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the Bloomberg Terminal, and the Bloomberg Business app. Scarlet for I mean the New York Post. No fan of President Biden, let's be sure now, but this is all over the media.
I didn't know this.
The President speaks at a Georgia waffle house following the date debate before it's quote, I think we did well.
Can you Could you see Libby Cantrell in a waffle house? I just can't. I can't you.
In the music business, we used to call it shay waff because you know, you're driving down on Nashville and it's the only thing open.
At three am doing a road trip.
Maybe have you ever.
Been to a waffle house? I had cracker barrel looked like you know, Danielle, I'm sixty. You've never been to a waff louse? Joining us?
Now? The queen of the waffless Lebby Cantrell joined us. Some pink quote, Libby, have you ever darked at the door of a waffle house?
A waffle I love twelve you know, a midnight waffle.
Cheese?
I mean, come on, you know, and that's in that synthetic butter.
It's just too much. Libby.
Thank you so much for joining us after the history made last night, I.
Got eight ways to go here.
But let's stay with your public policy, which means the legislative branch. How does Capitol Hillary act we witnessed last night?
Yeah, I mean there is definitely the reports of a collective freak out to use a more technical term, the collective bed wedding are are correct. I think folks who are on the ballot, particularly those who are in vulnerable Senate races, who are in House races that you know, of course, Democrats control the Senate by one vote. How the Democrats are hoping to flip the House Republicans controlled by a very small margin, and I think those folks are very concerned this morning.
Now.
Interestingly, as you know, they've been actually outperforming on polls, so there has been a big gap between those candidates in Biden. But I think they are very concerned that Biden will be a headwind to both re election into into their aspirations of flipping.
In your world, you're surrounded by people that won't shut up. I mean, I don't know if you know this, but they have this surveillance cork where it's Tucker, you know, Scarlet can put in my mouth time shut up.
In your world, nobody stops talking.
Was President Trump advantaged last night because he didn't.
Have a mic on a lot so he had to stop?
I think that.
I think the format absolutely favored President Trump. I think so ironically they were the Biden world thought that not having an audience being able to mute the mics would be a detriment to President Trump, but if anything, he seemed more controlled, more moderated. Now, how both how both candidates characterize each other's presidencies were just not correct. There were a lot of falsehoods I think on Zay honestly,
on both sides. But but you know, the reality is that President Biden did not fact check President Trump.
Uh.
And of course the broader issue here is that he just underscored all of the concerns about about his age and and President Trump, on the other hand, looked energetic, he was confident, and he was very much on his talking points. He talked a lot about immigration, he talked a lot about inflation. I think from a market's perspective, we didn't hear anything about deficit restraint.
Uh.
You know, I think if any thing, both gentlemen really reinforced the importance of Medicare and social Security. There was no really whiff of reform. President Biden talked a little bit about it, and we they talked about tariffs, and so I think the big themes for the markets, you know, higher deficits and more tariffs, more hawkishness on China. Those are I think, if if you're trading in front of your screen this morning, those are kind of the big takeaway.
John does that here a talkers doing? You know, mean.
Stocks here these trading, But those are those I think are the big takeaways. Obviously, the chances of President Trump being re elected are higher this morning than they were yesterday.
I think after yesterday's debate, it's clear that style over substance was the big takeaway from the proceedings of ninety minutes. I guess the question now is how does the White House regain control of the narrative versus how do Democrats as a party regain control of the narrative.
Yeah, I think there is no really indication from Biden will released the campaign world that there is a problem. I do think that, you know, it sounds like from from you know what, folks are saying that internally in the White House there are concerns. I think it's called the broader question is even though folks are talking about an open convention or replacing President Biden, the only person
who can make that decision is Biden himself. We are not in the nineteen sixties, right, This is not in nineteen sixty This is not nineteen sixty eight where you had party elders in the back room smoking cigars after the testing. And I we keep reinforcing that to clients. Is that just the party mechanics are so different from those days. It's a really only President Biden can make the decision on whether he is going to continue to be on the ticket, and this is his decision alone.
With PIMCO and particularly with the a leons on the continent of Europe. You've always had an international feel foreign Affairs, and I give Foreign Affairs great credit. They had two Biden Trump foreign analysis within the latest issue, and the democratic side, of course was done by Ben Rhoades. Who else Ben Rhodes last night on Twitter? Just think about what that debate looked like to people and leaders around the world. Libya, how you mentioned this earlier? Scarlett? How
will this be taken particularly by Beijing? Nick Burns has to deal with Beijing over there.
Yeah, I mean, and I actually, by the way, that Foreign Affairs article Ben Rhod's article is very interesting. Robert O'Brien's article in that in that latest issue, I would say, if you're interested in what a Trump two point zero foreign policy will look like, that is worth a read because he sort of lays out the roadmap for foreign policy.
You know this.
Of course President Biden is on the way a candidate. He is the president of the United States, and so I think it's what what signal did he send both our allies but also to China. Well, you know, he you know, he did not, of course, restore any confidence that he can manage for more years, let alone night next ninety minutes. So I think it, you know, it really undermined. You know, I think I don't I don't want I don't want to. I don't want to be
hyperbolic here. We don't want to over extrapolate from one debate. But again it reinforced.
Okay, cume to the So what do you tell Jerome Schneider today he's in short term paper. What's the market effect for Jerome Schneider at PIMCO that.
You see in Washington.
Well, again, I think that the big takeaway from last night is that deficits are going to continue to go up because neither candidate is going to reform the entitlements. They may not be able to spend a lot more, but they're not going to do anything about our structural deficit issue. And again, tariffs are likely to go up. I thought the interesting conversation around tariffs was that President Trump was not defensive of his tariff plan. He was
leaning into it. He was talking about how it wasn't going to increase inflation, how it was a good thing for the United States, both from national security person and an economic perspective. He talked about deficit reduction in terms of tariffs. So I think the big takeaway Tom is and this is true. If Biden's elected too, deficits are going up and likely we're having more hawkish relationship with China and tariffs are.
Going to Let me thank you, Libby ConTroll with Public Policy and PIMCO here after this historic debate.
The first smart.
Note last evening was from Terrence Haynes. He's with Pangaea policy. He's been doing this forever. You know, he was prepared. But the bottom line is Terry Haynes absolutely nailed it last night with perspective over what we saw Skyletfu and Tom Key Now with Terry Haines. Terry, I'm not going to mince words off your note. I'm going to pick a couple ideas here as I can.
Others.
The Democrats, particularly alike, nervous for next week until the polling consequences fully shake out. How low will the polling be, how will they adjust after President Biden's performance.
Well, you know, I don't think the polling is gonna change a great deal over the next ten days. That is instinct on my part. But compare this Biden to three points. Biden is at you know, roughly forty two percent right now, he and Trump are tied. Thirty three percent of those surveyed in the CNN Flash post debate
poll thought Biden won the debate. And you know, there's a bunch of different snark we could respond to it, but they you know, but there's third of those not too far off the two percent thought that he won. So I think what you're probably going to get is some sort of a dip. But you know, short attention span theater here is going to move on to Trump, immunity, Trump and you know, Trump sentencing conventions, all kinds of
other things. Meanwhile, Biden's got a lot of time to try to correct the ship, and Democrats have nowhere to go on this. Frankly, Okay, well that's.
A really important distinction. Now.
The zeitgeist this morning is they do have a place to go. Why can't they go to a president who decides with his family to in some form not run for a second term. And there's seven or eight other people that can make this look like Grover Cleveland Alexander in eighteen eighty, Why can't they do that?
That was Grover Cleveland, not Grover Cleveland.
Excuse me, sorry.
Anyway, But the point is really twofold. One is that Biden's got a tight grip on the party. Secondly, you know, a lot of the party's been enabling and pockets of the media as well. Not this not this network, but pockets in the media have been enabling Democrats, particularly corporate Democrats in Washington, trying to ignore this as best they can. You know, now the reckoning is here. You know, the last thing I think they will do is make a snap decision to jett us and the sitting president off
the ticket. And the sitting president will resist that with every fiber, and he's being He's been after this for fifty years. So you know, reality will set in and the plan B will be you know, how do we how do we prop this up and move forward?
Let me bring in Scarlet foo in for plus wing this one.
Scarlett Terry. We know a lot of Americans don't like the candidates running for president in November and they want someone else. Does the debate boost any third party candidates?
You know, I don't think it does, Scarlett, And you know, there's a huge disparity and a lot of things related to this election. One is the appetite for a third party candidate compared with the actual third party candidates. You know, I thought at one point, probably back in January or so February, that Bob Kennedy had a pretty decent shot
at becoming a serious candidate. He's decided to turn himself into a niche candidate, and his numbers reflect that the air is slowly being let out of the balloon and will continue to I think, continue in that direction. The other thing I want to point out to you, it's implied in your question, is you know, where do people go? If this was any other Republican other than Trump, you'd
see wholesale flight from Biden to that Republican candidate. I think polling shows continues to show though that even though people are kind of marginal on Biden, they don't want to go to Trump. There's no such thing as a somewhat disapproves of Trump. It's all strong disapproval. So you know, these people are in a bit of a quandary, which you know, in a backhanded way, works in Biden's favor.
I think.
Okay, so that's how it stands with voters. What about our allies, our rivals in the global theater as Democrats wait for polls to come out, and you said it'll be a couple of days. How does Europe, how does China prepare to think about what might happen in November?
Well, you know, I've been banging the drama on this for nine months to a year. I think, you know, we've got the highest geopolitical risk in over fifty years already. So you know, the net of last night's debate is that it's negative for for geopolitical risk and it's negative for US domestic political risk as well. You know, our ally or excuse me, rfos already feel somewhat emboldened. That's
a whole other conversation as to why. But they do, and you know, allies now officially you're probably going to be a little bit more disquieted.
I'm trying to avoid the you know, the twenty four hour culture or cable TV talk Terry, But I got to go to a single sentence of your brilliant note from last night. So the first thing I read, folks last night, coming office tobacco. You said of the President of the United States, sometimes over prepped and was without humor a sin for an Irish American politician.
This was no JFK last night. I get it. But the over prepped I think is brilliant. Terry.
His first answer, I was thunderstruck by the fectoidness of it.
Yeah, yeah, I think so. The you know, I heard that a bunch in the debate where you know you could almost see the you know, you can almost hear the click, and you know, like you know, this is the spiel that works, and you know with with polsters and fact gatherers, and you know this is my answer, you know, kaboom. And of course that that you know, that's a double sided sword too, because you did that whole medicare daff happens when when he forgets the line
and the transition. So you know, Biden's coin throughout his career has been affability and relatability, and neither showed up last night, and that's unfortunate for him.
Terry Haynes, thank you so much, and for all of us at Bloomberg, thank you for your perspective across many conversations in the past twenty four hours.
Mister Haynes is with pen Geez. I know he'll be here in July fifth.
And that is Neil Dutta is all of you know, I thought you did a phenomenal job in twenty twenty three of being optimistic, Neil Data of Renaissance Redmac. I should say, are you still optimistic about the American economic experiment?
I mean, my optimism is getting a little bit shaken because I think the Fed is, you know, on the wrong side of the eight ball here. You know, their rhetoric, I think doesn't really match the tone of the incoming economic information that we're seeing. You know, they're going around telling people that the economy is strong. Over the first five months of this year, real consumption is growing below one percent. New home sales we just learned are running
at their lowest levels since last November. Ending home sales are at fresh record lows, and over the last six months, core capital goods orders and shipments are basically flat. And I think the reason that matters is because one of the things the Hawks have been saying is that financial conditions.
Are too easy.
They're too easy, so the FED can't cut if financial conditions are so so loose, Why is it that you know things that you'd expect to respond to the sort of standard financial accelerator model, like housing, like business investment.
They're flat on their back.
So either you're looking at the wrong financial stress variable.
You know. Maybe it's things like loan.
Rates for for private households more so than corporate credit spreads. Maybe it's the strong dollar. Maybe it's just high interest rates generally.
I look more so the equity.
Prices that that really is what we should be focused on. Scar is Scarlet, by the way, Tom, I haven't talked to Scarlett, I feel like in so long, so it's good to hear her.
To hear you know.
I mean, she's she's like doing the twenty four hour shift today.
But the don is with his kids in the afternoon. He's like, forget about Scarlet. Neil dota with scar Good morning all Neil.
Let me ask you about the core PC and just dig into it a little bit more because it's slowing down. The games are slowing down in large part because oil prices have come down, and I know we're talking about core versus non core, but in any case, and declining goods prices, but services which does include things like home insurance or auto insurance that remains sticky. I got the bill for my home insurance. It was stunning, and when I asked the broker to look into other policy premiums,
couldn't find anything better. So I was stuck with it. And we're not talking about two point six percent increase. We're talking about twenty percent.
Of your house price has gone up, So it's a wash.
Oh, John, I don't think I had to cut.
The dogs back from Fancy Hills dog food to some you know, cheap costco.
Thing you guys are because of the insurance continue scarlet.
So me, you'll talk a little bit more about the services inflation that we're seeing and the stickiness there and whether we're not paying enough attention to.
Well, I think we're paying too much attention to it, quite frankly, because this is being used as a rationale for sort of holding off on rate cuts, and frankly, I think what's interesting is that we can say why core services inflation has been strong, but I think it's more challenging to lay out a coherent rationale for why it will stay strong. One of the reasons why we look at core services is because of the labor market sensitivity.
If you look at unit labor costs over the last year, they've been growing less than one percent at an annual rate. So where's the inflation coming from. You talk about insurance costs, and it's true that insurance costs have gone up, but it's also true that the underlying value of the asset you're ensuring is not rising as rapidly as it once was,
whether that be housing or more importantly, autos. Right, auto adjacent services, things like motor vehicle insurance, maintenance and repair costs, those have right, those are for disinflationary pressure because the value of the car is declining.
I mean, if we look.
At wholesale auction prices for use vehicles, it looks like used car prices will continue.
Deflating over the summer.
We already know that new car prices are done about a percent last year. So I think it's just important to kind of think about first principles and what do we know? People are talking about how we're done with the disinflation and goods with the dollar breaking out to your to date highs, So how does that work? I mean, most of what we import our consumer goods.
So anyway, well, Neil dunnah with us, and we're going to continue with mister Dota Gino Martin Adams with us as well. We are commercial free for you in this eight o'clock our lots going on future stabilize up eighteen and out to up twenty four now back to up eighteen, mark the up nineteen right now, SMB futures, NaSTA c cup half a percent is as well.
Neil Donta.
We just had an economist on talking about sub two percent real GDP for six months Q one Q two. Do you buy into that that the American economy is that moldy.
I mean, you could talk me into something like that. I mean, we had sub one and a half percent growth in the first quarter. I do think that, you know, it looks like Q two is running about two and a half and you know, so you average that out, you're talking about a round two percent for the first half of the year. I think what's important is that
private domestic demand is clearly slowing. I mean, one of the reasons why there was a little bit of enthusiasm in the first quarter is because we had such a strong private domestic demand backdrop in Q one.
But remember that a lot of that was premised on.
A sixty basis point increase in residential investment which we know is not going to repeat in Q two and probably not in Q three.
And so again I.
Think, you know, housing was a steady tailwin for GDP growth over the last several quarters. That's unlikely to be the case through the summer. So private domestic demand will look as strong. And we had, you know, a big we're having a big inventory restocking right now in the second quarter, but with orders still kind of slungish, it's hard to see how long that inventory boost lasts. And
that's going to ultimately win on manufacturing. So yeah, I mean, I think you really have to have quite an imagination to say that we're running at two and a half percent.
I think, you know, maybe one and a half percent.
That's possible for a quarter, but two percent, I think is sort of where I'm too.
Do you hear this from meal data? Is extraordinary?
I mean, I get this in the Gloom Crew, But mister Dudda is not the gloom Crew.
No, He's been the opposite of that. You know, I think about how last summer we got this unexpected lift from spending on going on vacation, Taylor Swift concerts. Is there anything on the horizon Meal in which you see Americans would be more willing to spend freely on.
You know.
You know, Scarlett, I don't think about consumption like that. I mean, if it wasn't Taylor Swift, maybe you'd have more people at the Beyonce Renaissance tour.
I mean, I think people go out and they want.
To spend money, you know, based on what their real disposable incomes are doing. And fortunately the last month was a good month for real disposable income. But generally speaking, what we know is that labor market dynamics are consistent with the cooling off of income growth, and that's going to weigh on consumer spending over time.
You know.
The good news is is that inflation should slow, so that should kind of keep real incomes on a steady you know, steady here. And that's why I'm you know, I'm not really lighting my hair on fire over recession risk. Well, what I'm talking about really is just a recalibration of monetary policy. No one's talking about a wholesale easing. I don't think the economy requires that, but the Fed does have a role to play. They have to play along here. I mean, they can't just keep saying, you know, the
economy is strong. We don't have to do anything when Evedence is showing something else. So I think they just need to set their rhetoric to the inc data and will be okay.
Neil Dotta, thank you so much.
With renmac just can't say enough about his at work here clearly more cautious than what we saw last that year.
As welcome.
The real world, folks of Bloomberg Surveillance is twenty people, well now twenty three. We got three interns helping us out piecing the show together. It depends you know what time. And of course, with the shock of the debate, literally during the debate, our team went to leadership of Sparta was blowing up the show and.
The real world folks.
As I sit on a leather couch in my living room and Bill's sitting there on my lap, and you know, I'm hanging out with a cell phone. And the first email I said was get Henrietta. And there is only one Henrietta. She has the sharpest note of you know, with Terry Ynes. Henrietta Trey's joining us from Veda Partners. It will be ugly, it must be fast, and in your list of people to save the day, Henrietta Trey's You have one of my favorite people, the governor of
Rhode Island, Gina Ramando, the former Secretary of Commerce. How can Gina Ramando or others save the day for the Democratic Party?
Well, thank you for that very generous info intro, Tom, I appreciate it. I was really kind of surprised last night as I was speaking with Democratic staff throughout the evening, Gina Raymondo's name came up in every single conversation repeatedly. Whether that was campaign operative sort of in the think tanks, whether that was folks on the hill, people who've worked on campaigns, she was perpetually there, and I think it speaks to exactly what you get at Commerce. Secretary of
Ramondo is highly competent. She has been tasked with probably the largest job the Biden administration this year, which is rolling out the combination of the Chips Bill and the five Artisan Infrastructure Act, not all at the same time, but through building out a two hundred person team at Commerce to get all this across the country. And that is no small task. That's what she's undertaken. And I think there's a lot of respect for her within the
Democratic Party. Maybe like a slightly under the radar possibility.
You are expert at the machinery.
If the president says I'm going to not resign, let's be clear on that, folks, but just step aside who decides who becomes their candidate.
I think the person that everyone should be watching right now is House Representative Jim Cliburn. I mean he is the one who orchestrated the win for Biden in South Carolina. If y'all remember that primary schedule, I mean Biden was down and out for a while. Bernie Sanders was the front runner in all the betting markets for a while, and Joe Biden really needed Jim Cliburn in South Carolina to pull it out for him. In One of the contingencies was that Kamala Harris needed to be the vice president.
He plays king maker in the party, and I would encourage folks to watch him most closely in the hours ahead.
That is super valuable to keep an eye on Cliburn. Investors and companies know Gino Rimando because of her role in all that important legislation at effects economies, affects the markets, but voters don't. Voters know Kamala Harris. So if something happens and Biden steps aside. Wouldn' Kamala Harris be kind of the default presidential candidate?
Absolutely, no question, And I appreciate you mentioning that, because I think a lot of the street washes over her and sort of immediately steps into a Gavin Newsom or a Gretchen Whitmer type candidate, and I think that's a mistake.
Kamala Harris is the sitting Vice president. She is the ranking female official in American history.
She is highly confident herself and has served as a United States senator attorney general in California. There's no reason to skip over her, and I think it would be a massive affront to huge population of the American public and the Democratic voting base if they were to supersede her sort of unceremoniously. This is going to be, at
this point a party line decision. The primary season is over, so for the most part, Democratic voters and people who are in the individual states that participate in primaries and caucuses, they are not going to have a say.
Now this is a party decision.
It's my opinion that Kamala has to be the front runner. She is the front runner behind Biden should he step down, and it would be incumbent upon her to decide whether or not she wanted to actively bow out to seed room to someone else. If that's a decision she wants to make. I think she's next in line, and it would be, as I said, incumbent upon her to say, you know what, I'm going to step aside with the
entirety of the ticket. If Biden's out, I'm out and sort of clear the way from the other four people I list in my note this morning.
So the punditry is clear in terms of calling yesterday's debate a disaster for President Biden? Is the Democratic Party un in understanding the debacle that was the debate? Are they united that something needs to be done?
I mean, I would say my cell phone was a death march of Democrats last night, And the kindest thing I could say about that is that they were united in that assessment. I don't think you can talk to any Democrat right now who would tell you that last night went well or that the biggest problem with Biden's age is not you know, the age itself.
It's not the number.
It's the fact that Donald Trump lied, you know, thirty plus times repeatedly on every issue from January sixth to abortion, and because of Biden's age, he could not combat those lies in real time.
That's the problem.
Okay, So what's the timeline here? The Scarlett's good question.
I mean my answer is, and talking to Margaret Brennan was CBS, there's a timeline which is collegial oh Chicago, oh ow, August will come back from summer. The third week is September. Blowney, what's the Tenriant Tray's timeline for Friday afternoon, Saturday, the Sunday talk shows and you get the Monday. Is anybody talking a shorter timeline Henriette Trace?
Yes?
Absolutely. One of my favorite people in the world.
Kevin Casey will shout out my mentor when I was on the Ways and Means Committee. I'm working with him on the Ways of Means Comittee. The first thing to think about is that Democrats feel like they have a little bit of breathing room. There is a moment here where Trump versus the United States is going to be decided by the Supreme Court. We're going to find out if the claims of presidential immunity are going to hold or not. That could come as early as today, within
the next couple hours. That is something that immediately gives Democrats a sense of a little.
Bit of breathing room. On July eleventh, Donald Trump.
Is going to be sentenced for the thirty fourth felony guilty counts that he received in the Hush Monday trial about election interference with the porn star in twenty sixteen. Then you'll have the announcement of Donald Trump's running me the vice president. So there's gonna be other pieces taking up oxygen for the next couple of days. The Democrats are really hoping will clear some of the air and give them room to sort of breathe and work behind
the scenes. I don't expect a solution or a conclusion to the will. He won't be stepped by question anytime soon.
Henry, let me.
Get Henriette, let me get this in because we're going to go to Rick Davis on this in a moment.
Folks, stay with us through the far. This is going to be special.
But I mean, if we ever really tested the twenty fifth Amendment before on succession and disability of a president.
Not really.
And it's interesting you bring that up. I think there's a lot of confusion about this on the street. I've been marketing the last couple of weeks, and I spent a lot of time walking through how you know, it's actually not a constitutional crisis to have the vice president step in and take place for the president. That is literally what the Constitution instructs us to do. Then you go to the Speaker of the House, and so on and so forth. So it's an issue of relay and
sort of socializing the American public. So sort of what happens next. The good news for Democrats here is that sixty six percent of the population already wants somebody other than Biden and somebody other than Trump to be on the ticket. So if it's going to happen, this is, oddly enough, kind of the best way. It's been speculated about all year. You can see it from the predictive markets. There has been at least twenty percent odds that Biden would not be the nominee. I think that's much higher
this morning. I haven't checked, but I assume it's about forty percent, and that is going to give you a baseline to start with on these sort of otherwise wildly extreme circumstances that are pretty normalized this year. A lot of the American public is socialized to the fact that this might happen.
Certainly, the investment community is.
Henrietta just fabulous. Thank you so much. Henrietta Tres with us with Veda Partners. This is a Bloomberg Surveillance podcast, bringing you 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.
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