Hard to See Trump's Google Attack Spurring Change

the viewing slash reporting of fake news media. In other words, they have it rigged for me and others so that almost all stories and news is bad. Fake CNN is prominent Republican conservative, and fair media is shut out. Illegal results on Trump News are from that give me a look him. I'm gonna keep reading it because it's all just seconds ago. And this address is our next discus Sushian, which is Google and Searches. Basically, it concludes with this

is a very serious situation. Will be addressed. Shara Overday, Bloomberg Opinion technology columnists joining us now. Google Shares didn't initially respond much to President Trump's earlier comments on this, but then did after his economic advisor Larry Cutlos, the White House was examining this, what do you make of this? Well, there's a lot to unpack their I mean, look, the core of the president's tweet there is that he believes

legitimate news sources, including CNN, are biased against him. Right, so his beef is really with CNN and with other legitimate news sources, not necessarily with Google. Although what he's pointing out right is that Google is surfacing legitimate news about him. Uh, and he doesn't like that. So look, I get it. But also the problem is that this is now Google problem. Well, Google actually released a statement talking about the algorithms that it has to generate these

search results. How do they determine that? I mean it could there be even political motivation here. So the problem is that there is a germ of truth in what the president says, which is that the ways that Google and Facebook to surface news and information is by design a black box that we don't know, We on the outside don't exactly know how Google determines these ten blue

links will appear higher than those ten blue links. And you know that again, the black box algorithms of those companies makes it more likely for people to believe, rightly or wrongly, that the information surface by Google or Facebook has some bias inherent in it, and it's algorithms are biased. The question is is it biased against conservative voices like the resident And I don't think that's the case. Sure, can search results be manipulated by third parties? I mean manipulated?

Is um boy that it's a little bit of a skewed word. Look, they're legitimate ways, including search engine optimization tactics right, to make to make certain web links appear higher in Google search results, right, And we I mean that would not have anything to do with Google. That would have to do with third parties that, for whatever reason, they want a certain product or service that's listed higher, so that when you type in the name of let's say you want an air fair, then it will take

you there. Right. So if you google, you know, running shoes Brooklyn. Right. There are companies that make sure that their websites are optimized at a certain and you can buy and you can buy keywords. All that's a different issue, right, that's more about paid ads on Google rather than surfacing content on their own. So yeah, there is some um ways to game the system, legitimate and illegitimate ways to game the system. But again, what the President is talking about,

is UM is gaming the system for political reasons? And again I just don't think that's happening. But it's part of this broader complaints that we've heard more recently than than previous years about bias by US Internet companies against conservative voices or censorship or suppressing conservative points of view. Again, I think most of those are bogus UM and are are basically done for political reasons, but it has become

impossible for the Internet companies to ignore. One question that I have is what can Congress or frankly, the President himself do. I don't know what Larry Cutlow is talking about UM in terms of what they could do to regulate search results. Some members of Congress have talked about cracking down on a aw that essentially protects Internet companies from legal liability from content posted by their users and UM that I think would be a real risk to

Internet companies, Google and others. I just don't know what the odds are of that law changing. Well done, Thank you very much for enlightening us. As always, Shara over there are Bloomberg technology opinion writer knows everything about technology. Have you got a new iPhone yet? Still still the old one, all right, it will take up a collection for you. Thanks very much for being with us. The SMP five hundred is of about eight and a half percent so far this year. Jim Paulson is the chief

investment strategist wore the youthhol Group. They're based in Minneapolis. They help to manage more than one and a half billion dollars. Jim Paulson always a pleasure to hear what you've got to say about investing. And I'm wondering, what is this term called capacity challenge? You talk about the

bull market is now capacity challenge? What does that mean? Well, one of the things PIM that I always think about is, you know, just the question we get lost and is there a lot of downside risk in this market or not? But I think an equal important question is just how much potential is left in this bull market, whether it's you know, whether it goes up for first uh several more years or not. Just how much upside is there?

And I think it comes down to how much capacity does this bull market have left to improve things that will make the market go higher. And if you just look at some of the central things, if you think about p monibles, or valuation. You know they're right now. The trailing p motibles the eighties, second percentile of post war history. It could move up, but not a lot. Bond yields they don't have much room or interest rates in general to move lower anymore. They're kind of spent

on that. Regard the unemployment rate below four percent, it's not like we could push that a lot lower, at least not without issues like overheating and other costs and interest rate pressures. Profit margins are record highs for the SMP five. Not a lot of room there, which means probably at best earnings grow at sales even and it could be worse at margin new road. And then finally confidence. We just reported consumer confidence today and it went up

almost to post war highs. To think about what to get potential on this market? What lever are you going to push at this point or improve to get the market to continue to go higher? Alright, So given that, how are you allocating well? You know, at least what well we're doing is I think there's the other The other big issue is recession, and if we don't have recession, then the likelihood of a bear market is not great. We have had bear markets without recessions, but not frequently.

I don't see the elements of recession right now, so I don't think i'd exit the stock market per se. But what I would do is diversify today in a much bigger way than I have up till now. And I'll just throw out a few things that you might want to consider. In that regard, I certainly would overrate the international markets relative to the United States. I think most of the risk UH and excess and over optimism

and stretched values are in the domestic marketplace. I'd look to the international markets, both developed and emerging in a bigger way, that have been already beat up pretty solidly and under owned and our better values. I'd also raised a little cash. If the FED is gonna pay you two percent now finally to have that asset. And if we hit an air pocket of panic, you have some dry powder to buy someone else's what someone else wants

to give away. I'd look to add a commodity e t f UH in lieu of equity exposure of from here at a three unemployment rate. If we continue to grow in this recovery, I think we're going to continue to disascerbate inflation pressure and commodities might outperform stocks. In the balance, I'd allocate some to a hedge fund. Uh. They don't make much sense that the market's going to

go up a year. But a hedge fund that can give you mid the upper single digit returns without the downside risk of the stock market, I think makes good sense. Now in the balance of this recovery, I'd add a little gold. Um, it's been beat up, and if there is any panic along the way here between now in the end goal to be UH, probably do pretty well.

The sector exposures, I'd barbell my exposure. From here, I'd still own some cyclical sectors merely in place and beneficiaries like energy and industrials and materials financials, but I also barbell that with traditional defensive sectors, whether it be low vall or or dividend aristocrats or the utilities and staples UM and LOU. From here, and then finally, i'd look

to defang my portfolio. If you if you've owned some of the most popular faying stocks, UM, I would congratulate yourself, pat yourself in the back, and then let someone else own them. From here, it might still own some technology, but I'd look to do that away from those overpopularized, over owned names. That that leaves you in this market if it continues to climb, but it gives you a

completely different risk profile on the downside. Uh, should the market that's getting old come apart at some point, Jim Paulson, It certainly sounds like you're preparing for something that is not good with the just of gold adding to cash by a hedge fund lock in some low price commodities. Right, Well, I think the Yeah, I really think PIM that the what I'm struggling with. I think the bulk could last a while, but I don't think it's upside it's going

to be that great. I think it's going to deliver buy and hold SMP probably delivers mid single digit returns and the balance of this recovery at best and um So if that's the case, there's other assets now that have very competitive profiles to that type of return profile, and they offer those without the risk that you're exposed to late in a bowl market. In in just long only,

this is actually a really important point. What is the return target that is reasonable for investors to go after in order to sort of figure out what could be potentially valuable to hold to own. I there's a lot of things that I look at, you know, uh, Lisa, Like if you look historically from four percent unemployment rates or less, what's the return of the market. If you look at p mobibles where they are historically, what's the

return of the market going forward. If you look at where interramarket correlations are today that are low, what's the turn of the market. And a lot of those things when you come when you deal with them, come up around on average like five percent buy and hold total returns. I think that's what we're looking at now in the public US marketplace, particularly among large guest times, and with the potential that ultimately a bear comes in, there's downside

risk if that that's kind of the profile. You don't necessarily want to be completely out of it. What if it goes on for another three years? Okay? But on the other hand, I think there's other things to Pim's point, commodities, cash, hedge funds, other things that can match that return if not do better and don't have near the risk profile at the end of it. Jim Paulson, thank you so much for being with us. Jim Paulson is chief investments tragist at the louth Old Group, overseeing about one and

a half billion dollars from Minneapolis. Our next guest says that President Donald Trump doesn't understand how much NAFTA has enriched the United States, Mexico and Canada. Joano Sarah is a columnist for Bloomberg Opinion, and you can follow Joe on Twitter at no Sarah b v. All Right, Jana Sarah tell us why the president doesn't understand what NAFTA has done. First of all, you can now follow me on Opinion. Underscore, Joe, I switched, Okay, I was asked

to switch my handle. Is that like, we're no longer calling it NAFTA, We're calling it something, the US Mexico Trade Agreement that maybe Canada will be allowed to be part of or not, depending on how nicely they negotiate with US. Yeah. Yeah, that's gonna happen. Sure. Um I I started thinking about this a while back when I was in South Texas. And if you go to South Texas, if you go to McCallan or El Paso or any any of the towns on the border, what you see

is prosperity. You really do in a way that did not exist when I lived in Texas in the nineteen eighties before and NAFTA past. And if you ask anybody there, they will very specifically say this is due to NAFTA. And if you look at the trade statistics, you know, um, trading is dramatically increased between the three countries. And when trade increases, jobs increase, and so um, you know, the idea that NAFTA is the worst deal ever or whatever

it is the President says, is just bologny. Okay, fair enough. There have been some jobs though, that have been lost as a result of NAFTA in the US, in terms of say, car companies that have decided to build cars in Mexico rather than the US because labor is cheaper there. So let's say, yes, net net, there have been more jobs that created than lost. Couldn't you make the argument that it could be tweaked to be better so that there was a more significant benefit for the United States?

Uh I. My own belief is that, um, the real crime here was outside of the sphere of NAFTA in the UH in the in the way that the United States with the government just kind of ignored the people who lost their jobs, there was no retraining, there wasn't a whole lot of economic benefits. UM. And I think that, know, yes, maybe it could be tweaked to make it a little

better for the United States. Maybe they have this new thing in it that says a certain percentage of the content has to be made by workers making sixteen dollars an hour, which is double what UM the day rate is in Mexico. So maybe that will be something that that does that. UM. On the other hand, you know, the NAFTA has created these complex supply chains that if you try to muck with them, you're gonna really wreck the entire system in which the way cars are built.

Uh and many other things too. Uh. One of the things about low tariffs is they allow for you know, uh, factories to be put on both sides of the border, and parts uh and various other things to go back and forth across the border as they as they make the parts and as they make the car, and and all of this is a net good and a job creator. John O. Sarah, Is this just politics? Well, some would say it's a diversion tactic for the president given what's

been happening in the last few days. That's that's one thing as as worth noting that the deal with Mexico isn't even completed. I mean it's not even done yet and they declaring victory um. And and third, there's the whole Canada aspect of it, which is that you know, how are you really going to have a NAFTA if you don't have Canada in it. It's it's kind of ridiculous.

I want to home in on something that you're talking about, where what the jobs that were lost there was some sort of lack of action on the part of if not the government and somebody else in terms of retraining some of these employees. Which regions are you talking about? And it is this part of what we're seeing with persistently high underemployment rates among white working age men in particular.

I think that's exactly right. I think the reasons we're talking about is is, you know, the northeast, the Michigan's, the Indiana's, uh, the Pennsylvania's, that that part of the

country swing states. Yeah, swing states with with white men who vote for Donald Trump, which is also really telling because it's right ahead of the midterm elections, which makes me wonder how much trying to come to some agreement or trying to say things are going to be better in particular for for carmakers or people who have those jobs. How much is that playing exactly to the mid term

election conversation. I think it's I think it's part of it, but I don't think it's all of it, because you know, three months from now, there will be no effective change, nothing will have changed. It's it's too it's too stun it's too quick. But I'm sure that's part of I'm sure that's part of the way he's thinking about it.

Best case scenario, do you think that nothing changes except for a name and President Trump can declare victory, but the trades, that the supply chains just continue as they were. That is the best case scenario. The worst case scenarios is that this constant bullying of Canada forces Canada to act in a in a drastic way. Uh that causes some of this to fall apart. Like what that can the Canada that they don't have an agreement, that that maybe NAFTA goes away, maybe he does. Maybe the president

does throw NAFTA out the window. Um, which would be a terrible thing, terrible for the economy and terrible for the three nations. More terrible for Canada than the United States. Probably, Yeah, probably, it's a smaller economy, it's more dependent on the United States. Yeah. Absolutely, every everybody's back into a corner here. Canada's back into the corner of the United States is back into the corner. We'll hold on a second. Let's take a step back,

because President Trump can't do this on his own. He needs Congress to step up behind him and actually uh ratify something, so you know, he could say whatever he wants. But it doesn't seem like Congress is necessarily on board here, especially considering the fact that Congress is probably going to change in composition following this fall. Uh. That's true. But it's hard to know how the Democratic Congress would react to um to a new nafter or we changed nafter.

And second of all, um, I may be wrong about this, and I could I could well be wrong about this. But but doesn't the president have you would need to aggregate the agreement without Congress? Uh huh, there's a question. I think that they need six months though, to even take it up and and to decide, so, I mean, I don't know a good question. I think good question.

I don't know. There are some steps he could take by himself, but my understanding is for any substantive change in the agreement, it really does have to be signed off by Congress. Am I wrong on that? I believe. I'm sure that's right for any new trade agreement. There's one other factor here, which is that if they don't have an agreement by this Friday, and this is what

makes it so ridiculous. If they don't have an agreement by this Friday, the six month time span bumps into the new Mexican president's tenure, and who knows what he's gonna want. Who knows if he's going to say I want this exactly the way it is, or if he's going to have his own series of changes. What happened on Monday. It's really kind of inexplicable, not in terms of the politics of it, but in terms of the the implications. And you can just ask you in the

details of all of this. When you talk about let's say, automobiles, right, SUVs and crossover vehicles are what Detroit really wants to sell, but those are made in the United States. That's my point that all of this consternation and challenge between let's say the United States and Canada, the United States and Mexico. You've got Ford announcing they're not even gonna make sedans except for the Mustang. Right, So, I mean sedans are being made in the American South by non union American labor.

Trucks and SUVs are being made in Detroit because they can make a profit paying uh, you know, sixty and eighteen, and Americans and in Kansas City, and and American sedans are being made in Mexico. I mean it's pretty simple, right. I just want to give people a sense of how the new nafter and I put nafter in quotes because Resident Trump would like to change the name of it,

how it would differ from the old one. Probably the biggest has to do with the auto industry, as we were just talking about, which would require that of car content be made in the US or Mexico under the current agreement, that is a minimum of sixty two point five percent. Also, to Joe's point, it's the sixteen dollars per hour wages for workers who are working on these autos. So definitely, UM, definitely a focus here on the auto industry, and I wonder how it's playing in the auto industry.

I wonder how Detroit is looking at this, given the fact that they look to be the vain subject here right, Well, Detroit does not really want to mess with NAFTA the way it is. They just don't. And uh, you know the idea that that that that the president is going to insist that a certain number of workers make sixteen an hour, that that that's going to stick in their crawl and anything that mocks up their supply chain. They spent years creating these supply chains, um, and anything that

mocks up the supply chain they will not be happy with. Alright. I don't know, Sarah, Thank you so much. Always a pleasure having you on. It's always a pleasure to be on the Pim and Lisa show. Jo't know. Sarah is Bloomberg opinion columnist writing on All Things. All things. Consumers are really confident right now, that is according to a whole host of consumer confidence measures. But what does it

say about the economy going forward? Joining us now is Lynn Franco, Director of Economic Indicators at the Conference Board, as well as their own Lenava, senior US economist at Bloomberg Economics, Lena, let's start with you. We do have a new Conference Board Consumer Confidence Index out. What do we know. We know that consumers continue to sort of

ride this confidence high, so to speak. So we've had extremely long, strong levels now for for more than a year, and I think what this is telling us is that we're going to expect sort of a strong second half with growth around three and a half percent. This is the best level since October of two thousand, absolutely, and

it's coming on both fronts. They're telling us a that present situation has improved both in terms of business conditions and employment, which are two key pillars of confidence, and expectations of well have rebounded as well after back to back monthly losses there So looking ahead, consumers expect more solid growth. All right, So Elena, come on in here.

What does it tell you about the sort of where we are in the credit cycle or where we are in the economic cycle that consumer confidence is so high? Absolutely so for But first of all, Conference Board um survey directly asks questions about the labor market and and such strengths that we are seeing in the Conference Board survey today really reflects the state of the labor market

right now. That it is strong. The unemployment rate is falling, so and that's what we should expect, like strong growth in payils like next week with that's what we expect in terms of economic cycle. We look at different kinds of indicators, the Conference Board Survey the Michigan Survey, and there's a big discrepancy between the two. The gap is widening.

So that is a little bit concerning in terms of the economic cycle because usually the Conference Board picks towards the end of economic cycle, whereas the Michigan survey reflects economic growth trends in general. But I think as long as we have income growth and that's what is flashing really green in each and every survey, so we should

expect business cycle to continue. What about consumers spending? And first of all, I just want to congratulate you and welcome you on your return from maternity, leading wishes and congratulations so cute. In addition to your family, and I'm sure that that is causing some expenditures not only on your part, but on the part of members of your family. And and to that point, looking at the survey, if you're in the automobile business, get ready people say that

they're going to buy a new car. Same thing with homes, major appliances and carpeting. Everyone seems to be out there buying everything went up in and the conference Board survey plans to buy within six months. Uh. That is a very positive development. And again we look at different kinds of surveys. In the Michigan survey, UH, the conditions to

buy actually deteriorated slightly. So as economists we have to look at a wide array of different service In fact, there's and this is one to watch for sure, because as prices go higher, people might find uh it less affordable to buy stuff. So Lynn, come on and here I'm interested in this idea. It's a very strong labor market. People are feeling confident as a result of that, and yet real wages once you strip out inflation, I've actually declined over the past year. How do you square these

two things? Well, I think the fact that strong labor market growth has also led to more employed consumers and hence more consumers that can spend. As Yelena pointed out, Um, you know, projections are for the labor market to remain relatively strong for the remainder of the year. Our income expectations are actually up so consumers are pretty positive about their earning potential, and I think this strong confidence level

reflects a willingness to spend. However, you know, if prices begin to rise and inflation begins to rear its head, then we you know, consumers ability to purchase items diminishes a little bit. But for right now, it looks like we're on very strong footing both in terms of confidence, in terms of spending and in terms of economic growth for the remainder of the year. All right, so more

of the same, uh, more of the same. And while I know it's you know, ninety plus degrees out there, it's not too soon to start thinking about the holiday season. And if we continue in this confident mode, with this ability to spend, in a willingness to spend, it could shape up to be a good season for retailers. Alright, then, well, it has been a good season for retailers throughout the years,

so that wouldn't be new. I still have to wonder at what point our wage is going to increase more than inflation, Lynna, just in thirty seconds, do you have thought on that. I think we're going to continue to see pressure by this tight labor market and we should begin to see hopefully some wage increases uh in the coming months. Do you agree with that? Elena, Absolutely, it's just more gradual. Uh. And there's a lot of non wage compensation like benefits and things like that, so that's

another factor. All right, Thank you very much, much appreciated, of course, Elena seta senior US economist for Bloomberg Economics and Lynn Franco, Director of Economic Indicators for the Conference Board. And that consumer confidence certainly indicated by the performance today of the shares of Tiffany. Yeah. Although you nailed it with when you have kids, that's when your money flies

out the window. And so I think that the low birth rate might have to do with uh, you know, if people start to have babies, that money gets fun, say soccer. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio. Became the team bo