Bloomberg Audio Studios, Podcasts, radio News.
This is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus global business finance and tech news as it happens. The Bloomberg Business Weekdaily Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Our most read story on the Bloomberg at this hour has to do with the Trump administration telling Harvard University it cannot enroll international students, so no doubt about it delivering a major blow to the.
School after the government, you might recall.
Also had frozen billions of dollars of federal funding and really escalating a fight that we are seeing between the United States and Harvard and other elite colleges. Colleges, but really kind of taking this to a whole other level.
Tip we got Kleimashinkska, team leader for DC Breaking News, joining us from our Washington DC bureau. Carol read the headlines at Kassia, But I'm wondering about sort of we were seeing the reaction, we're seeing the interest. Everybody's talking about this story, right now, is this the type of thing that is going to get legal pushback, our lawyers already working on this to try to prevent this from happening. Or can the administration actually make Harvard do this?
Yeah? Great questions, Thank you for having me. Indeed just currently them all throughout the story on the terminal and really a surprising new development and major escalation where the Trump administration is basically telling Harvard they cannot all international students. Not only that, but also the current the currently erals foreign students have to transfer or they will lose their
legal statute. Harvard has already responded on the saying that they will that they will fight it, that they obviously don't agree with this decision, So there will be definitely more to come.
You know what's interesting, Casia Like, it's you know, we've been seeing all of this play out, and I feel like universities have been trying to figure out what's the right balance in terms of dealing with the administration over it. I feel like money trumps everything, and financially we are continuing to see.
Impacts on universities.
Because of what the administration is doing pulling federal funding.
But I look at Harvard I mean, we.
Keep reading the statistic, almost sixty eight hundred students at Harvard, twenty seven percent of the entire student body come from other countries. That's up from just under twenty percent back in two thousand and six. This is looking at the university's data. I mean, this becomes a bigger and bigger financial blow to the university. And you do wonder at this point do universities in general, Harvard included, you know, are going to fight back even harder because this is about money.
It comes down to also in terms of principles.
Yeah, exactly. So this is more than a quarter of all their students. I think it's also interesting that this is the Department of Homeland Security involved them. The statement your this hour came from the DHS, which was as citing right, the protests, the fact that they blamed the Harvard leadersh for not being able to keep its campus basically safe and putting some students at through it.
Yeah, I'm thinking about all the Harvard alumni in Congress right now. Harvard Law actually has an article on their website post election touting the fact that all Harvard Law alumni running for reelection to Congress won their races. Well, five more alumni vied to join their ranks. They talked about incumbents in the US House of Representatives. They also talked about Republican Ted Cruz Tim Kaine who were re elected to the Senate, in addition to other alumni from
Harvard Law School. Have we heard anything yet at this point from either Democrats or Republicans who were alums of Harvard University at least Stephonic for example, who's been very critical of the school. Republican member from New York House, have we heard anything from them since this came out.
You know, it came out less than an hour ago, so I haven't seen anything here yet. On the breaking news desk, you might. You know, it's not only people in Congress, it's also major donors right on both sides. So I'm sure this story will continue to escalate.
Talk a little bit more about this coming from the Department of Homeland Security, Like, it's just interesting, it's kind of playing into kind of the safety element, right, We've seen this kind of being used, I feel like in terms of security reasons. We've seen this with immigration in general. Like I just that thinking and philosophy that continues to come from the administration again that I guess will also be discussed in any kind of legal arguments.
Yes, this timing is really interesting and really strange, you know, given what happened here in DC overnight as well, and
the statement actually specifically sites Jewish students. It's also a kind of woo you that the statement landed just after online let it finish her briefing, so that kind of didn't allow us to ask her more questions, even though obviously must have been aware of it happening, because apparently there were some papers going back and forth between the Trauma administration and the school for several days or even weeks now. So Yes, this is definitely an interesting timing for this announcement.
Yeah, I'm also thinking, and i know you're covering breaking news, but I'm also thinking about just the educational impact of
a move such as this. Given the numbers that Carol mentioned, thousands of students there, close to thirty percent of the entire student body, this is the type of thing that could potentially wreak havoc on a university's finances, but also in such a short period of time where ostensibly acceptance letters have already been mailed out we understand the yield of the class coming in the timing of this is pretty is pretty wild.
Yes, it's really strength and difficult. It's not only about the new students but also existing students who will have to transfer or lose their legals tables that me insluding their visa, possibly being forced to go back home. Yes, and it's not only about the finances, right, but also about the diversity of the campus. I mean, we know that the school has been previously attacked for their diversity efforts, so there's also addresses that issue of the diversity of the student body.
Cassie, one last question.
You know, it's interesting that it feels like Harvard is being attacked big time. We've seen it also with Columbia and some other schools, but it does feel like makes me wonder like who didn't get into Harvard and the administration that's like so angry. But I know it's a bigger, broader story. Having said that, should we assume that other schools will be targeted in a similar way as hard as Harvard is.
Being so I think this is what is very surprising about this news, right, that it singles out this one's school and goes after its leadership. So I think we have to see we have you to find out whether the DHS will go after other schools as well.
Yeah, fascinating and uh, you know, just I think it's safe to say many would would characterize it that way. Cassia clemschinks she's team leader for DC Breaking News, joining us from our DC News bureau.
You're listening to the Bloomberg Business Weekdaily podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Well, let's talk a little bit about today's big take. Carol Masser, I couldn't get enough of this and the illustrations that are included in it. Max Abelson joins us now he's Bloomberg News, a finance reporter, whether it's geopolitics, trades, tariffs, or on more more personal level real estate, crypto corporate ventures. Some say this second term of President Donald Trump is
all about the art of the deal. Some of the actions, though, have raised ethical questions that have been addressed by White House Press Secretary Caroline Lovitt, including earlier this month.
The president is abiding by all conflict of interest laws. The President has been incredibly transparent with his own personal financial obligation throughout the years. The President is a successful businessman, and I think, frankly, it's one of the many reasons that people re elected him back to this office. Look, I can assure you the President acts with only the interests of the American public in mind, putting our country first and doing what's best for our country full stop.
That's his intention, and that's what he's focused on.
Well, today, the Bloomberg Big Take is focused on how since the early days of the reelection campaign, President Trump has more than doubled his net worth carol to about five point four billion dollars.
All right, we want to get into this and with us to who has written this Bloomberg Big Take. It is one of the most read and it is a must read. It has been deemed so by our Bloomberg editorial team. Max Abelson and Andy Massa wrote the story. Joining us right now is Bloomberg News Finance reporter Max Abelson right here in studio. It's pretty incredible because you guys have really laid out all that's been going on
in terms of business activity for the President. We should just you know, we just heard from Caroline Levitt, who has been asked about this at some of the press conferences, the daily White House press conferences, and she says, the president abiding by all conflicts of interest of laws, incredibly transparent and so on and so forth. But it does beg a lot of questions tell us about how you approach this, because.
There's been a lot of stuff going on.
I would love to you I'm going to say something about our project, and I'm going to say something like this is basically the opposite of it. But you'll see what I mean. Our project is really about being able to step back and to say in concrete terms, factual terms, clear terms, what is happening here when a president is doing more than anyone in modern American history that we can tell any other president in modern America to position his family to make an astounding amount of money while
in the White House. And when I say astounding, what we're talking about is not in the millions or in the hundred of millions. What we're talking about is deals that are in the billions. Whether we're talking about the Trump n empowering I think more than ten bills million dollars worth of real estate projects, the trump Na empowering billions of dollars of value for a social media company which which only went public last year, you know, hundreds
of millions of dollars of crypto. And then and then I told her I was going to say something that was the opposite of this, that this is this is what I want to say. As I was walking here from my desk in the newsroom, just on the other side of this floor to our radio studio, I saw that the United States government, the Trumpet administration, told Harvard University right that that it can't enroll international students and that and that existing foreign students are going to have
to transfer or lose their legal status. And you know, for me personally, news like that, which I find comes basically every week, maybe sometimes every day, just these really things that I had never contemplated or never heard of. That there has been so much tumult in the last few months, so many things going on, tariffs alone, the stock market alone, the economy alone, that it is so easy to forget that what is happening on the Trump business side is really important too.
So what Ann and I we're trying to do.
We try to just forget about politics, and forget about policy, forget about things like Harvard, and just really focus on the Trump money making machine.
Can I say?
There are folks that come in and say, you know, we're all kind of chasing the stuff that is coming out of the White House, and the question often arises of like, well, wait, what are we missing?
What is going on that.
Maybe isn't in the headline, or what the administration is talking about or the president's team. So take it away because you guys did some really deep reporting.
That is what we tried to do, so Annie Massa and I with help from many editors. I want to mention David Shear, who really made this happen. What we tried to focus on is that compared to all that tumult that I just mentioned, all the Harvard news and the comings and goings, compared to that, there's something very clear about the Trump empire, which is that it's approach,
and our timeline is since the reelection campaign began. Everything that we're talking about here is after he announced his reelection.
The approach is clear.
The Trumps are selling that family name, and they're doing it at a scale that I really do think could could very well be the story of the day, the story of the year, if it weren't for all these things happening. You know, we see, we see the Trumps going and doing things they simply did not do in the last term when they.
Said no to no new foreign deals.
In the first administration, we were not talking about new foreign deals and last of administration really because Trump essentially said that they wouldn't happen. Now, you know, you basically have to take out your globe because Annie and I traveled, you know, journalistically speaking to Cutter, India, Vietnam, the United Arab Emirates, the United States is involved too, and at
each point they're doing really interesting things. They're built, they're they're they're licensing their name to really big projects, hundreds of millions of dollars if not billions of dollars worth worth of projects. And sometimes not all time, sometimes something very important is happening, which is that the deal includes
arms of governments. I'm talking about you know, it may not be the Trump administration, it may not be the Trump family, I should say, signing a deal with a government, but governments are involved, and that rubs up against what Trump said would not happen this term. When Trump said there would not be new deals with foreign.
Governments, governments involved, government money involved.
What we're really talking about is things like let's say in Oman, for example, they announced when they when they announced that deal, they announced as a partner the Umran Group, and that is essentially as it's a think of it as a state owned tourism group and they're going to be involved in that deal. Listen, let me let me point out that the Vietnamese I believe he's a prime minister.
He may be the president, but the head, one extremely important figure in Vietnam met with basically the financial representative representative on the Trump on the on the new Trump project in Vietnam.
That is what we.
Mean when we say that these things are very big, They're potentially very lucrative, and a lot are happening right now.
Max real Estate is just one piece of the puzzle here. It's certainly a global piece of the puzzle. The crypto story is included in here as well. You talk about world liberty, financial the Trump and Millenia mean coins as well. I want to focus a little bit on the corporate side of things. I think that gets a lot I think that gets a lot less attention than everything else. Right, there was a lot in here that I had never even heard of when it came to Trump family connections.
Grab a gun for example. Talk a little bit about the corporate connections and what you Annie and the team uncovered here.
I really admire any Master's ability to put her finger on these on these corporate connections, the things that I hadn't heard of. I mean, you know, it's it's I think it's actually helpful to put crypto off to the side because it can it gets so much attention. I mean literally, tonight, Trump is scheduled to meet with the top holders right of one of his one of his crypto projects. I think it's the mean coin. But then
you know, so that that gets all the attention. But then you see something like seventeen eighty nine Capital Donald Trump Junior join. I think he became a partner at seventeen eighty nine, like a matter of days after the election. I think it was less than a week after the election. And that's that's a group that you know, Rebecca Mercer, if you remember the Mercer name, it was a really that is a really important Republican mega mega donor, and
what they're basically doing. The way to think about it is they're essentially monetizing the kind of Trumpian vision for US culture by taking stakes in you know, things like the Enhanced Games. I don't know if you've heard of that. Basically it's been nicknamed the steroid Olympics.
Yeah, I've heard of these, you know. But you can athletes who can sort of they're not drug tested. You can do whatever you want.
And then that's right, that's right, listener.
Listeners can't really see me right now, but I'm like extremely jacked and steroidal.
You know, lanning, that's exact purpose.
I'm going to fight in the inn assterial Olympics.
That's right, you know.
But the list goes on and on there. It's almost much to mention on just one interview. I want to give a shout out to Unusual Machines, which is such a drone component maker.
You know. When this is how powerful the Trump name is.
When Donald Trump Junior's role was announced in by the way, in November November twenty twenty four, right again on the money, the stock popped basically two hundred and fifty percent, maybe just shy of two hundred and fifty percent in like the two days, two trading days that followed.
That is power.
I tell people that my beat here is money and power. That is money and power, and it just keeps going. There's you know, have you ever heard of PSQ Holdings? Do you a public square?
Now I have?
This is the anti woke ye. This is the anti woke marketplace where you can go and buy items such as these pro life diapers that you guys highlight in the piece.
YEP.
I want to thank Michael Seffert, the CEO who gave us a comment. He said that Trump Junior is an incredible businessman, GJI partner and marketing expert and in other words, in other words, what he's saying is that we want Trump Junior for his mind, not necessarily for anything else. But that's a good example of like, you know what,
three million dollars more. That was Trump Junior's twenty twenty four compensation we found for PSQ and his board role was announced once again December December of twenty twenty four.
It keeps on going.
There's Dominari, which listeners should should read any mass a separate.
Story on Donor.
We talked and We're fascinating, have you you know, do you know the the idea of like basically events contract.
Yeah, we interviewed the call She founders when they launched years ago.
Kyle She.
I mean that role was announced January January, and that's Donald Trump junior again Eric Trump. I don't want to overshadow Eric Trump. Eric Trump is also involved in some of these stuff. But it's but when you're talking about grab a gun, for example, that's yet again, Donald Trump Junior.
It's yet again.
It's's essentially the last few weeks, it's yet again at least three million dollars. And it's you know, for for listeners who I think that I'm especially interested in talking to listeners who sort of their minds aren't made up. You know.
I don't think there's much.
To do as a journalist for readers and listeners who just know that they despise Donald Trump, or that they know that they adore Donald Trump. I'm interested not in pandering to like this someone who has their mind made up already. I'm really interested in just like focusing on the numbers and focusing on just like what's actually happening. And you know, whether or not you dislike this or
admire it. I think it's really helpful to take a step back and to look at a family empire that is poised to make money while while the father is in the White House in a way that's you know, I don't know what to compare it to.
Obviously, obviously the.
Biden family, the Obama family, the Clinton family, the Bushes. I can add, all of these people are capitalists. All of these families were familiar with their reporting around their money making, for sure, But as a financial reporter, I've never seen I think the keyword here is the scale billions of dollars just for Trump Media and Technology Group, which you know of because it's the true social parent, right, that went public last year he was on.
The campaign trail.
This scale is what appeals to me as a finance reporter because it feels so new.
Listen to be fair, right, like you say, other presidents in their families make money, whether it's.
At they write books, they are consultants. There's a lot of things.
And just by right by being associated with a family that was in the White House, right, it definitely opens doors. But the point is, I think also is so much of this is happening before going into the White House, and now that he's.
In the White House, that is that's a really good way of saying it. You know, one of my favorite early scoops. I think it was like in the first five years that I was at Bloomberg, Yeah, was about Barack Obama getting paid. I believe my memory is hundreds of thousands of dollars, maybe three hundred thousand, maye four hundred thousand, maybe it was less for speeches at finance firms, including Canter Fitzgerald, which is ironic, Candorvidgel just across the
street from us here in our Bloomberg headquarters. Yeah, Canter Friitgherald. Of course, the family that's in control is the Lutnik family. Howard Lutnick, of course is our Commerce secretary now.
And I bring that up.
It's relatively random and relatively stale, But I bring that up first of all because it goes to show that the Obamas, just like many other political figures, are interested in money making.
But I just want to bring up the difference in scale that as far as I.
As my reporting showed that that was a guy making a few hundred thousand dollars, I know that this book deal he made it.
What was that like sixty million dollars?
I think, yeah, but what I would But what I really tried to wrap my mind around, and I know Annie felt this way too. Is that what we're talking about now for the family since the re election campaign began?
Right is in the billions, Max Abelson, this is a great story. It's today's big Take. It's one of the most read stories on the Bloomberg terminal. You got to read it online because the illustrations in there are perfect as well. Max, Thanks so much for joining us.
This is the.
Bloomberg Business Week Daily Podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and the Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa played Bloomberg eleven thirty.
There's a lot that is once again coming out of DC.
We have actually seen shares of Fannie Mae and Freddie Mack surged to sixteen years sixteen year highs after President Trump said late last night that he was giving very serious consideration to bring the firms public after more than a decade of being under government oversight.
So let's get to what you need to know.
Bloomberg Intelligence Consumer finance analyst be Elliott is with us once again from our DC Bureau. Back to our DC Bureau week. Go Hey, Ben, good to have you here. First up, Fanny Freddie been around for a long time, storied history, quasi government publicly traded endities. What do we first need to know kind of about that history?
Yeah, so they were founded many decades ago. Fanny May first in the thirties, Freddie Maclear in the seventies. Actually, they were privatized in the past, in the late sixties by previous piece of legislation which sort of has some echoes of what's happening today. And the company is basically guaranteed seventy percent of US mortgages. You know, their existence is unique globally and it makes the US home ownership
model possible. It's the reason that we have a thirty year fixed rate mortgage available to homeowners today.
So what do we need to know about what happened potentially during the financial crisis and the government oversight that we've seen over the last few years, and what could change given what we heard from the President.
Yeah, so the companies are fundamentally changed since the financial crisis. It's important to note that they were doing all kinds of ancillary businesses. They were basically operating the world's biggest hedge fund, as Warren Buffett once said, and they got over their skis taking on a bunch of additional risk beyond just guaranteeing vanilla mortgages. So the majority of the losses they suffered from two thousand and twenty eleven we're from those activities, right, So they don't do any of
that anymore. But you know, they exist in this sort of quasi governmental state where the FHFA and the Treasury own and are in charge of the companies, and by and large they function very well. They provide a huge amount of liquidity to US housing markets. Every year, they make the thirty year mortgage possible, and they earn about thirty billion dollars a year for the Treasury Department. So
the status quo is arguably working. But they're in sort of a bankruptcy like process that was never meant to be permanent, and so there are a lot of observers who think that that process should now come to an end, all.
Right, So you've got Fanny May up forty percent in today's session. Freddie mac is up just about thirty nine percent. So if they do go public officially and they're publicly held entities, what does it mean for them, What does it mean for their role in housing?
How might that change things from what they've been.
Well, it's it's really important to note that there are very few details on this right. So the President has been has been sort of saying what he said last night since twenty seventeen, so we don't have anything new. And the really important detail will be how, if at all, the US government continues to back these companies after the exit conservatorship potentially and and start to be to trade
like normal public companies. And and everyone by large degrees that there will be some form of federal government guarantee. They hope it will be explicit, they hope it will be defined at a certain value, and they hope that it will be paid for. But by and large, the companies get a huge amount of benefits from being quasi governmental.
You know, their their credit rating is tied to the sovereign, for instance, so they get very they get they get financing on par with the with the risk free rate essentially, which allows their business model to function at the price as it does today. So if the companies were to exit conservatorship, you know, it's not necessarily true that mortgage rates will arise, but there are plenty of ways in
which they could. One is that the companies choose to or need to earn more profits to attract third party private capital to replace the government's current stake. And the other way is that agency NBS investors lose faith in their backing and they start to see credit risk returning to the securities, and therefore they demand a larger premium over treasuries and that translates into higher mortgage rates.
What does it mean exactly when you say that the US has a stake in these companies, Because you know, I go to HDS in the Bloomberg terminal to look at these equities to see who the holders are, it doesn't say the US government owns x percentage of these firms.
Yeah.
So, actually, at Bloomberg we do an interesting thing, which is that we display the share count as though the Treasury had already executed its warrants. It holds warrens to buy seer of the common stuff. But they're not actually exercised yet, so the federal government is not reflected as an owner of the common shares. What they do own is something called the senior preferred shares, which obviously as the name implies, or senior to the common shares and
the valuation. There is something called the liquidation preference, which is growing each quarter equal to the amount that the companies earn, and it's approaching four hundred billion dollars. So that's kind of the biggest impediment to this recap and release process that you hear about is what does the federal government do with this gigantic stake in the companies and how does it get paid back?
Yeah, because I wonder if the government is still somehow involved, is it kind of a sure thing for investors?
Maybe not a high flyer, but a sure thing. And I also do think about.
Like moral hazard, like if something goes astraight, like do we just assume the government's going to be there to protect things?
Yeah?
I think there's the biggest risk is obviously moral hazard, right, right, if they leave conservatorship and there's a defined dollar amount that the Treasury agrees to backstop the companies and they pay for it. I think even then bond markets will assume that if worst comes to worst, the federal government is going to write a blank check. The companies are absolutely fundamental to the US economy, and you know, if they were private enterprises, there's just no way that they could,
you know, go into bankruptcy and be resolved simply. And the evidence of that is two thousand and eight, right's staring us right in the face. So it does seem as though there's some circular logic here, like we'd be going right back to.
Where we were, Ben, fifteen seconds. How important is Fanny and Freddy in terms of the housing market? They'll liquidity just very quickly.
Absolutely crucial. They backed seventy percent of all US mortgages, and without them, the fixed year, the fixt R eight thirty year note just just wouldn't be available the way it is today.
This is what you call an interview.
Why you should care, Ben Ellie, thank you so much, Really appreciate b leotom me intelligence consumer finance analyst, Ben la You know the.
Top holding is Pershing Square at two percent.
Love this stuff. This is Bloomberg.
You're listening to the Bloomberg Business Weekdaily Podcast. Catch US live weekday afternoons from two to five pm Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Mac.
I'll bet you let me drive.
Oh no, no, no no, this is not a toy hory. Please, I'll dovels. Let's great, I want to drive.
It's a good question.
This is the drive to the closet plunk for.
Me Efe Well, Drin Don on Bloomberg Radio.
All right, everybody, we're just about eighteen minutes away from the closing bell on this Thursday. Carol Master along with Tim Stanovik live here at our Bloomberg Interactive Broker studio, Charlie and Bill Maloney breaking down the trade, talking about the equity trade, we're pretty much hovering o our best levels of the set. But what we really want to get into is what we've been talking so much on the fixed income side of things, in particular US treasuries.
Sometimes you have the perfect guests for the moment we really had, and this is one of those times. We got Kathy Jones with us. She's chief fixed income strategist at the SHWUB Center for Financial Research, and she's here in our Bloomberg Interactive Broker Studios. Thanks for coming in. It is always great to see you, especially in a week where we're talking about over five percent on the thirty year.
Well, thanks for having me. It's a fun time to be to be talking about it.
So what would you say is the underlying root cause of what we saw happen yesterday?
I think there are a number of things have come together. So it didn't just happen overnight, obviously, But the initial catalyst, or the immediate catalyst, was the budget bill, which was kind of a final straw for the market saying Okay, there's really no meaningful progress going to be made anytime soon on reducing the deficit. And this comes after we've seen glow yields rise, after the dollar has fallen, and we've made all these policy changes on trade that actually
would discourage capital inflows. And so we're this policy mix combined with the budget said Okay, if I'm going to hold long term paper, I'm going to need a higher yield to compensate me.
But that bill is now closer or that bill is now closer to becoming law, and we're seeing yields actually pull back a little bit. So in my view, and correct me if I'm wrong. Nothing is really shifted on that front. Yet we're not seeing as much excitement or in the words of the President, maybe yippiness in the bond market. Yeah.
Well, I think a lot of the yippiness happened when we hit five percent, right, and so now we're settling down and kind of dealing with when what's so.
We don't stay yippy even though we're above five percent, just the fact that we hit it is yippy.
Well, yes, but we have a one day reprieve, so we don't know what's coming. But I would have to say that if nothing changes on the policy front, the likelihood is that yields will continue to rise at the long end, just because investors want more compensation for all the risks that have been put together.
Here.
One thing I want to get into is, and what I'm finding interesting, is this just isn't a US thing. It's a global thing.
And we talked about this with our John Authors, who has a column out. He said, the bon vigilantes vigilantes excuse me, may need a lot of rope and so, but getting into he said, even some bigger things, not just governments, fiscal houses, longevity costs to society and just a different way of thinking of it, And I'm just curious how that plays into your thinking as well, Kathy.
Yeah, absolutely, demographics are important here because we do have aging populations and that means the burden on government will be higher, presumably than it has been in the past, as a larger proportion of the population requires government services, and we haven't done anything to kind of address that
in balance longer term. So that combined with you know, we've come off twenty years of slow growth, low inflation, and ramped up our spending, and now we're ramping it up more at a time when the economy is actually doing well and inflation's not low and interest rates aren't low. We're kind of having the policy impulse, the fiscal impulse is going in the wrong direction at this stage of the business cycle. Usually it should be countercyclical, and this is pro cyclical.
Are you worried about these spending programs ultimately will lead in some ways maybe to stackflation. And I'm just thinking about if we're living in a higher rate environment, that's going to have a cost right across the board everybody everything. And I'm just curious as we continue to see, we're probably going to still be in a higher tariff environment. Things are going to cost more, and I know we'll settle into it that everybody has just so much in terms of funds to play around with.
So do you worry about stackflation? What do you worry about in terms of the economic scenario.
I do worry about stagflation because it's probably one of the most difficult things to get out of, and that's without a lot of pain being inflicted on someone somewhere. So policy wise, what does the FED do with stagflation? They probably can't lower rates, right, because that will just send inflation higher. On the other hand, if the economy is weakening and unemployment is rising, they really should be easing policy because that's part of their dual mandate. It's
not an easy process to work out. If we had it in the seventies, you know, Arthur Berns and Nixon and all that, We've talked about a lot, and it was it was a long painful process to get out of it. And so if we go back to an environment like that, and particularly if we do it globally, that is going to be a very difficult process.
Is the risk now of that greater than at any point you've seen before in the last let's say, since the Great enter Crisis.
Yeah, I think it's on a global perspective, or just for the US globally as well. Now we're encouraging Germany and Europe to spend more on defense. I don't know that that's going to create for Europe, you know, this boom, this fiscal boom, but it's more than we have asked of them before, and it's more spending than they've done before. So we have that in Europe. Japan has its own unique set of problems, and you've seen those yields move up very quickly. So it could become a global phenomenon.
All right, So there's that backdrop. Keep hitting my mic, they're gonna yell at me, but we have that backdrop.
The other thing is, nothing is as deep and liquid as the US treasury market. So how does that insulate us from some of what might come?
Yeah? I think the one thing, the thing that gives me the most comfort is that there's no real replacement for the US treasury market.
And the other thing is not likely to be anytime now, right, you know, you.
Can't really see it on the horizon. And the other thing is we are well healthy country with tremendous assets, so we have the capability of funding our debt, of spending you know where we need to spend. We have the capability to reduce our debt and to service our debt, even at higher interest rates. We don't seem to have the willingness to deal with it.
That's more of the issue.
But we're not like an emerging market country, our poor country that builds up so much debt it can't service the debt. We have the ability to do it.
Just a minute left. I've been asking everybody this question today when it comes to fixed income, how do you see corporates competing with fixed income right now?
For money, there's been a lot of interest in investment grade corporates. I think they're a little expensive right now, Okay, and we like them, but you know, the spreads are pretty tight, so i'd say up in credit quality, but I think they look pretty good.
Yeah, because we spoke to Sandy Villary yesterday who mentioned he's not interested on the fixed income side when it comes to US debt. He's looking at corporates. That's what's interesting.
A lot of issuance in Euro now from US corporate?
Is that where you would look overseas? Like where would you in the fixed income commit some new money right now?
Got about forty.
Yeah, we like from the municipal bonds look very attractive. We do like investment grade corporates, and some of the Euro denominated issues could be very attractive even though the yield's a bit lower. If you think the dollar is going to go down as we do.
You're someone who's seen market cycles, does this kind of feel odd?
Weird?
Like?
How do you see it? Forgive me just got about twenty five seconds.
Yes, it feels weirder than anything. And I've been in this business for almost forty years. Yeah, this feels weirder than anything that I've seen.
And that includes GFC COVID.
Yeah either you got it.
Yeah, thank you, which is why we really look forward to talking with you today as always, Kathy, Thank you. Kathy Jones, she fixed and comes strategist over at Schwab Center for Financial Research, joining us right here in our Bloomberg Interactive Broker Studio.
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot com, the iHeartRadio app tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal