This is the Bloomberg Surveillance Podcast.
I'm Tom Keene, along with Jonathan Farrow and Lisa Abramowitz. Join us each day for insight from the best an economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. Joining us now is really one of the key calls
within the Bloomberg Surveillance world. It's rarely that you get somebody to give you a statistic or directional call and also throw a date on it. Matthew Lizetti and the team led by Peter Hooper and David Fokers Landau Deutsche Bank had the courage to do that a long long time ago. They said, there is going to be a slowdown, some form of Nber recession, but it's going to be out there. He nailed that call. We get an update this morning with mister Okay, let's go to the time delement.
Now which week, which day, which hour do we get a recession?
Yeah, you know that the timing is always very difficult to a month.
We're still Q four.
We updated our outlook this week, kept the recession timing in Q four. You know, I think it's based on we've seen the FED titan obviously very aggressively. You've seen credit conditions titan. You've seen some breadcrumbs within the labor market data of some softening. I'd be cautious about this morning's data just because there's a lot of volatility, there's seasonal adjustment issues, there's states that are they're moving around.
But if you look at the last Friday's jobs report, it showed the permanent job losers really rising, and that's I think an important important indicator. And then as you look forward for the consumer, you have excess savings dissipating by the end of the year, you have student debt payments coming back, and so we think it's a consumer that looks a lot weaker by the end of the year.
What gives you confidence, especially since people have been pushing out this date again and again and again.
Yeah, I don't think you want to express too much confidence on any particular month or quarter, to be honest. You know, the labor market has proven to be more resilient, the consumer has proven to be more resilient, but I think, unfortunately for the Fed, so has inflation. And that was kind of our expectation as you go back to last year.
It was that the labor market was strong, it was that the consumer was strong, and then therefore inflation was going to be more persistent and the Fed would have to move more aggressively. I think looking ahead, I think the Fed skips next week, barring a big upside surprise to CPI, but I also think that they tee up a rate hike over the next several meetings. We think that comes in July.
If they skip. If they go through with that kind of shift, do you expect a meaningful move up in longer term yields or basically people say, maybe this is a sign that this Federal Reserve is willing to accept inflation that is a two point something over the longer term.
Yeah.
I think that's the worry from their perspective, that you get this upward shift in inflation expectations, because the market interprets it as they are losing some of their credibility or commitment to that two percent objective, and so I think they will want to do anything to push back
or kind of tone that down that that notion. I think even from the doves you've heard, you know they want to skip, but they want to be very clear that this is not the peak of the tightening cycle, that there's very likely the potential for more rate hikes to come.
We've given short shrifts this week to the crew, including Adheim and at evercore Isi, who say, look, we're going to disinflate with clarity in your note, and again you've got the courage to put a date on it year in twenty twenty four, December of two and twenty four, some kind of sub three percent inflation. How does our world change with say two point sixty five percent inflation.
I think it's all about how you get to there. We for our forecast at the end of next year are down at two and a quarter percent core pc. So it looks like the Fed no one.
Is very close to the way sing that in right now.
Well, I think it depends on how you get there.
Now.
If it's an immaculate disinflation where a labor market stays where it is and that's in a kind of a fantastic outcome for the economy, for markets, If it's a recession that is needed to get you there that it's a labor market that very sure much needs to weekend. I think it's a very different dynamic the FED, you know, I think their own forecasts have shown a need for sum recession and rising unemployment. It's clear that the staff for the past several meetings have come to that conclusion
as well. We still hold that view that they really do need this economy to slow materially the labor market the weekend to get close to two percent.
And the legacy of Deutsche Bank analysis, it even goes back to Adam Siminsky and oil years ago, is always think dynamics. So I've got wage growth coming down, but I've got inflation screaming down to two point x percent. Can we have a quote unquote Lazetti recession with actual real wage stability or real wage growth.
I think what you will see is that wages will come down materially as the labor market weekends, and that is I think part of the Fed's game plan. They talk about, you know, wages being a very important input into that X service core services, X shelter component. We think it's an important the overall labor market is an
important input into too. Rental inflation to get back to two percent sustainably, I think you need a softer labor market and the FED needs wage growth to come down closer to that that metric that shairpalse site to three percent.
Do you think that if they go again in July, assuming they skip next week, that the FED is done after that?
I think there's still upside risks. You know, we have been I think everybody has been consistently surprised, and those surprises have all been in one direction, which is inflation, stickier labor market, stronger consumer, a bit more resilient than anticipated, and so you don't want to discount the kind of serial correlation in those in those surprises. Could we get more I think it's it's certainly possible, which could push the FED.
To raise rates and yeah, again behind five and a half percent. I'm just wondering, though, from your perspective, as we headed to this mid year point and everybody writes their mid year outlooks, whether there's anything that you're kind of changing shifting second guessing from the first half that you think will be a driving theme heading into the next six months.
Yeah, for us, it's definitely that the potential that this cycle takes a little bit longer to play out, and that therefore their session doesn't come by in this year, but but a little bit later. I think for us a key has been that we've pushed back the timing of rate cuts. We're now in March of next year, in part because the unemployment rate takes a bit longer
to get there. I think just one important counterfactual here is that if we had not had these banking stresses emerge, it looked likely that the FED was going to raise rates by fifty basis points in March, and having done that, I think they probably would have done so in May, and so the counterfactions we'd probably be fifty basis points higher on the FED funds.
Right.
The key question for them is our credit condition is tightening enough to offset that.
What's the counterfactual of China? Do the export disinflation even outright deflation? What do they do with the struggles they seem.
To be having. How does that change the American model?
Certainly the global growth impulse that people are expecting from China is seemingly not there as much as anticipated. I think the real concern from an inflation perspective in the US however, has been not only is services elevated, we've seen core goods inflation over the past three or four months also bounce back. Now, last month it was all about used cars, so you want to discount that a little bit. But go back three or four months before that,
it was broad based. It was household furnishings, it.
Was medical goods.
And so there's even in that category that we have the most confidence that you're going to get this big disinflation.
Aymils, tell me that you're not walking back to the office.
I am.
Actually you come on this. It's like deadly out there.
You have a mask, and you do a mask.
You guys have some down in the lobby.
You're taking one of Mike's last mask. I brought myself. I'm going to go out there and die today.
I'll leave one for you.
I'll take you for you.
Matt Zetti walking across Central Park. But what do you call the building?
The deutsch Bank Center the time warne deutsch Center, just the deut Back Center.
Very exciting. Well, we looked at we we'll do something over there. Sometimes Misteretti is a Deutsche Bank. But right now and this is really important. And radio on television. If you want to know what the margin were caate next, listen carefully to Kristin Bidderley, head of North America investments at City Global Wealth. Were thrilled she could join us today. There's a very sentence in the usual blatherer of a mid year outlook that you're released today, which is are
you playing defense or you being on the sidelines. That is a perfect metaphor for the emotion right now.
I think that's exactly right.
There's this feeling out there that you're either all in or all out of the market that I think you guys were talking about this earlier on the program, this idea that you're either all in T bills and sitting in that five percent, or somehow you're chasing and finding
a defensive play in tech stocks. And so what we've done, and this is something that we've done from the very beginning of the years, we've actually been very balanced in terms of our fixing come portfolios, our equity portfolios where we are fully invested, but we're picking our spots in those asset classes in terms of quality. And when you look at the performance of something like that year to date, it's actually high single digit returns for a balanced portfolio.
It's not the twenty five percent of the NASDAC, but it's certainly strong returns.
Here to date.
Stan Jokimena was great, ye said, I with Shnali Basseki talked about the prospect of going into recession and compared almost staples to what's happening with AI in Nvidia. Can I compare can I put in the same bucket some of these tech names with consumer staples.
I would love to hear that in more detail. I think that would be a challenging analysis to do. But I think when we talk about what's happened within the market more broadly, I do think this concentration and everyone's talking about this, this is not a new story about the breadth and the market. The breadth in the market, those seven stocks representing more than one hundred percent.
Of the gains.
Even if you look it's not a uniquely US story. That's a global story as well, that there's ten companies representing eighty five percent of the global gains. And so what does that tell me? It actually tells me that the market is pretty rational. Where the money has been going into has been these megacap companies with strong free cash flow generation, the ability to fund growth not dependent
on credit. Markets have their balance sheets in order, and that a lot of them have raised guidance going forward.
So given that, right, given that, maybe there's rationality, but maybe I want to play that because you can't really predict the AI future. Are you starting to now say that the rational plays of say regional banks, of say just generally financials. Areas that have gotten beaten up are looking good again if things aren't that bad.
That's one of the themes in our outlook is actually this coming rotation within equity. So as I mentioned earlier, we have been playing defense. We've been invested in areas like global dividend growers, but some of the areas that we've been eyeing and adding exposure, so something like MidCap. Right, So looking at MidCap and the valuation differential trading at about a twenty eight percent discount to larger cap, looking at some of those themes, you have to be selective.
This isn't just kind of a broad brush. You want profitable companies just like you want profitable companies in large cap. But that's an area when people ask the question, has this theme gotten away from me? You can actually find opportunities just going down the cap structure.
One thing we've been talking about throughout the morning is the weight of people who have been hiding in T bills to go into Nvidia, to go into big tech, to look for those double digit returns that you were talking about, and not be happy with single digit returns even if they look pretty pretty good on a risk adjusted level. You've been traveling a lot talking with clients. What do they say? How much pressure are you hearing to get a little bit more with respect to earnings.
I think everyone is asking that question of is tech a buy? Should I continue to chase this rally? And I think one of the most interesting things bringing it back to the AI conversation because we have to, right that's just the dominant conversation right now. I think there are fabulous companies out there, but they're valued at, you know, in even more extreme level, and so in terms of making money in any type of market, it's really that differential.
And so some of the areas that if you think of the net beneficiaries of AI, the concentration has really been in those megacap companies. But then when you look at areas like cybersecurity that's going to have to come along for the ride. Areas like one of our long term term unstoppable trends is investing in longevity, a net beneficiary of this technology, where you have haven't seen that type of valuation and you haven't seen the funds really
come into those areas. Those are ways to be invested, but not in a pure play.
Just quickly, what's special about forty three hundred on the S and P.
I don't think anything special about forty three hundred.
Act this way, you could just stop in them pulling back.
I think Look, I think the major conversation is once we hit that twenty percent appreciation level and this idea that all of a sudden it would turn into a true bull market, I think we have to look at whether you're in the camp of higher for longer in interest rates, or you're in the camp that we could see a cut at the end of this year. If there is some type of recession ultimately and some type of it has to signal that we're going to see
further contraction within earnings. And that's something that I think the outlook right now is a little bit too rosy. We actually that was one thing. Coming into this year, we thought we were going to see about a ten percent contraction in earnings. We've reduced that. We think is about going to be about a six percent based on the strong Q one, but still a contraction.
This conversation is of fifteen years ago. I'm not used to a normal conversation that was in fabosi or in you know, the CFA curricula. I mean, it's shocking to hear this. It's like, oh, a normal conversation after fifteen years of oddity.
We're all recalibrating.
Fifteen years Is there a rights? Is that what you're referring to.
Yeah, and there was no risk free rate. The sharp ratio didn't work. I mean, it's all there is to it. And we all made it up as we went. And what's so important here, John, is all the focus of the media, the financial press is on short covering a short squeeze convexity to the upside stuff I don't even understand. And you know what it's about, the bitterly world, you know, the David Kelly world, which is the basic idea, do you have the courage to get off the sidelines.
That's the heart of the matter.
The cash trap. Yeah, it's been a fate for the shot for the last few weeks. Kristin, thank you, Thank you. Kristin Biddley, the City Global Wath Management at Any joining Us now the president of Any Research ED. I've loved the notes over the last couple of weeks. The mother of all mounts ups at a week closer to a mount up than a mount down.
Well, I think we've definitely had a melt up in the Megacap eight stocks. As you've been highlighting, these stocks have kind of taken over the market in recent weeks. I think it really started with the banking crisis right in March March eighth or so, when we started having the banking crisis, the financials took a dive. Even energy took a dive on fears that if the financials are going down, that can't be good for the economy. And
the energy stocks went down. But people still wanted to be in the market, and they ran into the Megacap eight because they have cash, they have cash flow, and they have a good business. I think the market's actually
got broad now back to the financials. Right now, we've got some uncertainty concerns about whether there might be another rate hike, but I think the economic outlook is still pretty good, and I think that once people get more comfortable with the financials, so I think the market will broadened out in that direction.
Yeah, I want to.
Give a look back here quickly in a victory lab for you. You've had a set of victory laps over a lengthy career. In October, Ralphan Kampora and Edward Yardanny said, climb on board this bottom in the market. You're up nineteen percent from your October low. The triple leveraged Yard Denny fund. This is something in develop right now. Is a fifty seven percent at return since October. Yeah, that's before Yard Danny takes out. It's two and twenty. But the answer here, d Dar Danny, I want you to
talk to people who missed it. They didn't listen to Ralphan kampor they didn't listen to Ben Ladler, they didn't listen to ed Yard Danny. Talk to the people who misses rally, how they get on board.
Well, I'm still optimistic that the market is going to move higher by the end of the year into next year. I think next year is sort of the environ meant that the market is increasingly thinking about discounting, and I think the economy is going to be better. I think earnings are going to be better. However, we have had a heck of a move, and it's been in these
large cap stocks. I think you know, as I said, look for where there's been laggards, and there certainly have been laggers in the financial they have been laggers and energy,
even in industrials. In addition to the melt up scenario for megacaps, I've also been monitoring the situation for construction in the United States and it's absolutely booming for non residential construction, and I think it's about the boom for infrastructure spending, and so I think the industrials are another place to be.
You were saying that the forty six hundred target that you currently have might be conservative. If this all bears out, what do you say to those who push back and say, if that comes to pass and all the people who are in cash decide it is the time to throw in the towel and go into equities that will give the FED more ammunition to high rates further and kill this off more quickly.
Well, I think the Federal Reserve, the Federal official. Federal Reserve officials have been saying for quite some time that they want to get the interest rate, the Fed fund rate up to a restrictive level. I think five to five and a quarter percent is proving to be restrictive. There has been a banking crisis. We have seen surveys of loan officers saying that they are tightening lending standards.
So I think they're where they want it to be, and I think they have to factor in that quantitative tightening as well as the tightening of lending standards probably amounts to at least another fifty one hundred basis points in effective federal funds rate hikes. So if the fund rate now is five to five and a quarter percent, I think effectively it's already sixty six and a quarter percent.
But if that's not enough edge to slow any kind of growth, And you are seeing construction construction companies actually seeing a boom, You're seeing the housing market reignite, You're seeing all shoots of possibly some sort of recovery, and manufacturing sectors that have been beaten up. Doesn't this go against the idea that it is enough, that it is restrictive enough to bring about a decline in inflation to the degree that the FED would like well.
Inflation has been coming down, as you know. Maybe it's not coming down as rapidly as some people think, but I think it's proven to be quite transitory in durable goods and even non durable goods. Where we still have stickiness or persistence is in services. And we know that rent inflation in the real world has come down pretty dramatically, and that's likely to mean that we get down to something like three to four percent inflation by the end
of this year. Right now, we're about four to five percent, So I'm optimistic that inflation can very well can come down very well on its own without any more restriction. I think a lot of the inflation was pandemic related. It was a shock that had been after shocks, and I think we're sort of normalizing.
Did jar Danny you talk about a broadening market? Helped me with package goods. Some of them are trading at nineteen twenty twenty one times earnings. Am I supposed to acquire new shares in those companies? I mean, I'm just just dazzled by the idea of buying new shares at a twenty one multiple that's got a single digit slow, single digit revenue growth.
You know, the bearers have been certainly right about the fact that we have really never seen a situation where a bull market got started with multiples basically at fair value. The forward pe, the forward pe of the S and P five hundred was fifteen point one on October twelfth when the market bottomed, and that is troubling to a
lot of people. But the reality is, if you take out the megacap eight, which are unusual stocks, you get a multiple of about sixteen, so again it's closer to fair value, whereas with them you're at eighteen eighteen and a half. So I think you have to really kind of slice and dicely the stock market and look for where the value is right now. And as I said, it's beating up financials that seem to be pretty good values.
Industrials I don't think have discounted what we're seeing with on shoring and with building the chip plants in the United States, electric vehicle battery plants and so on. So I think there are still opportunities in the market.
Great to catch up at what a coal just to be constructive. So far through this year, mine's constructive authorny research. Talking of the financials, let's continue on now when we do so with Jeffer you visiting with Paul Sweeney yesterday.
It is b N Y Melon conference in Florida, and its jetted up to join us. He's senior market strate to just be and y Melon. It's a quiet period, but it's not a quiet period. I'm gonna ask you an open question to start equities, bonds, currencies come out of these, Where is your single focus now in.
The I think those single focus is we need to acknowledge high for longer. By single focus is those residual fed cuts that still seem to be the market is intent on pricing and heading into next January probably needs to get rid of them.
Now. We talked about the fog as being sort of a metaphor right now for a lot of the uncertainty that we have in the market. It's unfortunate and convenient. However, I do wonder how much this lack of conviction makes you have all that much more conviction in cash, because if you could just sit there and earn something, you know, even if you're not through, you know, throw blowing it out of the water. It's better than nothing.
That's been the theme that we've observed in our flows and for the best part of the last six probably six months, if not longer. But having said that, there is one new dynamic seemingly coming through things of flat lines. So people not adding to more cash because they're seeing that allocations are just solo right now to risk and
are the institutional investors that we custod for. I think they're starting to push some funds, not speculatively a bit or opportunistically, but they're looking at valuation and they're looking at the growth environment. It could be a bit more benign than we give it credit for, so funds are actually being pushed back in.
In the next half hour, we're going to speak with Eddie Danny who's going to talk about the Mother of all meltups Mammo as he calls it. And I'm wondering how much this positioning right now of an increasing amount of cash is actually being fuel for this mother of our meltups. It could be coming.
I think it is going to be the fundamental ass allocation story for the second half of the year. But on top of that, the macro picture is can we dirt and visage maybe a soft landing, and Gun was having a few conversations around this. If we can get to say year end with still pay rolls around two hundreds hundred and fifty thousand, but core inflation core PC on the way down to four four and a half percent, I think that is a good environment. That's a good result.
So if that translates into the corporate profitability, stability and earnings growth as well, then with the cash on the sidelines your better return profile, why not push cash back into equity.
I feel like right now there's two different views. Either you just sit in cash take five or you go to AI and chase types and dreams something in between.
Right now, for you, it's that bubble story as well. If there's still one asset class I have of conviction on globally, I think it's an emerging market at asset it's a lot of interest in Latin right now. The benefiting from a US story is still positive. I do think a China stimulus is coming as well on the commodity side, and see credibility in that region. In terms of positive real rates, we always go back to the
real rate story. The FED is giving you a one percent or so real rate buffer, but in Latin they're giving you two three, if not higher. So in terms of asset allocation, the residual flow, I think a lot can go there.
To China stimulus. What do you expecting.
So if we use the benchmark and from from years ago where they had that tax cut round as around two trillion woman b mark, that is the baseline that the bare minimum to really make a difference to the data. But on top of that, I think there needs to be a shift in expectations. You know, when I was there for the first time in many, many years a few months ago, you know, there was just this palpable fear that things could still go back to, you know,
where they were a few months ago. But that clearly is not the case near right now. So there's got to be a governmental push, but again encouraging the private sector that they can leverage, they can add to their balance sheets and move on according because China has been de risking, deleveraging of the last two years.
To China, and it's the last twenty four hours has been just extraordinary. How do you treat the IMF's cautious five year view, even what Oas did yesterday. Do you just instantly say I want to be suspect of that and take a contrarian, more optimistic view and global GDP.
Well, I think global GDP is reflective of you know, where global productivity is, where global demographics are. You know, China's own growth forecast. If we go back to March, you know when they came out with the growth targets the NPC that was considered conservative at the time, especially if we take into account the rebound and the remands
and coming through. But then if that is a warning signal, then I think it gives the impetus for government suspend to invest, a boost productivity, to boost growth and get things in a back on track.
Leilan Miller at China Basebook is heated that the street has this wrong. He's far more optimistic of the domestic Chinese experience and says it'll even come over to a Pacific room statement, is this the mother of opportunities?
Were missing?
I wouldn't say it's the mother of all opportunities, but given the last three years, you know, China's almost been an afterthought in terms of AUST allocation because of lockdown, because of other factors. There is an opportunity set there as well. But having said that, going to the fiscal story, that's also one thing I deeply worry about globally right now. When the IMFIR and with them Chancellor Hunt just upgraded reports for the UK, one thing joor jy Over said was,
please don't do additional fiscal stimulus right now. We've seen what happened in Turkey before the elections. We've seen what's happening in Poland right now New Zealand for example, pushing through stimulus that's lasting. Central banks certainly right now, to be honest, even the debt se debate, maybe the fiscal h consolidation, shall we say, was barely anything. So central banks, you know, they need some help from the governments.
That was the most diplomatic way of saying they actually didn't make any progress and cutting any kind of spending whatsoever in the debt celling debate. Just sort of putting this all together. This is a time of media reviews. Yes, and there were a number of high conviction trades in
the first half that were absolutely demolished annihilated. What are some of the conviction trades heading into the second half that you're concerned about and I think about the conviction trades that you talked about of AI in Lancash right.
So in terms of AI, do we want to think you know that is that you do have a growth story, you have the innovation story, but is there a Tina focus in there? Again, and I do have some cash allocations to push for I will just go with via Tina theme. So I think that is one thing to
bear in mind. But going back to my earlier point about FED cuts need to be priced at, one conviction view that we have is this high for longer narrative globally, and we're talking about potentially no cuts from major central banks at all until at least the second half of next year, whereas you know, that is not something that's priced and I would say the FED or anywhere globally because it's sticky inflation, persistent inflation, and fiscal is only
going to make that worse. And we've got quite a few elections near coming up globally over the next eighty months as well, and we love electoral giveaways on the fiscal side, don't we. So that's where curve steepening bond yields. Will we even be looking at, say JGB ten years at one and a half a century, West teams are going to come through.
A Jeff, that's interesting. Jeff, you there have been my man, and looking forward to eighteen months of politics and financial market volatility.
I'm golf now.
It would pay it to some to talk to somebody that actually understands sport. John Garrimandi is a Democrat from Sacramento, but far more than that, he's someone at Berkeley who was second team All American in football. He is someone that had a legit football prospect with the Dallas Cowboys and the Oakland Raiders, and he said, now I'm going to go over to the Peace Corps with the love of my life to Ethiopia, and that was the end
of his football career. He did so well in California politics, Lieutenant governor, of course, insurance commissioner, and joins us here on the combat of modern sport. John, I can imagine the Saudis wanting to buy the Dallas Cowboys or something like it. Compare your analysis of this golf transaction regulation and monopoly with the shock if the Saudis or someone wanted to buy the Dallas Cowboys.
Well, actually that kind of thing has happened in the soccer leagues of the world. The super wealthy, some of them from the Middle East, do own one of the key soccer teams in Europe. So yes, it does happen. But this situation in golf is really unparalleled. What has happened is.
That the.
Leagues, the PGA leave and the European leagues have formed a monopoly and they do not pay American taxes, so they can come into the United States make billions, which certainly the PGA already had at least a billion and a half annual revenue, and it considers itself a charity and does not pay corporate or any taxes at all.
So we're going to end that piece of it.
With regard to the monopoly, if I were a professional wanted to be a professional golfer, I have no choice now but to bend my knee to this new monopoly. And if I wanted to sell golf clubs or I had a golf course, I've only got one choice.
I'm going to have to take whatever they offer to me.
Gauge the bipartisan support. What's so different about Gara Mendi, Folks, is he's been in the depths as insurance commissioner in California. Trust me, it's the worst job in California. So John, explain to me how you're going to garner bipartisan support against the lobbying of the golf people. But frankly, the lobbying of football, basketball, hockey, and the rest.
Well, hockey, basketball and the rest did have the same exemption. But over the years beginning all almost a decade and a half ago, those exemptions were eliminated. And they do pay taxes based on their net income. So there's only one left, and that's the PGA. It considers itself to be a charity, does not pay taxes on their income. They're exempt from corporate taxation. We're going to end that.
I think we got a real good shot at it. Interestingly, in the twenty seventeen Trump Republican tax cut, this tax exemption, in the early drafts of that bill was there to be eliminated. A fellow by whose initials were let's see j N contacted the President or somebody in Congress and said, oh no, no, you can't do away with the tax exemption, and it was removed in the final version of the twenty seventeen tax bill. It's been floating around for a
long while, the elimination of this exemption. My staff for one of my legislative guy he wakes up in the middle of nights and tries to identify the worst grossest tax loopholes, and this was on his list. Yeah, he pulled it out yesterday and said, why don't we run with this and eliminate this gross tax loophole.
Congressman, There's a larger issue here as well, when it comes to US relations with the Middle East, with some of the areas that are trying to plow into a lot of the major sports that people really depend on, including golf. I'm wondering how much pushback you're getting from within your own party, especially at a time when Tony Blinkin right now is meeting with over in Riad with
MBS trying to work out some peace tale. How much are people unwilling to really poke the bear in this particular instance.
Well, we ought to do more than poke the bear. It really really angers me that we are forced to bend our knee to NBS, to Saudi Arabia that has the worst human rights record perhaps in the world, and we know h has assassinated and then hacked up a journalist who was critical of Saudi Arabia.
We should never.
Ever put ourselves in the position of being subservient to anybody, and certainly certainly not to Saudi Arabia. Now, just keep in mind, they've stuck the United States and really the world with an increase in petroleum prices. Just in the last week they decided to cut their production, the result of which is America is going to wind up paying
more for the gasoline and fuel that we consume. At the same time, this merger is going to give Saudi Arabia access to the American market, access to American money, and not have to pay taxes.
That just really pisses me off.
Well, I just again, I wonder, though, and to your point, how much you have support from other members of the Congress at a time when they don't want necessarily opek plus making another They don't want a continuation of these cuts, they don't want oil prices to keep going up. How do they sort of gain leverage at a time where they might be equally angered as you, but might have these other interests as well.
Well, let's put it this way. If Saudi Arabia thinks it can come to America, run a business in America and not pay taxes. Something is seriously wrong with that equation. And that's exactly where the situation is today. And we as Americans ought to say, yeah, fine, if you like this merger, I do not. But if you like this merger, then go ahead. But by God, you're part of this system, then you're going to pay taxes.
And that's that.
You're not a charity by any stretch of the imagination. And this loophole, this gross tax loophole, simply has to end.
Congressman ten years ago or so, you decided that the nation had to honor a golfer named Jets. You put in legislation in the House. I'm not sure quite how it came out, but I want you to comment on a time past of Garamendy, on Palmer Nicholas and the sportsmanship that's out there. I saw that at Okill at the PGA Tournament of a couple weeks ago. It sounds like, because of greed and money, we're blowing up what we knew. What can your shop on Capitol Hill do to get out front of this?
Well, there are two specific issues in play here. One is the tax loophole which my legislation would close, and this new monopoly would then have to pay corporate taxes adds with any other corporation, and that raises a whole other question about American corporations that do not pay taxes, But we'll let that go for a while. The other issue is one of competition, and what has been created
here is an international monopoly on professional golf. That race is very very serious questions of competition or no competition. So they said at the outset here, if I wanted to be a professional golfer, I could have chosen to play golf in Europe, or in the United States, or in this new leave league.
Now I have but one choice.
I'm going to have to take whatever this new league offers me, and I have no negotiation opportunity. Similarly, if I have a golf course, I don't know, call it Deadmaster Trump's golf course, he could have gone and negotiated with two different leagues for the use of his golf course. Now he's going to take whatever they offer him. He's just no choice. There was a monopoly this year, and I would expect Congress.
To take that up. And if we don't, certainly the European Union should congresson.
Thank you so much.
It's a gentleman from Sacramento, the Democrat John Berrimandy. Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and anywhere else you get your podcasts. Listen live every weekday starting at seven am Easter. I'm Bloomberg dot Com, the iHeartRadio app tune In, and the Bloomberg Business app. You can watch us live on Bloomberg Television and always I'm the Bloomberg Terminal.
Thanks for listening. I'm Tom Keen, and this is Bloomberg