumers that are coming to the banks and cannot get loan because of the regulatory pressure that were just discussed about, these loans could fight home
in the growing, emerging, booming private credits. We have over one hundred and twenty different investors that we are feeding to provide home for these loans, which they are happy to get access to massive amounts of loans in scale that are as good as bank loans, but the regulatory capital of the bank is not allowing them to do that. So we are the efficancy of this booming type of private credit, which is a new form of capital, and the need of banks to clear their balance sheet even more.
That's really interesting.
No, you go ahead.
I was going to ask. In an environment where investors think rates will go lower, the bond market might not agree with that. Right now, how does that private credit equation change?
So the private credit equation is actually becoming bigger and better. So the reality is that they are looking to find more ways to lock rates and to invest massive amounts
of capital. So the actually the interest rate going down, while very good for the consumers because now they have a better relief on the ability to pay their debt, is actually being driven by very big amounts of private credit that are being injected into the system to help these consumers find the ability to find us their debt.
All right, God, we're gonna have to leave it there.
Thank you so much.
Paul Krubiner, he is the CEO of Pagaya, joining us here in the Bloomberg Business Week Studio.
You're listening to the Bloomberg Business Week Podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and Android Auto with the Bloomberg Business You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa Play Bloomberg eleven thirty am a journal.
Now about you let me drive? Oh no, no, no, no, honey, please Gravelsten, I want to drive.
It's a good question.
This is the drive to the globe on Bloomberg Radio.
Well, well, well look at that.
Wow, what do you see?
It's almost four o'clock.
That's crazy. Yeah, you've been here all day.
I know. Well, I live here in the Bloomberg building. I don't actually leave, you know, I just row out a little.
You got everything we need?
Yeah, food, we don't have showers, but who needs that?
Who needs that?
Hey?
We don't. Yeah. Let's see what Paul christopher has to say about this rally run up and that breather. You keep talking about the pause that we're seeing.
The pause.
Paul Christopher's head of Global Investment Strategy at the Wells Fargo Investment Institute. He joins us from Saint Louis, a collective sigh emerging from the markets today. Finally a little bit of a pause in the rally that we've seen post election. Paul, how are you thinking about this?
Yeah, truly a couple of days of pause. Very well, come rest, but and we'll have to see what happens with that. CPI number tomorrow. A bad number could give the market a bad jolt. We'll have to see about that. But you know, the real thing to keep in mind here is that the trends since the election day are really trends that go back to the early part of October when Trump started to take momentum, and even back
earlier than that, to the middle of September. Once we started to get a sense that the economy was stronger than what we thought the market had thought in early August. Then the market started to move okay, higher, yields more of a soft landing, maybe no landing, So yields go up, right turn, premium goes up, Equity start to march higher, Cycnicals get the rotation bid, especially financials, and you get
a little bit of a breather from tech. And so that's kind of the same thing as that Trump rally that started in early October. So it just accelerated a set of trends that were already in place. When you start thinking about, well, okay, tariffs, that's going to raise inflation, so yields need to go higher, check that box. They were already going higher. Inflation makes the dollars stronger. Sorry, tyrorists make the dollars stronger, check another box that was
already going higher. And then finally the idea that you'd have tax cuts and deregulation and stock investors just love that. So again another coincidence. And so this rally that we've seen here the last week, we should see in a little bit longer term context that could continue for a while, but maybe not at the same pace we've seen last week.
Well, Paul, layeron to the corporate fundamentals picture, because you think about third quarter earnings, it's still earning season. But of the companies that have reported so far, it looks like seventy five percent or thereabout have beat their earnings estimates, and that is bang in line with the average from the past ten years or so. It's below the average
of the past one year five year look back. And in this market, I mean, prior to this big Trump rally that we saw, of course, it just felt like average wasn't good enough. So when you think about the long term and you think about the earnings power, does that spell further gains.
We think it does, but maybe not quite right away. That's why we do get a little bit nervous about the run up in the last week or so, and I mentioned that in terms of the CPI report tomorrow, you'd only really need some sort of fundamental disruptor here for people to start taking profits. But in terms of earnings, yeah,
seventy five percent, that's about the longer term average. But notice that the guidance was a little bit more negative, and earnings growth is slowing, and that's entirely consistent with an economy that's slower this year than it was last year. Now the question is where's that bottom. We think it bottoms in the fourth quarter, and then with the benefit of FED raid cuts, starts to improve with the economy in twenty twenty five. So we're looking for stronger earnings
next year. Again, a point I made a moment ago. The trends we've seen since mid September are we think, solid trends, but they've just accelerated a little bit much here. So look for a pullback and then maybe some good buying opportunities when that pullback finally arrives.
Talk to us too about the interaction between the bond market and the stock market. It feels like the bond market has just been the epicenter of volatility over the past week, over the past couple months as well, that hasn't slowed down the stock market, but we're starting to approach some of these levels out the curve where people's
it starts to raise some alarm bells. According to some of the investors that I've been speaking to, how are you thinking about the rise in long duration treasury yields?
So we kind of look at the components, like the inflation piece of the long term yield, and then what we call the term premium, which would be the portion of the yield that the investor requires in order to be compensated for staying in bonds instead of going over to a more attractive looking stock market. And that term premium is what's been rising lately. That's kind of a good sign. That's what you'd expect to see in an economy that's bottoming out, where people aren't worried about recession
anymore but seeing recovery. So now bond investors demand a little bit more term premium. They want to say, hey, stocks are going to do well, you're gonna have to pay me more borrow or whoever you are, for me to lend you your money for ten years in this
bond and we think that's not necessarily an unhealthy sign. Now, if we were to see a strong inflation report tomorrow or in the next couple of months, or if we were to start to get a sense that the deficits under the new administration in Congress will be very much higher, then that could pose more of a problem for stocks. But that's a little bit down the road.
What's the signal that the bond market is sending about what it thinks the Trump administration is going to do?
Now hard to tell the You know, as I said earlier, if you see the bond yield rising and the tariff story remains intact and the dollar is accelerating at the same time, that would be those two facts there. A stronger dollar and higher bond yields would be consistent with tariffs and inflation, except that the bond yield really isn't
being driven by inflation. It's being driven by fundamentally a term premium that's consistent with a reinversion of the yield curve, a de inversion of the yield curve, you might say, where long term rates rise because the economy is strengthening and equities are expected to be stronger. So there's kind of a sense in which investors could be could find it difficult to disentangle bond yields rising. Yeah, that could mean inflation, or could mean tariffs, or or it could
just mean a health economy coming up. And so these two trends running in parallel right now will have to wait to see how they sort of separate themselves out. Typically they do after an election. Right the weeks after an election can sometimes bring trends that are very short
lived and don't last for very long. So again our advice to investors here is is to treat what's going on in markets right now is a bit of a reaction, not a true fundamental rotation, and stick with stick with the plan that we established in August, looking for cyclicals on pullbacks, looking for small caps on pullbacks, and really playing for recovery next year.
And Paul, just really quickly here. We only have about thirty seconds left with you. But if you did start to see some of those buying opportunities open up, what are the sectors, what are the industries where you would be looking to catch the knife there?
Yeah, definitely cyclical. So we've liked industrials for a while now. Energy financials have been a big player lately. They get the benefit of deregulatory expectations plus a stronger economy. Financials throw in there too, and we like comm services communications services here as an alternative way to play tech.
All right, we're gonna have to leave it there, but thanks so much for joining us. Paul, really do appreciate it. Paul Christopher, head of Global Investment Strategy at the Wells Fargo Investment Institute, joining us this afternoon from Saint Louis.
This is the Bloomberg Business Week Podcast, Apple, Spotify, and anywhere else you can get your podcast. Listen live weekday afternoons from two to five pm Eastern Bloomberg dot com, 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.