Bloomberg Surveillance TV: April 11, 2025

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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and as always on the Bloomberg

What's your reaction this morning, sir.

Oh, I think you see we're right in the midst of a negotiation. This is home territory for President Trump, both in his business career.

And his first term as president.

You know, he reads the marketplace, he engages with people, he uses leverage, and we're gonna get to a great result. We're seeing in the midst of it right now. But I'm quite optimistic about where we're going.

Well, the United States has already slashed it's forecast for global oil demand. If we continue on this path of a trade war, do you expect demand to continue to decelerate?

Oh, Their prediction of the demise of demand growth for oil is is older than I am. So Look, there's cyclical factors on economic growth that do impact at the long term growth rate of oil little more than a million barrels of oil per day per year has been going on for decades. I don't see any big change in that in the foreseeable future. You see a marketplace right now that is worried about economic growth, and I think you're seeing some softening in oil prices from that.

Both those are going to be wonderful for the United States.

Well, it's not just.

A softening of oil prices, mister secretary. I'm sure you've seen that since Trump's inauguration, prices are down more than ten dollars. At what level do you think you can see drill baby drills? The President likes to call it when it comes to shale producers, because what we're hearing is that they cannot do this if price is fall fifty dollars a barrel.

Yeah.

Look, investment decisions of oil and gas companies in the US and abroad or based on a little bit of multi year view of oil and gas prices. They're not moved based on the spot price of oil today, or oil last week or oil next week. So these are

That's real fear.

But I think the marketplace may be discounting the wrong answer here. We're going to see very very positive economic growth in the next few years.

But is it still realistic to be talking about adding the United States adding another three million barrels of production at these prices?

Well, I think you're referring to Scott Besson's plan there, and his three millions was three million barrels of oil equivalent. Most of that growth will come from natural gas, and of course the domestic demand for natural gas with the growth of AI resourcing manufacturing and our surging exports.

Boy, yes, we will grow oil equivalent.

Production by at least that much during President's term. But we will also grow oil production and other liquid natural gas liquid production in the United States as well. So absolutely are we going to see strong growth in American energy production one hundred percent.

Mister Secretary, You've been on a tour in the Middle East for about two weeks since our understanding that before Saudi Arabia decided to add even more barrels to the market, there was a conversation, a dialogue between the Trump and Minute registration and the Kingdom. Can you give us a sense of what that dialogue looked like. Is the United States supportive of OPEC plus adding more barrels to this market.

Yeah, we don't directly coordinate on oil production policies or whatever. That's certainly an OPEX purview. But I don't think anyone in the world misunderstands President Trump's desire to see more energy produced, therefore lower prices and more economic activity. Absolutely, that's President Trump's agenda. Look at his genda can be summarized as prosperity at home and peace abroad.

Lower oil prices.

Help both of those, and the piece abroad that's the most concern right now. In the region where I am in the Middle East is Iran. Iran over during the Biden administration, oil prices were higher. There was sort of an appeasement attitude and no strong enforcement of sanctions, enormous funding de Hamas to Hesbaala to the Huthis, and a rapid advancement of their nuclear program. President Trump's agenda is

Well, when it comes to Ron, we saw even more sanctions on the regime yesterday. When it comes to these oil sanctions, the President has said he wants to go back to maximum pressure. Is that part of the conversation you're having with golf allies on this tour that they'd be willing to step in if some of those Iranian barrels come off the market.

Well, fortunately, just from the United States production itself and the size of the global oil market today, Absolutely, we can tolerate squeezing out Iranian exports. That and of course, do all the golf neighbors want the same thing we want?

Yes.

Do they fear a nuclear armed Iran? Absolutely? Do they think now is the time to turn the screws and end Iran's nuclear weapons program? Absolutely? But yeah, can the world tolerate that absolutely. Years ago, twenty years ago, could this have happened? No, But today we both have large American oil production, better relations with our neighbors, and a strong,

As a secretary, the President has said a lot, even recently to me on Air Force One, he likes that. Guess oil prices are coming down? Do you and the President have a price in mind.

No, I think my whole life, I've avoided predicting prices or dictating prices. We have a wonderful free market economy. That's what makes the world wealthier. That's what allows consumers to continually re express choices in every direction.

So no, there's no formula for a good oil price.

There's just a broader belief that lower cost diesel, lower cost gasoline, lower cost home heat, lower cost electricity, all of those are good for American consumers and good for businesses. That's President Trump's energy agenda and I'm here to implement.

It, Miss the Secretary, appreciate your time this morning, this evening where you are. Thank you very much for being with Blimberg TV. The Energy Secretary there, Chris right. This is what Sarah Hunt of our pint Saxon was has to say. The damage has been done both to markets and to sentiment. Goes on to say, what we do know is that the uncertainty is likely to continue. Sarah joins us.

Now for more.

Sarah and Mornick, good morning. How much weight can you put on the guidance from the banks this morning?

Well, I think it's interesting that they're giving guidance at all, because I expected a lot more of a not necessarily pulling guidance, but a larger uncertainty.

We were going to bracket things.

So I think that there is a call to strength there that says, you know what, we see what's going on, We see what's going on in fixed income markets, and see that this is actually going to be a decent year for us. And I think for the bigger banks that's an easier thing to say than it is for some of the smaller events.

I think how positive people were coming into twenty twenty five sentiment sky high. Long growth will improve. Capital markets activity is going to be fantastic. Lisa was asking this question in the last thirty minutes or so. The capital market's activity now for the financials delayed or derailed? Which one is it.

I'm going to say delayed. I don't think it's necessarily derailed. I think that ultimately. You know, what was interesting about the comments that you brought up earlier in Marie was that in that long list were some of the things that are supposed to be positive, which is the deregulation, and which is some of the mergers and acquisitions and stuff that we were.

Talking about going into this.

But the fact that the tariffs came so soon, and the tariffs came so hot relative to what the expectations were, I think has got everybody going losing sight of the fact that there may be other things, and I'm not sure any of us know exactly what that's going to be.

Is the market reacting to the hot rhetoric, or is the market reacting to market structure issues that are amplifying moves that are then causing people, for lack of a better word, freak out.

So this is another problem where the answer is yes, because it's all the things right. It's both they're reacting to the moves, and there is some there have been some ongoing discussions about what's going on underneath the markets and whether there's anything going on within the structure of the treasury basis trade, this the FX markets.

So I think that.

There's a combination of things where you get the first reaction on fundamentals, and then the second reaction comes from things that we're not necessarily able to see.

Where are we in that?

I mean, is there a sense that there's something that just blew up, or there's something that's in the process of blowing up, and we're watching it and then creating a narrative around American exceptionalism around it, and then adding some narrative talk about that, and everyone's running to the edges.

And just hiding.

I mean, I'm trying to figure out the anatomy of what is going on. After a really tumultuous couple of weeks.

I think that you are not the only one.

I think all of us are trying to figure out what's been going on underneath the surface and or the size of some of these moves. How problematic that is because so many firms have levered up more and more as we've had less volatility, and then you get volatility that is off the charts, and you have to think that there are some reactions to that, and some of those are going to be people making a lot of money, and some of them are going to be the opposite.

The Treasury Secretary said yesterday they're going to go through the queue when it comes to these deals they're making with other countries, and then there's going to be a period of quote, great certainty after these ninety days.

That what you expect ninety days and you get some certainty in the market.

I would love to see great certainty in ninety days. I'm not sure that you're going to get great certainty because I think that as we go through all of these things, there's going.

To be continuous changes.

So I think that if you take some of the uncertainty off the table, which.

We haven't yet at all.

And I think that there was some expectation that once the announcements were made, that was going to be a catalyst in and of itself from an uncertainty standpoint, and all it's done is that up.

So I think that there is going to be some.

As you start to get deals through the pipeline and people start to understand what they are, I think that will help calm things down. But right now we're still in that phase where that hasn't happened yet, and I think we are that max uncertainty that we all keep hoping to get behind just continues on a daily basis.

As a forward multiple on the SMP doesn't screen recession right now, Camra Dawsum, might that point in the last hour from your perspective, given the price move we've already seen, do you think we have the capacity to absorb back news now going into the next several months where we might see some pretty big downside surprices on data.

Well, I think that.

We came into this year with the market and even elevated at multiple than it was right now. So is it back to a place where you can feel very comfortable with it. No, which is why I think that you've got risks to the upside and risk of the downside. Because you get really good news in this market wants to take off, you get really bad news, and we can say, you know, the multiple still expensive and it

So in the meantime, we just want some way to hide. Some people do anyway, some people more aggressive than that. But if you want a tin hat and a rock to hide under right now, it's not the treasury market.

What is it.

It's not the treasury market.

It's some of the areas that have done fairly well in general recessions. Those things like consumer staples, they got really really cheap at the end of last year, and everybody was looking for more exciting things and more growth, and then you look at those multiples, you go, you know what, that's not so scary. Some of the defense stocks have gotten killed also, and so I think that there's some opportunity there. There are some places, even something

I want to set on one point that you said and make this full circle. The big banks coming into this year, a lot of people were really excited about them because of the growth in the economy that they were expecting, as well as deregulation wave. That's something that we heard from Jamie Diamond that the deregulation is going to be a real positive. We also are seeing that steeper yield curve that could also benefit these banks in

I think that it's a much Yes, I think it's a much different situation for them now. But I also think if you look back when all the technology stocks are outperforming, the banks are underperforming. So in good times they tend to lag a little bit, and in bad times, I think people go, oh, my goodness, there's a great business model, and we're all looking at cash those we're all looking at balance sheets again, all of those things become of utmost importance when you have this much volatility.

Can we finish on tech? What becomes of Apple if we don't get an exemption for that name? What happens to some of these companies.

I don't necessarily want to speculate on what happens to Apple if it doesn't get an exemption.

I think that is it not bad that you couldn't possibly even speculate, Well.

I mean you can sure, you can speculate, and you can say, well, ninety percent of their phones are coming from here, then we lose x amount. I think the problem is it is such and I mean this goes back to those discussions in twenty eighteen and twenty nineteen that the tech stocks are actually staples of themselves because are you.

Going to live without an iPhone?

And how many people are going to say, Okay, now I'll just go back to the method of financing it that the phone companies used to do, and I won't buy it outright, so that two thousand dollars doesn't become as scary as twelve hundred dollars. They're expensive things to start with, but I think that the ingrainedness of that technology into our lives is difficult to separate.

So I don't know that for that.

Reason, it's as bad as it would be because it's not a lot of speculative buyers of iPhones.

So Rahan, I appreciate it. Of Vutpant Saxon Woods. We begin this out with stocks fluctuating. It's earning season kicks into full gear, so Vita suplimanning. But Bank for America writing first quarter beats animisses may not move the needle as much as in recent quarters. There is a reasonable probability the absence some resolution or clarity transparency could be compromised. Savita joined us now for more Cevita, good.

Morning, Good morning.

Reflected on the bank earning so far and so far, so good. And there's a line that you used over the last week that it's dangerous to underestimate companies on the S and P five hundred now dangerous is it really well.

I think that my mantra is own cash and stocks, sell bonds, because if we're in this environment of inflation of you know, even lower growth, I think that's a terrible environment for asset classes that have no optionality. When you think about stocks, they have lots of options. Companies can pull forward cash return, they can you know, they have creative accounting mechanisms. So there's a lot of optionality

So what worries me.

Is that a lot of companies intimated that they you know, they have to pull guidance, and we saw this in twenty twenty with COVID.

It's not great.

So what we found is that companies that pull guidance, that used to issue guidance typically under perform on average by about three percent until they actually start start giving us guidance. So it's understandable that these corporates can't give us guidance. Who knows, I mean, it's a it's a very uncertain environment. But that transparency that we used to have in the s and P. Five hundred has been compromised, and I think that's the key risk.

Can we talk about the playbook for you and the team. Have you spent some time on the stagflash playbook.

We have.

We've spent a lot of time on that playbook. We've spent a lot of time on the tech bubble, you know, de Rating Playbook two thousand and eight, and I think this environment rhymes with all of those. During a stagflationary environment, you want it to be in stocks over bonds. You want it to be in value overgrowth.

So you wanted to.

Basically buy cash and cash yield and that's where cap value comes in. And that's still you know, I still see this as a very unusually attractive size and style box in the s and P. Five hundred, nobody talks about large cap value anymore because it hasn't worked for such a long time.

But if you think about these companies, these are you know.

Kind of big companies that have rationalized capacity, are focused on returning cash. You know, energy companies have transformed their philosophy from drilling and capex to cash return above everything else, and these are companies that actually benefit from a little bit of inflation, which we're likely to get if we see these tariffs go.

Through in any way, shape or form.

Well, how much you look at companies that are really domestically based too, and not necessarily international.

Yeah, so this is the tricky part because a lot of companies that are domestically based are the buyers or suppliers or in some way maybe more vulnerable than the multinational companies that actually have the foreign exposure. So I think that's where you really want to dig down and see what their externalities are, what their dependencies are, and if that's on. If you've got a domestic company that's dependent on a big MNC, you know it's not a

So I think.

Tech aside other companies in the US have shown a lot of resilience during periods of macro volatility. So you think about what we've experienced over the last four or five years, We've had inflation go from negative to nine percent to three wherever we are now, and that could go higher. But during that period, US corporates actually saw

A week ago, you downgraded your expectation from the sixty six hundred range to fifty six hundred, which is still an upside from where we are today. And I just wonder what leads that if it's not going to be big tech, and if potentially you have bond yields that are not going to be cooperative into potentially a stagflationary type of environment.

Yeah, I think large cap value gets us there. I think you without participation of tech, without I mean tech could flatline tech could even go down as it has already, and we could see the market end a little bit higher. And I think the idea is where we haircut or target is not necessarily the equity risk premium, but really

Make America grow again.

Who's gonna lend money to these companies, probably some of the larger US banks.

I think that's the next leg.

Energy is a great place to be if you're in a stagflationary setup absenter recession. I don't think we get the FED to cut because I think you know, that would require a meaningful down draft in inflation that they're just not seeing. So we have the FED on hold this year, and that's an environment where you still wanna own cash, cash return, anything that's got that short duration, you know, kind of characteristic when it.

Comes to trade in terwris. Do you think the risk is that it hits earnings more or actual growth?

You know, it's a good question.

I think it hits growth in the near term because it's very difficult to plan and do anything when you don't know what the what the playing field is going to look like. That said, companies have generally been able to navigate periods of uncertainty, and I guess I would highlight we're always in a period of uncertainty. I mean, today, we know that Trump just came out.

President Trump came out.

With this this package that's potentially worse than expected. But you know, the two years ago we could have had the same type of uncertainty. We've had COVID, We've had other types of shocks that corporates have handled. So I guess I look at this and I think, okay, companies are sitting there kind of waiting for clarity. But we know that China is the culprit here. We know that

We played this guy back in twenty eighteen, and it was far worst for equacies, far worst for credit, and the tarifs were nowhere near as high as they are right now. How instructive is the twenty eighteen example for you, Well, twenty eighteen.

I think was interesting because companies were pretty good about being able to shift their sourcing models. So what worried us after April second was that it wasn't like you could shift your sourcing model somewhere else. It was like everything was under siege.

Today, I think.

That's a little bit mollified by the fact that we've seen this potential for negotiations outside of China, So I.

Think that's a positive.

But when you think about the tariff setup back in twenty eighteen, even before that, companies had been pretty aggressively shifting sourcing out of China to other regions of the world. So I think that's the other kind of takeaway is that half the economic activity that we used to do with China has been shifted to other parts of the world.

Is it just too difficult to internalize some of these numbers being thrown around. Are they just so large that people don't think they're going to happen.

Well, yeah, I mean I think that, you know, going above one hundred percent on tariffs, like our unitary elasticity model breaks down. I mean, you know, it's very difficult to model that in. But I think the idea is that's the region where we're really going to see trade limited.

But the good news is we've already.

Been in an environment where companies have been reshuffling away from China to other regions of the world.

Just feels like mutually a shured destruction. People see them going on. They don't think they're going to last very long because they're just.

Too high and it can't work. It's full decoupling. You have to ask the question, though, is it also de risking? Is the United States going to make sure that they don't get things like high end chips. One thing I'll say about these numbers is we know Trump likes to start from.

A maximalist approach.

Well, they're above what he promised on the campaign train, which was ten percent around the United States. And up to sixty percent on China. So I think if you're looking at this play play out and it is going to be art of the deal, then maybe that's where we end up.

What he promised one forty five and going up. At the moment, I'm not sure they've stuff. Savitrio's good to see it, Thanks for coming, Thanks for being here, Savita Supermanium. There of Bank of America on the sancruity market joining us now around the table twenty percent of Pimco. Tony, good to see you. It's been a while, Thanks for dropping by. I just got one question. Help percent answer? This has Japan been dump in US treasuries and how would we know?

Are in the data?

No?

Slowly And people talk about China's selling, that they'll start selling, but they've been selling since February twenty twenty two when Russia invaded Ukraine. They had at that time one point one five trillion of US treasuries. Now they have seven hundred and fifty billions, so almost four hundred billion has.

Been sold so far.

So this idea that China will sell them have an impact on the market, well, that's kind of looking in the rearview mirror There could be more of that, for sure, and it's geopolitically driven, but it's not the determinant of yields right now.

So what is the determinant what's going on right now?

I think the nervousness you see in the value of the US dollar and the concerns and markets reflects this a big concept. And I'm going to talk about it because I wrote a book on it. It was a decade ago and Tom Keene I heard on the radio this morning talking about how the Greek yield to a thirty year bonds is lower than the US thirty year bond.

Please tell them hasn't changed?

And so what that tells us jo?

And of course has something's different in terms of the assessment of credit now. A decade ago when I wrote a book, it's called the Kynesian endpoint, the idea that our nations can reach practical limits to their indebtedness. Greece reached a Keynesian endpoint, could no longer borrow from the financial markets because of its credit problems. The UK, under this trust twenty twenty two reached a Keynesian endpoint, and ever since, Rachel Reeves, the Chancellor of each checker or

So are you saying that what we have seen this week is Donald Trump's Liz Trust moment for the United States?

I'd rather call it a read my lips moment.

George Bush nineteen eighty eight convention speech, written by Peggy Newton, famous for writing speeches for Ronald Reagan, said the biggest takeaway is when he said, read my lips, no new taxes. Two years later, as president, he raised taxes because the interest on the debt reached the record level three point two percent that stands today, that'll be broken next year. I say it's a read my lips moment because George Bush had to do something that was anathema to the party,

We get from a read my lips moment though, to a list trust moment?

If there's complete ignorance of what the bond market is concerned about, I would think that you would have that moment, But so far you see some relenting to the bond market, and the James Carvill like remember he said, of course he liked to be reincarnated as a bonabista because he can intimidate anyone, if anyone, If the policymakers decide to say no to the bond market in the sense of allowing inflation to write so the Federal Reserve could permit, it, could create that moment.

But it's not.

And that's why you see Fed Chair Powell being very slow and gradual and prudent about rate cuts because it's the right thing to do, because high inflation would be saying something very negative to the bond markets. So I think as if we go on at physically irresponsible path, you see the bond market pushing back, and what.

I would expect.

Then the final word is a hall of mirrors effect where not only are investors looking at policymakers, but policymakers are looking at markets because they matter a great deal now with the high level of debt that the US has, aren't we there.

Right now policymakers looking at markets. Donald Trump even talked about that the bond market was a bit queasy overnight.

It happened now, But in a multi dimensional game of chess that you know Donald Trump plays, if you think he's thinking that, then you've got to think something else. Perhaps who knows. So it may be the case that policymakers are looking. And the big signal this week from policymakers in Washington and Trump's team of rivals is the ascension, if you will, of Scott Bessant, the Treasury Secretary, speaking more in a fashion in ways that we're used to rubenesque.

We were speaking with Greg Peters of PGM Fixed Income earlier, and he said that this week really has been a game changer for him, that he can't put this back in the bottle, you can't unsay certain things, and that this really is making him rethink the role of treasuries as a safe haven asset, given that if the goal is to reduce trade, then essentially there will be less dollars overseas to invest naturally in US treasuries. Are you thinking about something similar?

Yeah, And I was looking this morning and anyone could on the IMF website the cofer data co fort data. It shows how much of the world's twelve trillion in reserves put in the US dollar. The figures today fifty eight percent. It's been in decline. The next closest nation or set of nations is Europe at twenty percent. For the Chinese currency. It has this fewer dollars of reserves in its currency than in the Canadian dollar. And so

That's one major major point. The next one is liquidity.

Of course, the US bond market this week has seen, according to the New York Fed, a seven hundred billion or so of daily volume.

No market comes.

Close to that.

This isn't to say that over time we couldn't see that fifty eight percent of money held in dollars decline, and you have a plurality forty.

Nine percent in dollars, more in euros, more in the end, et.

Cetera, et cetera. It's possible, and it'll be gradual. I weren't expected to be immediate at LISTA.

I'm praised you brought up bliz Trus for a bunch of reasons, including this one. The former British Prime Minster eventually left, had to reverse policy, made a scapegoat of a chancellor. It's a very different moment for this moment in the United States. I don't see that happening anytime soon.

Well, I don't foresee President Trump stepping down. It's unclear who he can escape goat. This was what he promised, promise has made, promise is kept. And there are a lot of people who say ultimately that the goal is the right one. But you raise a great point, what's the off ramp? How much do you say that what we are seeing right now is a structural change that is going to last where you cannot get these relationships back in the same kind of way.

Tony's good to see you, as always, Thanks for very thank you, Tony for sensei there of PIMCO. This is the Bloomberg Sevenants podcast, bringing you the best in markets, economics, angiopolitics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always, on the Bloomberg Terminal and the Bloomberg Business app.