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 and 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. This is a joy. It's a joy always to speak to Claudiasm.
She's founder of some consulting, Bloomberg opinion columnists and formal Federal Reserve economists. But far more when you're that young and you come out of Michigan and you're codified with the rule in your name, there's very few people in the economics game they can say that, Claudia, where did the same rule come from? Was that a paper you did in your spare time on a trip to Europe and said, I think I'm going to come up with a rule. How did the Sam rule get invented?
The reason the Sam rule exists is it was part of a policy proposal. I had to automatically send out stimulus checks during a recession and to calibrate how much you send out how often, So it really was a sidebar to the policy proposal. It's turned out to be considered relatively useful to people watching recessions, but that was never the.
Right point of it. The heritage of Michigan with Betsy Stevenson and others there with Claudia some the Sam rules now full front and center. Kolbe Smith writing it up in the Ft ten days ago. How many states are in recession based on the Claudia Sam rule.
Right, Well, there's different ways you can calculate it at the state level, but somewhere around ten or less states are in a place where their unemployment rate at the state level has risen more than a half a percentage point. So that's kind of the rule at the national level. We're not calibrated at the state level. And yet I think it's a good exercise to look under the hood and see how various states are doing in terms of
their unemployment. And a big one within that group that has, you know, this higher increase in unemployment is California, and that's a that's a big state.
If you do look at some of these pockets of pain, and then you look at the overall aggregate, Does it make the overall aggregate look worse or better? Because some of the increase that we've seen in unemployment have really been driven by a few pockets of pain, right, And that's.
The thing to look at. In a state like California, there's been some very specific areas of distress. So you think about the tech sector, which is important to California's economy. And the question now is where we see these pockets of stress, do they spread? Do they resolve themselves kind of locally? And right now that is we can't know that yet, but that's something to be watching. Is that spread that will could eventually push the whole economy into a recession.
A lot of people have said that we can't necessarily get a recession and we can't necessarily get an employment creeping that much high. If you have consumer spending where it is, you say, it's not a mystery. So what is this non mystery telling you in terms of how long it can continue?
Right?
So it was really careful when we look at various numbers to understand who's actually measured and how they're put together. Something like GDP, something like personal consumption expenditures that we look at that's reflecting mainly a lot of high income individuals who are spending, whereas we look at something like the unemployment rate, everybody counts equally, So I think it's where GDP there's like this tension between consumers keep spending
and spending. But that's in a setting where these data tell us a lot more about someone like Elon Musk than they do a Walmart cashier. Right, So we have to be a little careful how the data are construction. And I think that's why the unemployment rate, which is a much more egalitarian measure of what's going on, that's a good way to look and that looks strong too.
Claudia, I'm so glad you brought up California. I was gonnaware of this, folks. I mean, I know California's ormuson. I thought list it was maybe the sixth or seventh global economy if you take it by itself. I'm wrong, it's the fourth. It's the United States, folks, China, Japan, and then the fourth economy would be California taken by itself. I mean, I think the financial media and frankly much
of economics, Claudia gets us totally wrong. They're these dominant states that are all Florida, California, maybe New York, and I'll let you decide the others Texas clearly, but are those three states not in recession while others struggle? Is is there something to size in America that gives us a better stability.
It's really a mixed bag at this point. Again, we're trying to figure out is the weakness contained or has it started spreading. California is the biggest one that's up in a it's unemployment race in employment rates have risen notably.
I look, Claudia at the FED meeting turned to that if we could, and the shock and all of it. We had two major economists say, okay, well then why didn't they just raise rates? Were you surprised that after the verbiage they just didn't raise rates in an Arthur Burns kind of way?
I was, though, I'll give him credit, this is the most hawkish pause I could have imagined, right going out and saying we're going to have two more rate increases. That's likely, not likely, just means that people are putting fifty percent or greater odds on needing to raise rates.
So it's not necessarily a done deal. I'm sure there was a robust debate at this meeting about what the policy chain should be, but wow, that really that summary of economic projection is really, you know, nailed it home. We're going to raise and it should have been a really clear signal forget about the chance of cutting this year.
It wasn't, Claudia, And what you hear is, yes, perhaps people aren't necessarily pricing in rate cuts, but as we heard from Ben Laidler, people are fighting the Fed. They continue to disbelieve that they're going to raise rates once even twice, especially not twice more this year, and that they're probably done for the cycle. Stuart Heiser saying that this is one of the biggest risks to the melt
up that he sees continuing. All things being equal, what's your probability that you assigned to the FED being able to go once or twice more based on what you were just saying. Unemployment probably the best gauge of how strong the economy is, and it still is pretty good.
Right, But that's all the more reason in the FED size to raise rates, right, and inflation has proved sticky, right, I mean the signal July could be it's a live meeting, we could raise again. Then they have a month of data between now and the July meeting, Like what are
they really gonna learn that they didn't know already? So I take them at their word for at least that first increase, But again, this has got to be hanging on a knife's edge because otherwise just raise rates, Like what are they waiting for if they think that's necessary. I still think that they're going to keep on to the holding the rates high, and inflation is just too high for them to be that comfortable to cut.
Which is one reason why people are really curious to hear what Ja Palla has to say. He's heading to Capitol Hill Wednesday, Tomorrow and Thursday, and he's going to be testifying for first time since the banking crisis kind of arose. How much do you expect him to double down and to say, you know what, you guys are getting it wrong. We're going to raise rates further. You can't just rally into strength and expect us to do nothing right.
And I think, you know, reading the monetary policy report that goes along with you know, when he testifies, it certainly has that flavor. You know, there are boxes on how we think about what's happened in the banking sector. They still are very I mean they're lying, this is very isolated, This doesn't have anything to do with interest rate policy. I mean, I think you can see in that report the same emphasizing these same points. So, like
you said, doubling down on what he's already said. And I don't think, I mean, he's not going to want to go so far from that script because they really did want this to be hawkish.
Claudie. One final question, what's our history of guessing or gaming or judging the trend and the second derivative of disinflation? Do we get that right? Ever?
Really? I mean, and there's if you go with the historical record, I mean, within a reasonable amount of time facing this disinflationary cycle, how to do enough?
How not to do enough?
Because again, this is not Volkar Fed that walked in and said we want this and we want it now, So there isn't much to compare it to. I mean, frankly, the Fed's forecast, especially in the out years, it's like, wow, that's pretty optimistic. And yet they could pull this off. I mean, there's still signs of it, but I think they're gonna be very cautious in stepping back even if inflation starts to fall.
I mean, it's really really, it's really really important here and I guess that comes down to the disinflation trend. And in housing, we get housing data today Pantheon folks, and this was a wonderful article over the weekend. They were just blistering that the housing confidence in housing certitude claudiusom is just wrong, harsh language. They said, housing in America,
the hope of it is divorced from reality. Have we can become too complacent about the ramifications in real estate of these high interest rates, waiting and hoping for that disinflation, right?
Well, I mean housing is one of the primary sectors that the FED should be working through to get to the real economy. I mean, that's one of the most interest rate sensitive sectors and it's been I mean we've seen initially a lot of optimism pulled out and now maybe more put back into the market. And as with all of these pieces, the FED cannot move the economy on a dime.
Right.
There's a lot of of going on in the pieces, but that's a primary transmission mechanism into the rest of the economy.
Claudia, thank you so much and congratulations on the amount of work we see on the some rule out there in this third quarter now third quarter almost almost third quarter of twenty twenty three, Claudia, Sam of some research in the equity space. We've really focused on this this morning because we've listened to you on radio and television and you want to know equity opinion around equity's bonds, currencies, commodities. Mister Kronnert is equity strategists and managing director at City Group,
where Thrillty could join us this morning. Scott Kronter, what a strange time. I want you to describe right now how you address in writing fear of missing out? Where is that in an equity strategy right now?
Well, where it is right now is in the performance games you've seen in this tech growth component of large cap equities, and it's also increasingly showing up in a lot of our positioning data. So over the weekend, our quant colleagues pointed out that looking at the future's positioning, it's about as bullish as you've seen since the global financial crisis. So there certainly has been a crowding in effect underway. As this Nasdaq led rally is really kicked in.
I am my head is spinning because I'll see on a given day, the bet is negative, the bet is caution, the bet is woe as me. We're all going to die, the bull market's going to end. And then you just said the bet is actually that people are very bullish. You can't have it both ways, which is it?
Well, the starting point is the fear that was kicking in last year is the FED peak hawkishness was kicking in, and we were really concerned about recession risk. So you went into this year with probably a little bit more concerned positioning related to this megacap growth coport, which felt the impact of the of the multiple compression last year. Heck, we're using this four thousand target that we can get to the same target we used start of the year.
Start of the year we looked bullish versus the futures implied positioning. Midyear we're hanging on to this target. Now we're looking bearish. So you know, there has been a pretty good seesaw a work here. I think the point we're making is is that what comes with this price
action is an implicit expectation around fundamental follow through. And our concern quite simply is in the shorter term for all of the AIU four you kicking in, the higher you go now, the higher the implicit expectations you set up for. And that just sets a pretty high bar going into the Q two reporting period.
So you think that this is going to be an earnings led decline because we're going to see some sort of declined to get down to your target of four thousand before going up to where you see it eventually ending up, which is around where we are right now. So is that really going to be the catalyst big tech earnings reports that disappoint I think we're going.
To find across the board. I mean, every company in the country better have an AI strategy that they're talking about. As you go into Q two a reporting period, the issue is going to be to what degree does that show up in fundamentals. And it wasn't that long ago that we were thinking AI was sort of a twenty five event. It's been pulled forward for to see if
some of the big tech names of late. I just think that what we're going to run into is this disconnect with how hard the market is run versus where earnings expectations are. We started the year two thirteen for twenty twenty three earnings. We're up to two fifteen now, and so are our call around earnings. Resilience has been very solid here. It's just a question of to what degree a lot of expectations are being priced in, perhaps too quickly.
So you think the people who think the FED is going to be the killer of this rally are overstating things that there's going to be some sort of additional rate hike or two and perhaps stick your inflation. That could really underline some of evaluations that have gotten baked in here. Do you dismiss that?
Well, I think that's part of the part of the equation, right, So we're kind of coming at it more fundamentally based.
But to your point least, I mean, you're still looking at at a FED that it's going to need to see a little bit stronger deceleration and inflation metrics to feel comfortable changing tune again here city the house view is another one or two hikes, and we're looking at a FED fund's futures curve that is quickly right sized over the past couple of months and is now pretty comfortable. You're looking at a five percent FED funds level into
the end of the year. So every step we go in terms of nudging up targets for the SMP, you still have to compare that to the return on cash. It's a pretty interesting trade off that investors are facing right now on this, but there's no doubt in our mind that a higher for longer FED higher than expected versus two months ago. The interest rate backdrop, all of this plays into a an ernie sorry, an interest rate tailwind that does keep somewhat of a lid on where valuations can go.
Where's lid on valuations three years out, five years out. I'm not talking about buying hold Scott Chriner, But you've been doing this long enough to know the percentage of money that's in the game for what for the financial media is long long term like thirty six months. How do you scope thirty six months given all the angst that's out there.
So it's not easy to do tom clearly. So the way we've kind of come at it. Heck, a year or so ago, we were saying, hey, geopolitical risk premium is going to knock a couple of multiple turns off the SMP. Now we're looking at this disconnect with how you're going to value growth versus cyclicals and defenses within
the market. The way we're thinking about it is that what's happening under the surface and this is going to be a direct AI and an indirect AI influence the opportunity for productivity improvement across the S and P five hundred in broader equity on the economic landscape here in the US, we think is going to get really interesting here. So longer term, we're pretty comfortable the market can hold
a higher valuation. Purtsey a megacap growth and tech, but also because the rest of the market is going to prove out that it's less cyclical than historically perceived. And I think AI, in addition to other forms of technology that have aided and embedded productivity improvements, end up underscoring a higher valuation than many investors have gotten comfortable with. So from our view, this is all timing. We think we've run pretty hard. We need to digest the move.
But the setup here is we navigate this recession risk in the second half of this year is for is higher for longer coming out the other side.
Scott Croner, thank you so much for the brief with City Group. If you're a retail investor in your a yield hog, you're looking at a twenty year duration, thirty year unibond, whatever it may be, to grab that yield, and you have been absolutely slammed over the last twenty four months of Bloomberg total Return Index down anywhere from thirteen to fifteen to seventeen percent, an end of the
great bond party. Megan Swivers extremely acute at this with Georgetown Finance and Mathematics, director of US Rates Strategy at Bank of America as well. I'm going to start with the basic retail question. It was up, up and away for ten years, fifteen years, whatever, we got absolutely slammed, priced down, let's say fifteen percent to be kind, We've come.
Back a little bit now what Yeah, Tom, I think this is really the question on everyone's mind right now. You know, you have yields at relatively attractive levels, but is now the time to be buying? And what history tells us is that you really need to wait until that final fed hike of the cycle to feel more comfortable and confident in going long duration. At this point,
and what we see from investors. The survey that we conducted at ba A. One of them is this Global FX and Rate Sentiment Survey, which is a really cool survey of global benchmark investors, has a pretty long history two decades or so, and that tells us that right now investors have more confidence being long uvest duration than they have really at any point in time during that survey.
Give us some maturity time on this, I mean, let's frame this out. The FED is at the two year space, The belly of the curve is five to seven years long duration. Does that click in at ten years or is it a different maturity?
I mean, you can think of it across the curve.
Really.
What you see though, and what we've been guiding investors tours, is when you're talking about long duration, talking further out the curve, ten year, thirty year rates, and those are more limited in terms of how much they can increase on the back of the FED continuing to hike versus the front end of the curve will be pulled higher with the FED delivering more rate hikes likely.
I The problem I have with this is everybody likes to talk spread market and all these other professional distractions. I get it. Everybody read for Bosi. I'm dazzled. Forget about it. The fact is bonds went down fifteen percent just as a round number one hundred became part became eighty five. That's all there is to it. We've come back a little bit to eighty seven, eighty eight, ninety,
whatever that number is. Are you, as a bond investor investing for total return or someone somewhere out there you get back to what we remember? Or is this the new level we're dealing with?
I mean to me, Tom, the answer to that question comes down to the inflation outlook, and right now, if you look at market price and kind of following up on the prior segment here, the market has a lot of confidence that the Fed's going to be able to see infleetion back down to two percent in a year. And if indeed that is the trajectory, then you want to get price on the exactly you're going to be able to see the FED cut alongside that.
The other thing you say in your research note is issuance. And this is where all my radars, Lise and I talk about this all the time. What are CFOs going to do in this milieu. I mean to me, you know, there's going to be the big guys call up to make four phone calls, including the Bank of America, and they sell a gazillion bonds. But is a total What will CFOs do on issuance? Yeah?
I think that that is another important question here, And on the back of this repositioning that we've seen from investors more broadly, what you have Treasury doing now that we're beyond the debt limit is increasing issuance. This first wave is going to be in bills pretty easily absorbed because if you look at the Fed's overnight reverse reboat facility, you got a lot of cash sitting on the sidelines.
They can go out and buy that. But the question here, right is this longer duration stuff ten years and out. Who are the marginal buyers of that going to be? And I think at the end of the day, that's another risk to this very consensus view in the market that we currently see, which is wanting to be launderation at these But.
The consensus view, folks, to frame this as simply as we can, You're going to look out to ten years, which seems forever away. Two thousand and thirty three two thousand and thirty four. You're going to buy it and you're going to clip the coupon. If the price goes down, you've still got the coupon to carry to help you. But the hope and prayer of the market now the consensus is price up along with that to a really pretty significant total return.
Right, that's exactly right. And again, you know, if the Fed is able to see the inflation levels that the market expects at this point, it makes sense for the Fed to get towards a more neutral policy rate sett and call it two and a half three percent, which means that you're going to have downward pressure on those yields at the back end. But really the challenging thing and the risky thing for investors is is stickier inflation. And currently the Fed really doesn't have a lot of
confidence in their forecasts. We don't think that they're going to stop hiking until they see core CPI coming closer to two tenths one tenth of a percent. You're at four tenths.
So what's your ten years call year end or one year up, whichever way you frame that.
Yeah, so year end we have three point fifty, so a bit lower than the levels that we're currently sitting at, and that is really due in part to the fact that we're going to be beyond the fed's final rate hike of the cycle, and you're going to have more conviction on what the inflation at look will be. But in general, we're not expecting this very massive fall in rates. It's it's looking near term like you're pretty much going to be sitting in this range between three twenty five three.
So I don't know if you get into portfolio construction. I got like gateways to go here folks with the Megan Swineber. But the answer here is it's real simple. Do you single point, do you barbell or do you ladder out maturities if you're scared stiff with the stock market?
Yeah, and that's the that's the important point here too. Rates duration and portfolios is the world's risk off asset, and if you have more of this pressure here on the equity market, you're more inclined to see rates be that buffer, be that hedge. A key point here though, is whether or not we're going to see this recession that many economists we're calling for at the at the start of the year. The data has been so resilient, right, The US economy is just a lot more resilient than
what the FED what economists. More broadly, we're ultimately giving it credit for, which limits how much you can really see the equity market fall and rates fall alongside it.
I got to go out to the long term space. It's great when you see Apple Computer put out a thirty year piece or whatever, and you know it's sold in two seconds as well. What is the plus minus of long, long duration, full faith and credit right now?
Yeah, yeah, you know, I think you have to be a little bit more humble about how far rates can fall. The FED when they were implementing the flexible average inflation targeting strategy, a big part of that, right was being able to see nominal rates move higher, be able to build in some buffer when they're cutting. So I think that the probability that the FED cuts down to the
zero lower bound is more limited here. You probably have to think that that in a FED cutting cycle, when we're in more this mild recession, it's closer to two and a half percent than it is falling all the way back down to zero.
I mean, I'm looking here, and you know, it's amazing how this is the trap, folks. You gotta be careful here. As many of you know, I bought the one hundred year Austria. It's like now in ninety seven, I'm down seventy percent in that piece right now and it's off, it's on the mat. I mean, even with some of the constructive things of Europe or whatever, the Austrian ninety seven year piece is still it hasn't come up as that's a trap you're talking about on a less you know, inflammatory.
Basis exactly, And I mean I think near term you have more potential for the front end to be more viotal move higher. With the Fed continuing hike. You see the market only pricing about another twenty five basis point hike over the next several months. If they deliver on two more, which is our base case call, you're going to see more upward pressure on the front end of
the curve. So we think that investors who've really been positioned for the end of the hiking cycle, which is curve seepeners long duration, you need to be careful here. And I think a good way to hedge this is to push back on what the market's prices.
The way to hedge it is to buy Nvidio right.
I can't comment on that.
She's Megan Sweibers, thank you for compliance for Bank of America. Sometimes I and very often, there can be a book of the summer or the book of the year, and it's just for whatever reason in the time, King blur, I blow it. I blew it. With Sebastian Page's phenomenal Beyond Diversification, I'm going to give them the highest regard on this. This is the most important adult Wall Street book since Richard Bernstein's classic volume on value and growth.
I can't say enough about it. Every time I look at it, I'm blown away by the acuity. Joining us this morning, the author of Beyond Diversification, Sebastian Page, shingles out at t row Price. Sebastian, I'm going to get right to it. You talk about quack remedies. What's the quackness of asset allocation in twenty twenty three.
Tom, it's we're going through a regime shift in asset allocation. You know, this is a critical time in capital markets history. In my mind, after forty years of declining rates, we finally made a higher high end rate and we've wiped out seventeen trillion in negative yielding debt. This begs the question what do we do with asset allocation? Both tactically how we navigate this regime shift, and that's been very confusing, but also structurally the sixty forty. You often ask that
question on your show. I think the sixty forty needs to be modernized. I think of the forty we should add maybe fifteen to twenty percent in different alternatives and look for equity protection strategies and so rethink diversification. This is a critical time for doing this, Tom.
This is really important. And folks, this is with the sharp ratio, with a risk free rate finally back to normal, and the Sebastian page religion is you know what, folks, that was a nice fifteen year gift. We're back to normal. We can't go out and find private equity. We're not Blackstone, we're not KKR, et cetera. Sebastian page. How do our listeners and viewers participate in the Sebastian page fifty fifteen? Whatever? The rest is an alternative.
You know, liquid alternatives are interesting if you know how to select them. It really matters how you define liquid alternatives, but investment strategies that focus on relative value that have less of the traditional market exposure are also available in liquid forms. But it also calls for rethinking how you navigate markets tactically, how you protect for the downside. In a nutshell, Tom, the big question for the sixty forty is what is the role of duration or treasuries when
we get interest rate shocks. Now, to be clear, we just had a five hundred basis points shock from the Fed. We're not getting another one. In fact, we've been adding duration back into our portfolios. But it's a critical question if you look out five ten years, what is going to be the volatility of interest rates, what is going to be the volatility of inflation? And how do you position your portfolio for those types of regimes. And this goes for things like hedged equity strategies. It calls for
things like real asset equity strategies. You know, stocks that we kind of didn't really like for the last ten years pre pandemic, right when inflation was below two percent, but energy companies, real estate investment trusts, metals and mining precious metals and so on, strategies that have a levered response to inflation shocks. This is all part of the new regime for the next five to ten years.
Well, how much is this regime changing in real time? There was a time, perhaps I don't know, five months ago, when people thought that tech stocks were the most interest rate sensitive, and yet we've seen yields rise and tech rally in tandem. Is that connection also broken? Is that diversification in these two areas perhaps different than it was just five months ago.
Yeah, Look, in the short run, say, I think six to twelve months, we're navigating threacherous waters. I think the narrative around growth stocks has been driven by different factors. Lisa, Yes, this correlation seems to have broken a little bit, but there's also an underlying narrative of yeah, okay, we're pretty
close to peak rates. Those big tech companies have shown that they're focused on efficiency, and then, of course, you know, you see positive surprises on cloud revenues, positive surprises on digital advertising, and then you hit sort of another kind of regime shift in AI. And that's really been part of the story, and you've covered it at length in your show. But you know, AI's been around for a
long time. It just seems like the large language models and the chat GPT are kind of yet another regime shift we're going through, and that's all part of the value versus growth equation. Lisa. We went back to neutral in our portfolios were value all of last year and we benefited from that. Now we're basically back to neutral
between growth and value. We don't want to be underweight if the AI bubble quote unquote if you will is kind of like nineteen ninety eight, right, So we'd rather be at neutral right now.
Semester Page, Thank you so much for joining us today with tro Price there. I can't say enough, particularly for pros about beyond diversification, hugely, hugely thought provoking. The Secretary of State in Beijing getting off the airplane sort of like the way Terry Hayes gets off the airplane at Reagan here back when he's coming in from Dallas DFW. He's founder of Benjia Policy and joins us this morning.
Terry just you know the basic idea of the shock of the Secretary of State of the United States at any country being shown or greeted to the country like he's coming out of Reagan. You know what it's like. You got to get from Gate ten over to gate three quickly and your luggage is on the way was accomplished.
And those that Reagan know the infamous skate thirty five x, and that was kind of what it.
Was there too.
What was accomplished was the ability of both countries to say that they are continuing to communicate, that that is calculated by both sides, is having the effect of diminishing tensions somewhat, I argued before the meeting, and would still argue that that's largely illusory. Uh. You know, my takeaways really are simply that China sees the United States business community, as you know, as its friend geopolitically and will continue to try to push that relationship that the United did.
That China also is pushing the United States to what they call recalibrate its its relationship in Asia, in other words, kind of back off and and and agree that Asia should be as Lake entirely, which is an absurd proposition to the many countries who are our allies there. Thirdly, there's no military communications. And fourthly, there's no mention of
Ukraine or Iran for that matter. So we've got communication, but we don't have a lot of communication, and We certainly on either side, don't have anything to show Terry.
This is the political tension right now. Perhaps it was a win for President Biden in terms of not escalating any tensions further creating some sort of open lines of communication. Was it a win when it comes to the politics domestically of a nation very much growing hawkish on China and some with some calling for some sort of decoupling which this president has pushed back against.
Well, you know, I agree that normalization of communications is a win for President Biden. Regardless, I think that's very true. At the same time, you know, we don't get much more than that, you know, not much has been gotten. Secondly, you know, my contention would be that the United States policy towards China actually started to flip in say twenty sixteen, twenty seventeen, even before Trump became president. And it is among the most bipartisan and probably the most bipartisan policy
area that we've gotten Washington. So that's not going to change either. The vast majority of Washington wants communication with China. The vast majority of Washington also does not want a situation where we're where we're either getting rid of our own geopolitical interests or putting our allies in more peril as a result of that. One of the lines, we're not doing that right now.
One of the lines from Tony Blinken's press conference after the meeting really stuck out, at least in a lot of the talk shows over the weekend and yesterday. He said, we remain committed to our China policy with the three Communicates, the Taiwan Relation Acts, the sixth Assurances, we do not support Taiwan's independence. We've made it clear that we oppose any unilateral change changes to the status quo by either side. Is that controversial, terry and how is it being sort of spun the day after?
Well, it shouldn't be controversial, because what Secretary of Lincoln is doing there is really underscoring that United States policy since nineteen seventy nine in the Taiwan Relations Act, remains the policy of the United States government, and there's been a lot of concern, a lot of understanding and misunderstanding around that over the past few years that frankly have been aided and abedded by both President Trump and President Biden in past statements. So you know what Biden's trier
e sees me. What Lincoln's trying to do is put a floor under that by saying, look, our policy is as it was, as it was and it continues to be. Make no mistake about that. Clarity is good, Jerry.
I want to link this to our economics and our corporate relationships with China. Captain Mann is at the Bank of England. She's one of the great American international economists, and Kathy Man of MIT and Brandie makes very clear that we have a codependency with China. We need them economically, economically, they need us. She owns the high ground on the
transpecific codependency. What is the relationship in these discussions in your Washington when they observe Tim Cook living that codependency at Apple and bipartisan presidents saying no, we don't want to do that. How's that work?
Well, then you know the vast majority of Washington understands the codependency. You know, frankly doesn't want to upset it.
I find the.
I find the whole war of rhetoric here, whether it's decoupling or de risking or anything else, to be a little overblown. On the street. You know, nobody's talking about removing Americans or American business from China. What China is trying to do at the same simultaneously, though, is trying to attract and continue to have in American business and American investment, while at the same time making the terms under which non China investment will exist to be more
onerous than it already has been. Yeah, but I don't see the United States as trying to take that away.
Terry Hanks, Thank you so much with Penjia policy. Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and anywhere else you get your podcasts. Listen live every weekday starting at seven am Eastern Bloomberg dot Com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can watch us live on Bloomberg Television and always on the Bloomberg term No. Thanks for listening. I'm Tom Keen, and this is Blomber