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Again.
We want to get to sort of the main geopolitical risk right now, and that's the fighting between Iran and Israel, with President Trump leaving the G seven early to deal with that. Ethan Bronner is Bloomberg News Israel bureau Cheap and he joins US now. Over here in the US, we're trying to understand what the US position is when it comes to President Trump and what's happening in the Middle East. Where are we where you are in terms of what Israel is doing and what its end goal is.
I say that the confusion over what the United States is going to do is equal here as it is there. Israel has set up this plan to try to take down the Iranian nuclear facilities as well as its ballistic missile capacity and its militia ability beyond its borders around Israel. So it's launched this plan. It says it can do
it alone. It would love the United States to help out, in particular because there's one huge enrichment facility four DOH, which is deep in a mountain that would be best got in if you wanted to destroy it with thirty thousand pound bunker busters that only the United States has, that only its B two planes can lift.
They're so heavy.
So right now we're also we're all waiting to see might the US decide to join or might this moment be one where the Iranians decide to negotiate a degree not to enrich uranium Ethan.
It just seems to me, at least that Israel as related to Iran, sees maybe a very rare opportunity to really deal almost kind of a death blow to them at or at least as a threat maybe even to their government. Is that the feeling in Israel that this is maybe a special moment of special opportunity for Israel.
It's one hundred percent of the feeling in Israel, Paul. The thing is that, you know, it's one thing to say this is a rare moment to go after to defange this regime and take away its ability to be so destructive. It's another thing to say that therefore it's possible to overturn this regime. Look, it might be. It
certainly would make them very happy in this country. But remember the Iran Iraq War went on for eight years and the regime in Iran put up with an enormous amount of suffering and it is still there forty years later. So it's a little bit of an you know, it could be an illusion to think that, just like in theory, by taking out being so painful in Gaza, that Hamas would yield. Hamas hasn't yielded yet, has it exactly?
Is Israel listening to the United States or will it, like once we get clear on what President Trump's position is.
I think Israel cares enormously about what the United States says, and I think it would not I'm certain it would not have launched this attack without a cent from Trump in a phone call last Monday and generally over these last months. So if Trump were to suddenly change, look at this point, it's hard to know because Israel's in
the middle. By the way, if I don't know if you're hearing, but we are having an attack on the Tel Aviv area right now with Iranian missiles I'm in my secure room with a steel door and a steel window and reinforced concrete, so I'm as safe as I can be, so I can keep talking to you. But people across central Israel are running to their bomb shelters. So yes, I think what Trump and the United States wanted very important to Israel. Absolutely, they've been coordinating very closely.
So Ethan is there.
I guess the next step might be, as you suggested, use of some military armaments to maybe deal a knockout blow to the Iranian nuclear facilities. Is there a sense that that is being discussed and if.
There's no doubt, there's no doubt it's being discussed. There's no doubt that. Look, if you look at the Americans have moved the Ninnis carrier group to the from the Asia to the Mediterranean. That's the second carrier groups. It's also sending others. Its sent Thad anti air defense systems to Israel. It's moving stuff here in preparation for participating.
That doesn't mean it will. And there's no question in my mind that the Trump administration is examining this possibility right now, and I don't know what it's going to decide, but we do know that the President left Canada, left banf early and said that he needs to deal with this issue, and he didn't sound like he was interested in some kind of deep negotiation.
Right well, Ethan, thank you so much for joining us. Ethan broun Our, Bloomberg News Israel Bureau Chief, Stay safe, good luck, Our thoughts obviously with you as he reports during an attack that is something that is tremendously amazing and reporting in all of that, Ethan, we thank you very much for joining us on that. I will continue to follow those headlines as they continued to cross again.
US President Donald Trump leaving the G seven meeting early in Canada to focus on this Israel Iran conflict, sitting that he wants a real end to the nuclear dispute dispute with Iran and just a ceasefire when no one really knows what that real end will be.
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Alex ti Al Longside faulse, we need this Bloomberg Intelligence Radio. We are broadcasting to you live from our interactive brookrostudio right here in midtown manhatt And also check us out on YouTube as well as all your streaming device as you can check us out on Bloomberg Originals. All right, so, late last evening or afternoon, the Senate passed or the Senate Republicans laid out its own version of the tax bill.
Joining us for more as hand made a trace.
Managing partner and Director of Economic Policy at Beta Partners, Henrita for you, what was the biggest surprise.
The biggest surprise to me had to be the Medicaid components. Some of this stuff we know is going to have to be negotiated for the next couple of weeks, if not month, at least a month from here.
Given the disparity between the House and the Senate.
But the Medicaid cuts really have a constituency of no one. I'm not sure exactly how they're planning to thread the needle just in the Senate, let alone the House with this package. They obviously are on a hunt for revenue. The tweaks that they made, I think based off our estimates which come from my colleague Spencer Pearlman suggests that we're looking at like two hundred billion dollars in additional revenue for medicaid.
But I want to be clear, this cuts.
Off thirty five percent of the entire state of Alaska's medicaid recipients. And that's not even the most recent analysis and accounting from CBO. So they're gonna have some serious problems with this piece. That really surprised me.
So talk to us about is this. I guess the next date that we're all waiting for is kind of a July fourth. That's when the Senate wanted to get something done. Is that is that still on the table?
You know?
I just can't get my head around July fourth.
I understand optically and emotionally, it sounds good, it's a feel good story to have this done by the fourth of July. But the only way that members of Congress operate and act is with a sword hanging over their heads, and that's the debt ceiling. So last week CBO actually pushed out the debt ceiling deadline to mid August to mid September. I think that's why you're seeing Ron Johnson, the Senator from Wisconsin, saying.
You know we're going to be to go shooting this all the way through.
August is because they don't have a hard and fast deadline until they need to hike the debt ceiling, at which point the debt ceiling will be what like forty two trillion dollars and get us through November.
Of twenty twenty six. So they've got a long way to go.
I think going to my world, and that's the energy world. I was really interested in how wind and solar got no relief in this. I can imagine I neither hydrogen. I can imagine that the alternative energy lobbyists were going hardcore for weeks in terms of the Senators. And I'm just wondering, like why, like why keep tax breaks for utilities and purchase power agreements for wind and solar but not for consumers?
Right?
And I think, Alex, you're really nailing my sentiment.
Right now, I'm trying to talk with as many staffers as I can to understand why behind this package. The IRA tax credits are extremely popular in Republican states. Specifically, they seventy percent of the flow is going to those districts, so that is really important for a lot of Senators who are for reelection next cycle. I'd highlight Tom Tillis most particularly on this one. I think that the IRA
tax components need to be adjusted from here. It's plane from the fact fact that the saltcap, for example, is not even addressed by this package.
It's just kept at the ten K rate. That they're going to do more tweaks.
So I'm expecting some pretty substantial changes to the IRA side, to the residential stuff.
And when we knew some things were going to come out, like.
The electric vehicles tax credit is standard operating procedure.
We knew that was going to come out.
And there's some understanding to get to your specific question that there's a duplicative component.
To the residential and commercial building.
Tax credits that already exist at the state level, so why does the federal government need to layer them on. So that's one piece, but really I can't bet the needle and get you the votes for this package right now.
Universities kind of surprised to me. They came out a little bit of a winner here. Reduced excise tax on university endowments. That's a big one. Where did that come from?
Yeah, that's a big one.
There's actually a lot of really random stuff that is and is not in this build. The university piece obviously is very much an audits with the public projection that the administration is take towards universities, and I think that is pretty widely supported by Republican lawmakers and voters.
Obviously, the Senators are indicated that maybe they're not all the way there yet.
But there's other pieces that are not in this bill, Like there was a proposal to tax cruise lines that you'll maybe remember Commerce Secretary Lutnik came out in wholehearted support for.
But again, you know, not to harp on Alaska.
I don't know why I keep talking about them, but you know that would have been a hit to Alaska. So they chose not to use that component to generate revenue. But they did choose to cut the Medicaid stuff and kick I think the late assessment is sixteen million people off Medicaid. So there's a lot of confusing pieces here. I'm again, I'm really just trying to thread the needle to find the fifty one votes for this package right now, and I can't get to it.
Okay, So then what happens? So you can't get the fifty one votes. We don't even know if the House Republicans are going to like what this bill is, So what happens now?
Yeah, So you know, let's talk about maybe the underreported component here, which is the potential that this doesn't pan out. We still have thirty percent odds that they kick this into September. Excuse me into Senator Lindsay Graham is the chairman of the Budget Committee, and he's being really clear that Republicans have four bites at the apple and reconciliation,
and he's entirely correct. They don't need to have this entire comprehensive package ready for prime time, especially with Israel lebron and the one hundred and seventy five billion dollars in this package that goes to large military preparedness, another one hundred and fifty billion that goes to immigration. There's a lot of ways for Republicans to operate for the next year and a half going into the midterms that doesn't have to be this.
One big package.
So I think there's going to be some renewed discussion, especially as we're talking about delays for forward progress, about maybe breaking this bill into pieces. The five trillion dollar debt ceiling hike alone loses you ran Paul's vote. So there had already been to conversations about cutting that back down to two and a half trillion and maybe passing these bills piecemeal.
That is an option.
It's a low odds prospect, but it's nothing to be mindful of as an investor.
So just thirty seconds on that raising that tax ceiling by five trillion. I can't do that in my balance sheet. But does it seem to be a problem for the federal government.
Uh?
Yeah, I mean I wish I had that kind of checkbook. That'd be pretty fantastic. This is a absolute record by a magnitude that I can't even do the math on. I think the last time we increase the debt scented by a specific dollar figure, it was like one point two trillion, and that got us almost a year and a half worth of functionality. Now we're talking about a five trillion dollar hike, which by the way, is a trillion dollars more than the House.
Is authorized, and it only gets us through the midterms. That's pretty exorbitant, and that really speaks to the sheer.
Volume of deficit increases that's in this package.
And it is also, you.
Know, the most regressive and substantially underwater bill that has passed. It's a negative twenty nine percent approval. Right now, that's pretty rough.
I mean, I think rough is like an understatement.
I mean, I've been a citizen in this country for sixty one years. I have no idea how they do that. I mean, I guess you just it's just kicked the can down the road at the highest level. I guess, yeah.
I know.
Also, it's like a holy definition to like the whip, Like what are you whipping?
Like?
No one's going to be whipped? All right, Henrietta things lot, we really appreciate. Jump back on those phones. Let us know what you find out.
Henrita Trice, Managing partner and director of Economic Policy over at Beta Partners.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
All right, let's get a look in on the markets. Then what do you do when their headlines like this? Shelby McFadden is investment analyst and Motley Full Asset Management to discuss her outlook. How much risk Shelby do you think you should have in the markets?
Well, I will start off with saying we are staying invested. Right there are points and in certain portfolio where we have a little bit more cash than we would like to. And it's not because we're sort of taking that step back approach and saying let's get out of this, we
don't want a part of it. It's more so that we're seeing that some of these pullbacks along with the rallies, are really broad based, and so the opportunity for buying in terms of getting in at a price that would favor us in terms of that long term return, it's not showing up as in a way that we would like, right.
So where there are higher cash balances is because we're sort of waiting for those fair valuation opportunities, but going ahead and staying invested because we can't control these sort of big market shocks, right, and it is a bit uncomfortable. It is something that requires a very long term orientation in order to sort of suffer through it. But it's not putting us on the sidelines of anything, We're much
more active. We're spending a lot more time filling up the universe, even when the price opportunity doesn't necessarily present itself, and just adjusting according to that sort of geopolitical risk as necessary.
Are there certain sectors that screen well for you guys? A lot of folks we're saying ahead now I have an opportunity to buy the mag seven when they sold off.
Earlier in the year.
What sector screen well for you guys?
I think right now we have surprisingly actually taken a closer look at certain financials, and in terms of some of our core and income oriented strategies, trying to get a better look at certain consumer stable companies that are just good at what they do and have been overlooked and sort of punished for where we are in the cycle.
In terms of tech.
We've taken another We've taken a look at Service Now, which has remained a bit expensive, but they're very mature in their space. They have high quality leadership, great retention, fantastic cross selling opportunity, and if the runway for agentic ai has been pulled forward the way we think it has, it's a great opportunity. If we sort of see any sort of market dip that allows us to enter that position sooner.
Now, you were stalwarts of say Costco and Walmart, and I'm assuming you still are. But if I'm max on that position, what do I do?
You max out on Costco and Walmart and you're already maxed out on MasterCard, you can do what we've been trying to do. You can go ahead and play that cow position that we've seen coming up this the past week or so, which has been Costco, O'Reilly Autoparts, and Walmart.
So we got, yeah, I do coin Cow. I did not coin Cow, and I.
Was devastated that I didn't see it's a Costco, Costco, O'Reilly Auto Parts and then Walmart. So O'Reilly had been something that we were looking at because when you think about it, and this has been something that's been ongoing since we had a lot of that inflation and autos in twenty two to twenty three.
People were fixing their cars.
Right now, when we look at that savings being depleted, people are doing that again. And then you add on top of savings depletion, student loan resumption, and tariffs. You're definitely choosing to fix your car. If you can, right, and so that has been something that has been periodically a little bit more expensive, but very much staple oriented, similar to how people are fixing their homes instead of
trying to sell in buying new ones. So if you can't get into some of those staples already, and you're still not able to get into the toll takers MasterCard, you could wait for something like an O'Reilly to pop up, or you could look in some of those other consumer staples that are more in sort of the health and beauty sort of space. Can View is a great option for that. We've seen that white label has not penetrated that sort of consumer health space the way that we
would expect it too. It's kind of hanging out, kind of flat.
The average age of US cars and light trucks twelve point six years. I'm looking at John Tucker when I say.
This, Well, have you looked under the hood of your car? I mean, there's nothing in there.
I recognize that I used to be able to change out a carburetor, fire.
YouTube videos for that.
Well, it's basically my new car, a twenty twenty four vehicle, is I've been saying, it's basically my iPhone it's an iPhone with four wheels, That's what it is. It is it's crazy. Is the FED going to help us out this year? Or should we not rely on that?
They could help us out this year?
But I wouldn't expect it to be until the end of the year, and as a result, I would not rely on it. I've coined in my team this is something I have coined frozen fed summer. I think that's what we're going to see because there's so much murkiness in the data. Right we're about to enter a period where there's not going to be too.
Too much promo shopping. We will have a little bit of.
Promo in July fourth, but a lot of the vacations have been booked right once we start to get into August, it gets a little bit more promo activity for back to So there's a short window for June and July where we can probably have a look at the data and say, are people still spending? Is kind of just the weather? What are we going to get here? And
so that'll help us out a little bit. But shortly after that we'll have murky data again from promo from Labor Day and then all of a sudden, it'll be promo from Christmas.
So I'm not sure the Fed's going to.
Have a great idea what we're looking at. Unless there's a really huge swing in employment in a negative direction. I would probably bet that employment would push them faster than just sort of retail and NCPI data.
How do you guys look at the international trade? Right Bank of America pum manager survey came out today and said that fifty four percent of respond and think the international trade is like the place to be in the next twelve months.
We have on our team. That's something we started looking at a couple of months ago. We were I don't want to say early movers, but we were early believers in the international trade, and especially in Europe. Now Europe had gotten beat up for a long time, but it's a place that we decided to just stay the course. And that is part of what comes with active but also concentrated portfolios, where you're going out head and saying, let's hand pick twenty thirty spots and this is where
we're going to position ourselves. So thankfully we're not having to time the market there, but we have decided to take a step and say, okay, Is it European discretionary, is it euromp in financials? Is it European defense? Right? Where do we need to go ahead and take more time and be more interested in just building up that universe.
So the short answer to that question is yes, we're definitely taking a look because especially between France and Germany, we know that there's going to be more spending there, not just defense, but in general the world savers are about to spend a bit more money. So how can we go ahead and orient ourselves. We have strong positions in companies like Icon, which is in pharmaceuticals, Nintendo which we don't have to pbscribe Nintendo, right, that's just a
strong operator. But we also have positions and these are in our model portfolios, companies like a Simrise where we're talking about different additives for sense and products like that. So being in that space already sort of gives us an advantage when that market kind of comes in the upswing.
One of the name here, I want to get to United Parcel Service. Yeah, the folks in Brown what's going on there?
That's always been one of my favorite positions. It's something I've covered ever since I've been in Motley Full asset management, and it's because they have a fantastic operator, Carol Toomey is a force of nature. They've gotten beat up over the past year or so because of the labor negotiations. I think a lot of investors thought they were going to come out with a bit more of an upperhand than they did, but they've already faced a lot of those costs on the upfront.
What they've gone ahead and done is shedded.
Business that's not profitable for them, and so that business is now going to absolutely dilute pricing in the market, and they've taken themselves out of it. So when we come out on the other side of this business cycle, we feel very comfortable with our position in ups because
people find ways to buy things. When we look at the overall financing nature of just consumption at this point, we know that there's going to continue to be movement of goods, and so finding that position where they're also a solid yielder and pretty high shareholder return, we're more than happy to be there.
Great stuff. Shelby always loved chatting with you, so fun. Shelby mcfadd an investment analyst and Motley full asset Management.
I'm so upset you didn't quit cloud and come can no.
And it's just I think the journalist, who did I want to meet that person?
Yeah? Because what a line? What a line?
Yeah? They need to get into marketing, all right, Shelby, Thanks lot, always wonderful to get your perspective.
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