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This is the Bloomberg Surveillance Podcast. I'm Tom Keene along with Paul Sweeney. Join us each day for insight from the best in economics, finance, investment, and international relations. You can also watch the show live on YouTube. Visit the Bloomberg Podcast channel on YouTube to see the show weekday mornings from seven to ten am Eastern from our global headquarters in New York City. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen and always I'm Bloomberg Radio,
the Bloomberg Terminal, and the Bloomberg Business app. This is my equity conversation of the day, so I'm going to have it.
Immediately on the podcast.
Single best idea, which we'll get out here in the number of hours. Julian, Emmanuel, you and ed Heiman are sitting around having an He's got that black penalt, He's trying to.
Get your white shirt dirty.
You're writing up the ed Heeiman evercore Isi. Note, what is the surprise of Hymen and Emmanuel in the last ninety days?
Ed Heeyman is rarely surprised. What's been the surprise?
I think ed has been surprised by this stickiness of inflation. And if you think about what the Fed's narrative has been since the December pivot, you should be surprised by it because it doesn't make sense with that conversation, with any precedent that we are familiar with with regard to inflation. Ed still sees the trajectory. As you know, he's been
aggressive and early on the inflation falling story. He thinks this is just a bump in the road, but likely takes that sort of getting to that last mile a week or economy in the second half.
All right, So Julie, for this market here as long as we can remember, TeX's been leading this market, big text, been leading this market upward and down. Or if you think about that twenty twenty two, can tech still lead.
This market going forward?
Well, tech can still lead the market. But what we've seen over the last several weeks in particular, but actually this goes back a number of months, is record dispersion among stocks.
Think about it.
Right before the bear market in twenty twenty two, it was called fang. Then when we started turning in twenty twenty three, we got to the magnificent seven. Now it's ostensibly really only the Magnificent four. And what troubles us when we look at the second quarter expecting more volatility, is that Magnificent four is starting to look a little less magnificent.
To be clear, here, this is the hallmark of you and Ed Hyman. You're in the market. I don't hear go to cash.
Oh yeah, no, absolutely absolutely not. Look, this is one of these times again, and you know, you go back and you think of the times where there may have been a motion reasons, there may have been stress reasons, And March of twenty twenty is the purpose.
I was thinking.
October of eighty six, Lenny Dykch's home run in Game three.
For the Mets. The ball has never come down. It went over.
Everett was lost over marblehead. I mean, what the Mets did in nineteen eighty six, we've never gotten over.
I'm staring at your red Sox jacket, Tom, and all I can say is Bill Buckner, and I knew you were expecting that.
Duncasses out here, So Brama walked by with a white sign.
Bill Buckner, it's opening.
Paul, save us here, Julian, you and your strategist brethren on Wall Street. I see you guys trip it over each other trying to keep raising your ear end targets for twenty twenty four.
How are you thinking about valuation here?
This is the arch question, Paul. This is a single best question right there.
We're taking a different tack here, Paul, okay, and ended its earnings and valuation driven as it should be. Now I will say is that my focus on valuation has been unlike anything I recall in my career. Frankly, I was managing money in Y two K. So that's why the first thing we have to do is step back and say, the market is exuberant, but it is nowhere near irrational. Twenty eight times what you saw in Y two K, which would imply sixty two hundred or so
in the S and B is exuberant. But from our point of view, with the accumulated sort of perfection priced in and the possibility that the FED isn't going to be able to deliver, and that eleven percent earnings growth which has been basically the baseline for the last couple
of months, has downside as we think it does. The way the way you want to think about this is how do you stay in your core positions with perhaps a tilt towards defense and not get scared because the history of making a sub our returns in investing comes from selling into down markets, as opposed to just sort of thinking about how you position when things are good as they are.
Now, do we still chase this market? I mean, if I chase this market, I feel like and I'm I'm Joe portfolio manager out there, Joe an investor with my four to one K, I feel like I have to be in those magnificent four or five names, whatever they are.
Well.
So, actually, the amazing thing is the options market is this is one of these very rare times where you're allowed to have your cake and eat it too, because the combination of this incredible retail investor FOMO. Remember the market is being moved in large part by zero days to expiration options trading on the part of the public, where you control a million dollars worth of stock for less than ten thousand dollars and the position closes every day.
That kind of FOMO and five percent interest rates give you the ability to stay in those mag seven names but actually have downside protection.
Julian Emmanuel, I think he's trying to get me to be my first trade. Thank you so much for the evercore I I We'll get him back here for a much longer conversation in the coming days. The little window into the childhood of Tom Keene. It was a twisted
and strange childhood. I would read the Wall Street Journal the day after I would sit in the pretty fancy dining room, and my father would read today's Wall Street Journal, and I would read the one before, which was folded up neatly and with engineering blue and red pencil and probably with an Oberlin napkin on it from my mother would be underlined Centrist political theory, and it started with Scoop Jackson, HHH, Ed Burkham Massachusetts and others.
Nobody is riven.
The centrist conversation forward like Richard Haas serving multiple presidents, multiple parties and Paul There is a interview, I should say, a conversation with Senator Joe Lieberman of Connecticut where Hass is impossibly young in two thousand and four, and we are so honored today to bring invest in or Hassan to talk about our.
Modern centrist Joe Lieberman.
Boy, are we starving Richard Haass for centrist politics?
I have this vision, Tom, that it's only a matter of time before the Post Office issues a stamp. And it's a series of centrists, and it basically has a thing endangered species. And Joe Lieberman was one of the best.
I look at his politics and his courage at the time, and a lot of heat and critique of moving left to right. Do you have a tendency now to see people from the polarized right moving to the center or is that a fiction for another day and age?
I think it's mostly a fiction for another day and age. Most of the incentives or pressures in American politics, from money, to political support to attention, is to move, if I may use a football metaphor in this opening day of baseball, towards the end zones rather than the middle of the field. Takes a lot of guts. It takes off in a willingness even to lose. If you're going to put country before party or your own personal ambitions, you've got to
be prepared to lose. And I haven't noticed Tom a whole lot of people who are prepared to.
Richard, there's so many hotspots around the world we could benefit from your analysis here. Let's start with the Middle East. I know you've had recently someone's perceived as a radical plan, a radical suggestion for President Biden about how he should deal with mister net Yahu as it relates to what's happening in Goazack, you share that with us.
Yeah, What I basically been saying is he doesn't have a partner in this Israeli government or this is really prime Minister. All of his efforts at persuading them haven't amounted to much of anything. So he's got to go over their head. He's got to speak directly to the Israeli people about Israel's future. If it wants to remain a secure, prosperous Jewish democratic state, it's got to choose a different path in Gaza, it's got to choose a
different path in the West Bank. And I even suggested he go to the Kanessa, do it from the floor of the Israeli Parliament. Take a page out of bb nets and Yahoo's book who came to Washington spoke from the Congress to speak against the Iran nuclear deal? But I don't quite care whether he does it from the
Knesse or not. I think, though, what we're actually seeing is the administration is moving away from a policy that's predicated on persuading bb nets in Yahoo, and they're dealing much more with the policy that's either independent, we're going to provide aid, we're going to veto this resolution or introduce our own and essentially pressuring the Israeli government. So I think it's a healthy change.
What is the status of net Yahu in Israel right now? Does he still have the support given how what's happened over the last several months.
Yeah, I mean the poll show he's quite unpopular. But there's only two ways to remove a sitting prime minister, and that's through a parliamentary reshuffle or an election. At the moment, I don't see a parliamentary reshuffling coming about. It's not clear to me that his current coalition partners want to dump them, not because they love him, but they love being in power. And at the moment, no one's there's not a mechanism to get from here to
new elections. It's possible to bru the government could be brought down on any number of issues. If you remember, before October seventh, the dividing issue in Israel was about the role of the courts and democracy. Now there's big debates about whether the ultra Orthodox ought to be conscripted. So there's lots of ways, lots of fault lines in Israeli politics. But at the moment, like it or not, kan Yahoo as Prime Minister.
Ambassador House, we stagger into April. We have a clear image of history of a lame duck Congress. Can we have a lame duck State Department, a lame duck foreign policy?
I think that's too critical because most foreign policy doesn't travel through the Congress. I mean the Ukraine situation. The funding THEIRTOP is in some ways different because again it requires congressional approval. So they're the real issue is what is the House of Representatives do? What are the Republicans do? But I think in the Middle East, with China and so forth, like can a lot of other areas, do your presidents enjoy a lot of discretion, a lot of latitude.
So I don't think it's fair to say that even though the State Department, to be honest, is a weak duck, most of the energy now in American farm policy doesn't come from State.
I would say the.
Lion's share comes from the National Security Council. Are some of the issues you talk about on this show. I would say even the Commerce department counts for a lot.
I don't want to get into your personal knitting here in your forty eight over day, but you know he's working seven days a week.
You know he's slowing down here.
Did any of the CEOs that greeted mister g in China? Did any of them get a host briefing? And if not, how do you brief CEOs and confronting the new China?
They did not in this case. So I spend a lot of my day, give them my new life and centerviews bucking to CEOs. I think China's probably the single most frequently raised issue, Tom. Look, Chi Jinping is courting CEOs. He did it in San Francisco in November, if you recall,
he's doing it now. He is hoping that American CEOs essentially become all lobby for what China wants in the US relationship, which essentially is fewer towers, lower tariffs, lower constraints on investment, lower constraints on trade, and he's hoping that he can essentially get them to press the government to ease up on China. That's why twenty twenty four. I mean, that's what China wants in twenty twenty four. What the Biden administration wants is no new hotspot with
Taiwan or North Korea or anything else. But no, that's what this is about. And I think American CEOs need to understand that anything to deal with technology is going to be constrained with China, and if there's a crisis over Taiwan, nothing is immune from political pressure.
Richard has thank you so much, particularly those comments on Joseph Lieberman of Connecticut Anna Wan, she's had a bloomberg economics and what will you listen for from the chairman? Is this a speech of substance or is this a nuisance?
By that, I assume you're talking about Powell. Yes, yes, I think you know right. So since the FOMC we have heard, the most important speeches so far has been Waller, and we heard from Waller, who is the more hawkish side of the FOMC, saying that while the FOMC is not over overreacting to the hot inflation prints in the first two months of the year, they must react to it.
And I think that is the message that would come through in powell speech that they're taking, they will be taking a very cautious approach to a deliberate approach to interpreting the inflation data. That said, tomorrow we are also going to get the core PC inflation data. And if Powell and everybody on the Wall Street is right, then it's going to come in at zero point three percent for core PC and two point eight percent for year over year, which is the okay inflation number.
And we had some I guess some look back economic data today. The GDP number four the fourth quarter revised, our community revised higher three point four percent. The survey was three point two percent. We also had continuing claims kind of regular line of the expectations. Anything that we receive today economic news wise, alter your opinion at all.
Yeah, I thought the most interesting data today is the GDI. So GDI grew at over four point eight percent in real terms in the fourth quarter, and as you know, the most GDI is supposed to be equal to GDP. Yet over the past two years, the biggest, one of the biggest puzzle in economics is that they are not. And GDI has been finally running below and.
Can you define GDI from me? And I'm guessing some other listeners and viewers.
Yes, So GDI means gross domestic income and it measures the income side of things. So it's supposed to be wage compensation plus firms profits plus governments profits that that would equal GDP, which measures the expenditure side of things.
So what we saw in the very very strong GDI number for fourth quarter is this big pop in firm profits and drilling down into so there's a you know, a thirteen percent increase on net operating surflus of firms and drilling down it turns out it's a category called dividend and business current transfer payments that rose by thirty percent on a quarterly seasonal adjusted basis in the fourth quarter that drove this giantantic pop in GDI. And what
that means is it's the stock rally. So I think the stock rally and easier financial conditions in stock market in the fourth quarter is starting to really show up in hard data. So we saw that in GDI today and in the Personal Income Report that comes out tomorrow we will be paying attention to also the line item called personal dividend income.
You saund like you on a green span of thirty years ago, analog simply, here are we going to get a nominal GDP of that supports revenue of corporations in America.
It does looked like that was happening in the fourth quarter. Perhaps that was the fundamentals that's driving the stock market rally.
Okay, Anna, thank you so much, doctor Wong as head of all of Bloomberg Economics in America. You look at the front pages around the world. Shout out the Globe and Mail in Toronto on point yesterday with a speech by the Deputy governor the Bank of Canada and Halifax.
That's how he is. Wow.
And she ripped apart the Canadian productivity story.
Well, she tore it. I've never seen a speech like that in America. She tore them. People are really upset about it. That's your front page look from Canada.
I did an audible there, at least I didn't mean to get out in front of the Globin.
Man, what do you start?
That's okay, and welcome back, by the way, thank you. So we're starting with this was like our top story today. Long time Connecticut US Senator Joe Lieberman passed away yesterday. He was eighty two complications from a fall. But the reaction from friends and from rivals. They are just starting to pour in, so I wanted to get to a few of them. You had Al Gore, the former vice president who chose Lieberman, you know, and his running mate
during two thousand election. He said it was an honor to stand side by side with him on the campaign trail. Then you have former President George W.
Bush.
He was the victor with Cheney, you know, over the Gore Lieberman ticket. He said, in both loss and victory, Joe Lieberman was always a gentleman. And this one I find I really enjoyed this one. Senator Lindsay Grahama of South Carolina, he was close to Lieberman and Senator John McCain. They called themselves the three amigos. He said, the good news is that he's in the hands of loving God. He said. The bad news John McCain is giving him
an earful about how screwed up things are. And he signed that statement as the last amigos amount here.
And what is so important, particularly for younger people to understand the Senator Lieberman is this was a throwback, Lisa, to.
What was normal. You had Mario Cuomo, you.
Had Scoop Jackson, you had hhh, Hubert Humphrey in Minnesota, and Joe Lieberman was the centrist you know, became far more centrist here from another time in place in what so said Paul is his politics is now odd.
Yeah and singular.
I mean you think about him and John McCain, two ends of the spectrum, but you could just absolutely see them after a day in having a cocktail again.
Yeah, what else do you have here?
Sure this was an interest from Politico. The Baltimore Bridge design. They're saying it likely contributed to that loss of the bridge. So the collapse are saying could have been avoided if it had this simple fenders that's what they're calling it. That could have been standard issue on new bridges since the nineteen nineties. So it's installed around the supporting beams. That's what these are. Because the ships are getting bigger, and that's the issue. You had the Dolly, It was
a thousand feet long. It had tons and tons of cargo on.
Its changed many cargo things were on top, I mean ten, yeah, twelve, fifty stacked high.
Yeah.
I don't know. I don't know how that works. I don't know how they stay afloat. I don't know. How they don't flip over out in the open sea. It's just extraordinary. But it's I can't imagine designing a bridge to withstand a ship running into it.
Right, And that's the problem. The ships weren't as big back then when you know these were designed. The fenders were started back when the when the bridge was designed. But it makes some sense, but they just didn't put them on them this time. Okay, so this is from tech Crunch LinkedIn. Something different you might see on LinkedIn. They're having short form videos, so similar to TikTok. So a lot of people are starting doing you know, Instagram, YouTube, Snapchat, Netflix,
they all do these short form videos. So here's where you find it. If you go over to LinkedIn, it's in their navigation bar, new video tab, And then when you click on it, you start seeing this little feed of all these you know, short form videos that go by and you can swipe through it, you can like it, you can comment, you can share it. So it's very similar to TikTok. How it can be different for LinkedIn
is the question. I guess you have to focus on careers and professionalism, but I don't know, Tom, you got to start working on those short short stores medium.
This is an untold story then social as Microsoft took over LinkedIn, and I would suggest as an amateur that very quietly they have changed it. I would editorialize, they've improved it. And it's shocking the difference in flow now between LinkedIn and mister Musk's X, which I still call Twitter would but they're going to TikTok LinkedIn?
Is that what you're telling me?
It's all about video short form.
Yes, it keeps people entertaining doing it is.
Too they you know, we're thinking of doing Paul Sweeney's short forms on YouTube.
T monetize.
What else do you have?
All Right, Finally we're working less on Fridays than we used to. No shocker here, but so the rush hours back in the midweek, right, you have everything buzzing, you know, but on Fridays it's a little bit quieter, sometimes a ghost town, a lot of people working from home. But here's the study. It says that the average worker now signs off an hour earlier on Friday. So that's what
they're starting to see. But they're saying it's okay. They're giving the green light the thumbs up because they're saying it helps with productivity. People are taking it easier, so it supercharges them. It gives them an extra boost. They're happier. But that's what they're seeing.
I've given up. So I've given up and I'm flex all you want today.
I'll say this, the productivity of France is about equivalent to the United States, and they work a lot less. There is something to what you just said, Lisa, that somehow if you work less you get the same or more done.
That's what the academic says. Interesting. I'm really torn here. I'm really troubled.
What I will say is with all the technology, maybe that marginal three hours on Friday, Paul is a weekend.
Yeah, effort.
Yeah, I mean, I don't know. You've said it all long time. Companies adapt, people adapt, systems adapt, and maybe that's just kind of what we're doing here, adapting.
So well where we all here five days a week, Yeah, exactly.
Well as picking up as we talking, you see people passing by here outside.
It is picking up, not right now, but.
There are people before going through.
Thank you, Lisa Mateo.
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