Surveillance: Peril With Woodward & Costa

here is the style of writing of peril. We're gonna get him on in a moment, but Lisa bob Wood fourteen bestsellers, there is a method to his madness and it really highlights the different dynamic that Mark's Washington, d C. And I'm talking about that with President Trump, which he talks about, but also going forward to the Puden administration and what they face going forward. There's a new frustration with the status quo. There's fusible urgency. But the division

here lies in what sauls it. Do you grind away at sort of the old you know, the old establishments, or do you just sit down and say I'm not gonna move until it all comes down. Robert Costa out of Notre Dame Holding Court in Cambridge, where Dr Larrion is and with him is Bob Woodward, and they have teamed up for Peril. You've seen it out on all sorts of media. We're thrilled they could join us this morning. Bob Woodward, why did you pick Robert Costa? You could

have picked anybody in politics. Why did you pick young Costa? Because young Costa is the best reporter I've ever seen and his work ethic makes mine look weak. Uh. He just threw himself into this years working at the Post. He understands the Republican Party, understands Washington. Uh, like no one. Uh. He taught me a great deal. And Uh it was you know one if I was saying to somebody, said, well who most of the work, and I said, actually, we each did six. Uh. It's the kind of partnership

where everyone over performs. And uh, I think over performance for him is just the natural state. Well, congratulations on the book, and folks, again, this is Woodward and Consta and Bob Woodward with a courage at seventy eight to say I'm going to go out and find somebody to do this with me. Robert Constant, the immediacy of the book is stunning. You've done loads of interviews on the look back I don't want to do that. I want

to talk about the future. And Robert Consta, you and your book by saying the peril remains, What do you mean by that? Well, I couldn't have a better reporting partner in Bob Woodward. He has taught me so much into that question about peril remains. Uh. That's a theme that runs throughout the book. And it's built not just it's not an opinion. It's based on reporting. And that's the Woodword method. Tell the story of American politics, American

democracy through scenes. And you see the end of our book. President Trump's out there on the political campaign trail. He has a warlike cadence and some of these speeches saying we will never surrender, never give in. When it comes to conceding the election, he's demanding a comeback, you know, Robert Costa, I'm gonna look at what we see with Greg Grandin in the Great American Myth, looking at jackson Ian history and how it folds over to the GOP.

Robert Costa, what kind of Republican party do you perceive in two thousand and twenty four a Republican party riven by divisions? You see in our books someone like Leader McConnell, the Senate Minority leader, wants to move on. But so many people inside the GOP, on Capitol Hill and beyond believe President Trump still has political capital and so his decision on will really dominate where this party goes at this point. But there's competition. Vice President Pen's a complicated

political figure, as our book shows. He may want to have his own say, his own bid, and there are other stars out there, but President Trump he remains the the political force inside the GOP. There's a question right now, Bob, what of what the current administration is facing in terms of getting a Washington back to a semblance of what

is considered or was considered normal. Considering all of your coverage backs in the Nixonian days, how dysfunctional is today's government based on some of the changes and the upheavals that we've seen over the past number of years. Well, that's an important question. I mean, it continues. Our point here is that Trump triggered a national security crisis that we didn't know about was a secret during the transition from Trump to Biden and uh As Costa says, look,

everything is peril. And if we look at Biden right now. He's got immense problems with Afghanistan with the virus, and he's trying to work out some sort of legislation to get his program through, and he's running into some obstacles in his own party. In the Democratic Party, he's supposed to be the leader and say okay, everyone do this, but that's not the way Washington works. And Uh, maybe

it's inevitable that people are going to be outliers. People uh the Senator Mansion, Senator uh sisma that they are going to just say we're not going to march to somebody else's vision, We've got our own, which really raises a question about this new dynamic, this new increasing frustration about a dysfunction of Washington, and how you go about

handling it. And Bob, I just want to know if you think if there's any precedent in terms of a group to saying we are not going to work with the establishment, period, full stop, unless we get everything we want, which seems to be an increasing fringe on both sides of the aisle, both Democrats and Republicans. Well, there are presidents presidents. President Clinton had a hard time getting his plan through. It It was a squeaker until the end.

So we are going to see. But the debate in Washington, as you well know, always one of them is about taxing and spending. How much spending? How much taxing? And uh, Biden has gone for the everything three point five trillion dollars is a big spending package. And uh, we're going to see. And if you talk to people, I mean, Costa knows this better than anyone. There's a lot of uncertainty out there, and there is a lot of peril, if I may use that phrase, about where this does

does the Democratic Party come apart? On Bloombard Radio and Bloomberg Television worldwide, we welcome you, Robert Costa and Bob Woodward with us an effort of peril. Can't say enough about it once again after fourteen bestsellers, Bob Woodward on deep background, as they say, Robert Costa, page two oh one of Peril to me is everything about the future of the GOP. Mike Lee of Utah, born in Arizona, wants to sit at Barry Goldwater's desk. There was a time of peril in nine four I lived at as

a kid. This peril here, how do you perceive it? Worked out across both parties. The Mike Lee example, the senator from Utah, is such a prism into the GOP right now. He was presented with the Eastman memo. Conservative lawyer Johnny Eastman presents this memo to Senator Lee based on our reporting about throwing out some electors on January six, about searching for altraing at electors that may be out there in the States, and Lee long story short finds

this is not the case. He does a lot of reporting on his own to probe the Eastman memo, and he finds there's no such thing as alternate electors out there, but this memo and John Eastman, they were in the Oval office. Our book shows on January four, two days before the insurrection. This is not just some memo or some fantasy. This was something that was actively going on.

Pay attention to what word always tells me, to the action, where what are people doing, and saying, I look, Robert Costa, and I can go to your time at Cambridge, where I believe you effort of the fractures career of Winston Churchill. Let's swing to the Democrats right now and look at their peril. I would suggest Robert Costa that these Democrats are remembered only by Bob Woodward in Washington, back pre Obama, back pre Clinton. Is this Francis Democratic Party now like

way back or is it something new. There's a scene in the book where Biden looks up. President Biden looks up at a portrait of FDR and he says, this is a time for that kind of transformational change. What you really see in the Democratic Party in our reporting is while Biden won the presidency, Bernie Sanders and his progressive movement have one power. They are in alignment with Biden. Sanders made the decision in April and May of to

work with Biden rather than against him. And you see Biden moving to the left on his one point nine trillion dollar rescue plan, which we detail in the book, and even now on this massive plan he's proposing, and that's currently on the rocks on Capitol Hill. Biden is not moving towards the center and trying to be the guy cutting a deal with Mitch McConnell. And that dynamic continues. He wants to have a progressive legacy, even though he's

known as moderate. Joe Biden from Delaware, Bob but just taking a step back when you look at all of the the reporting that you did for peril, what's your big takeaway in the new nature of the United States democracy in this new very fractus era. Well, then it's being

tested and stretched by both parties. And I remember talking with President Trump when he was in office in nineteen, going into the Oval office and saying that the old order in both parties, Republican and Democratic, uh, is changing, is evaporating. Uh and uh he just he said yes, And I said, it looks like you seized history's clock in sixteen. And he just jumped in his chair behind the resolute desk, saying, yes, I'll do it again, talking about coming up. And of course he didn't. He lost.

But the big Trump theme now is the election was stolen. We dug into this as much as you can, and we found these memos in this documentation that the biggest Trump supporters realized there was no stolen election. What is Trump running on essentially his campaign is, well, they stole it in though there's no evidence, and uh, somehow I can run in four and and get it back. What the average voter sits and looks at all of this, what does it mean to them, who's going to offer

a better life and a better program? That should be the issue. Maybe that will surface in all of this. We have to continue on this, folks, with another one hour conversation with Robert Costan Bob Wooder. It is peril, highly readable. It's a classic Woodward shocking, deep background effect. It opens with General Miley, I might point out as well, and of course it is a look past as Woodward and cost to look to the future of our nation's politics.

Jordan Rochester that joins us next tomorrow G ten fex strategist. He will be there for Spurs Villa this weekend. I'm not sure what that's got to do when it comes to pandas or anything. Jordan, Hello, great to have you with us. Good morning everyone. Let's start with sterling. Jordan's that has become really, really unpredictable, hard to trade. And I know you're scratching your head and I've read you know earlier this week you've been really transparent, open, honest,

you didn't have a clue either. What are people saying to you? John? I think it's we've gone back to the old ways of looking at the pounds, even though it's not Brexit. We're not talking about trees made a given the press conference, Boris Johnson doing this, none of that Houses of Parliament stuff. But we're looking at Stirling with an inflation premium view. What's that about. We got this fuel crisis, petrol people are struggling to get petrol in their cars. The UK is highly exposed to this

gas crisis that's taking place in European energy markets. Was seeing the price of energy in the UK, just like the rest of your spiraling quite a lot higher. But the one thing that has really made it really difficult for us or john is we priced in banking and rate hikes, re rate hikes, price for next year, the pounds law. So it tells me we've got to adopt the old sort of framework, which is keep an eye out for UK inflation expectations. If they keep rising, if

energy prices keep rising, that's gonna weigh on the pound. Jordan, I'm going to ask a question, and I need to be a little bit open about this because I'll get a lot of hate mail. This is not my view. Before everyone starts sending me hate mail. Is this trading like an m currency now? Jordan's yeah, it's the question you always get asked. It's trading like can developed currency that's having an inflation problem um and emerging markets typically

have higher rates of inflation. So yes, in that respect, it's trading like in the end currency because we're focusing on that inflation metrics. But it's still one of the reserve currencies of the world outside the dollar, So we're not going to go too far and say it's untradeable, and you can definitely trade it. It's just very unpredictable during time. King, good morning to you as well. Is this such regime shift? Jim Bollard talks about a regime shift.

We finally have a sum no dollar giving us a big figure move kind of millieon for Q four. Is it a time to make big figures? I think this time we've had months now of your A dollar, for example, being in a very tight range throughout the summer, and I think as folks have gone back to the office and we've gone back to work in September, it's kind of woken everybody up to the risks that we're building up over that summer period, and you're A dollar has

been in a range and we've had leverage. So the headphonding community have been short the Euro, but not the real money community. Tom. So what I've been saying to clients is I think euro is having its end moment. You think backs to Q one this year when US rates moved higher after Georgia Senate rate results. The real money community through in the towel and all their dollar shorts against the end, they went long all the end.

They didn't do the same neuro The European reopening story was still very attractive, and we had et F flows into Europe, but that's for the FX that hasn't worked. And now we've broken below one sixteen, which is the line the sand for me. I think this is regime changed, Tom, and we're looking for one four seen in the euro against the dollar. All right, that's the short term, But Jordan, you do see the Euro going back to versus the dollar.

I believe. I believe that that was your car. Can you talk about the path to get there and how the ECB responds to some of the inflationary inputs, even though they call them transitory. Absolutely, Yeah, the dollar view is still predicated on a global recovery. But right now we're going through a slowdown data. The surveys are all slowing down, So that's why we're talking about dollar strength

right here and now. If we get into the sort of Q one next year, we'll have hopefully of pricing quite a lot of that slow down, and then we'll start to focus on the positives again. The European mobility data is fantastic. The returns of work in Europe has been much stronger than it actually has been in the US, according to the Google Apple data and every other statistics we look at for So that means maybe there's a

European performance story next year. And also by December we might have got the German coalition to announce the policies they will actually do. Whichever coalition is actually formed, maybe the market focuses on those growth numbers and could boost euro again. But fully e c B. They've got the same situation for the UK. Energy prices are going up.

They're actually nearly double more important for European inflation. Nine and a half per cent of inflation basket in euro is energy, so energy costs rising is a big deal for their actual inflation forecast. But they'll be able to rest on the fact they've had a decade of low inflation, so the idea of them raising rates next year or the year after it is very low. But for markets, what will be looking at. There's already one rate hYP price into the ECB by that's the end of it.

So do we see the re spe raise rates three years away? I have to I have to really raise a question about this because central bankers have broadly said that energy prices are not something that they look at for core inflation. That isn't going to necessarily bleed into their view in terms of whether to raise rates, since it has factors that go beyond monetary policy. Why is

this time different? This time is different because we've just had a record fiscal stimulus in Europe and the US, and also we're having massive supply chain problems, so it isn't going to be just energy. It's gonna be a lot of other parts of the CPI basket are going up. And the main thing for me is look at those

consumer inflation expectations. They're not falling, they're rising. They're rising slowly, but over time, as energy prices feed through to people's budgets, when they see the price of their electricity bills, when they start to go to the shop and see food and clothing going up, They'll start to think, maybe inflation is higher than to present, to raise my inflation expectation, and that sort of feed through perhaps two wages. I'm not talking about a wage spiral. I'm not talking about

inflationary spiral. But we are talking about the direction is probably higher inflation expectations, not lower, and that's something central banks respond to. I got one prediction from you, then you're a dollar looking for one fourteen. Let's get a second spurs Villa Sunday afternoon. You'll be there, Jordan, What are you looking for? If we get anything, just anything close to the shock result of one nil against Man, you all be happy, absolutely happy. We're talking about how

many beaver Town bread beverages are you gonna have? At least a couple, at least a couple, for sure. Can't drink comment a stands though, anymore, can you? Jordan? Really, I didn't know that that to change. To bring the base back into the stands, you have to except halftime. You have to drink really quickly and then come back out, which is what you see. The stands are still slightly empty until about forty minute so much every day about it. Janda,

thank you. Joanna Rochester there fourteen eurox strategist. Right now, we consider Washington, and we do it with someone who is steeped and I mean steeped and what infrastructure can do. Captain Clark is the Assistant Speaker of the House, but far more she represents the fifth district of the Commonwealth of Massachusetts and is adjacent to the most successful infrastructure

project ever done. Karatin Clark. I stood in Boston and abject awe and looked across the torn down Southeast Expressway at the north end I had never ever, ever seen in my life. Can we bring that infrastructure success to the rest of America. We are going to do just that, and that project, the Big Dig, shows what we can do not only create good jobs, improve our roads and bridges,

but also reconnect communities. And we've seen that play out over and over again that communities, especially communities of color and low income communities have been cut off. And so our Infrastructure Plan plans to do that physically and also help those who have been cut off by lack of opportunity to be part of a royal economy that we're going to build Congressman. I'll go with that. I think

that's very very good idea. But do you do it linked to a social program or is today's action going to be you and Speaker Pelosi are gonna delink infrastructure and future big digs from a social agenda. We this is all about building a great economy getting people back to work. So these are always part of one build back better agenda. There's roads, there's bridges, there's broadband, there's getting the let out of our water, and there is

making investments to have the workforce of the future. We know, whether you are Warren Buffett or the local restaurants that I recently held a round table with, childcare is a huge barrier for getting people back to work. Is about the economy. Look, the nation's in crisis. Even if you were playing baseball last night and that double play you went into was terrible, terthy Clark. I want to know right now you mentioned bad water. Dan Kildee Flint, Michigan,

his lived bad water. He's got to go out for you and Speaker Pelosi and count the votes today. Can you count the votes attaching this infrastructure bill to a three point five trillion dollar social agenda? Of liberals. This is the agenda of the American people. This is the agenda of American business. Do we want a full recovery or do we not? These are absolutely on parallel tracks, and they are the President's agenda, built from his conversations

throughout this country. So whether you're in rural America and you can't find childcare, or you need to get the lead out of the water in our urban cities or in our suburbs, this is all part of how we addressed this moment of economic, racial and climate justice. And this woman, do you think that there will be actually a vote today in the House of Representatives on the billion dollar bipartisan plan. We are working every day to make sure that we have a path to get to

the vote. And I can tell you this about the Democratic Caucus. We are united in behind this Build Back Better agenda because we know that this is what our economy needs to meet this moment a great challenge. But Congresswoman, what happens if that vote is not held today because there are not enough votes to get on board and to agree on the build Back Better part of the

whole package. The two part issue that the Democrats would like to pass what I know for sure is that we are going to pass both parts of these Whether if we can do that today, that's what we're working every minute of today to make sure happens. But if it doesn't, that doesn't mean this is over. This is

a commitment. This is why the American people sent Joe Biden to Washington, why we have the majorities and there is a deep unity around making sure that we rebuild this economy, we address the urgency of climate change, and we make these critical investments in the American people so they can get back to work. To be clear here, then you don't think today is an important day. Today, it's a critical day, toote. I'm just trying to find out commerce room, because you know how this works. We

have these long conversations. You read the script. We got a way, and I'm still not sure if there's a vote today, well, we're still in negotiations. We want to get to yes. Everybody does. And that is what the White House is working at. That is what leadership is working at. That's what our whole caucus is working at. But whether that vote happens today, and I hope it does, this is not over. If we haven't reached that point in our negotiations. Our commitment is to getting this entire agenda,

and that will happen. That is our you know, that is what is happening because we are committed to the American people and meeting this moment a great challenge with one of great progress. But we also have a deadline today of keeping government open and I we will also deliver on that. We will not allow a government shutdown, and we are going to take up you know, go back and make sure that, as your opening said, we deal with this issue of the debt ceiling. It is

a primary responsibility. We have already accrued the debt. The spending is in our past. This is about moving forward, and Democrats are going to ensure that we protect the full faith and credit of the United States. Have a feeling will be talking about us again. Representative Catherine Clark, the assistant speak for the House of Representatives, congresswoman, thank you so much, Thank you very much. Michelle was talking about Christmas in September. Let's get that, Solmes in September.

You want to do Christmas in September's Christmas in September? Right now. Michelle Meyer was just the Bank of American of course, they've got a granularity which she helped invent out of Boston University in housing and in the American consumer discuss Christmas in September, really, Michelle, Um, Yeah, you know, it's not obviously quite Christmas in September, but the idea is that we are seeing evidence that consumers are spending

earlier this holiday step in Um. And you know, when you look holistically at the the aggregated Bank America card data, September showed some real momentum. And part of that is this broadening of spender cross goods in particularly an area of light cooling in electronics, things that are most sensitive to holiday sales, which could be a function of this full forward of holiday spending. But you're also seeing this this kind of mini re engagement on the easier side too,

which has been super encouraging. So the car data we've been following has been really quite positive for the consumer and make me feel pretty encouraged as we head into the next quarter. Yeah, everybody knows we're just pulling forward from December twenty three when I begin my shopping. Great, have you adjusted your GDP? View our theme today? On September thirty, no visibility. Q four no visibility Q one

give us some visibility. Yeah, well, I think we're seeing just that with our high frequency data that we're setting up, which should be a better que for UM. So Q three GDP is coming in right around four percent, give or take a you know, a few tents here UM. But Q four it looks like, you know, our baseline forecast has been for six percent growth and I'm holding to that number, and the data that we're tracking, the hybriduency data that's in flexing higher UM, suggests we could

very much succeed on that forecast for six percent. So I think the demand is there. The indications are that we're seeing this reengagement in the economy start, which is really encouraging. As the cases come down, the real question will be on the supply side. You know, how much capacity is there to realize the strength that we're now

seeing on on demand. And the flip side of that is higher prices, which we're seeing in a whole range of places right And I'm wondering, you know, the sort of stickiness here that we're looking at going forward and the disinflationary kind of trend that people were talking about before and people are spending more for the same amount of stuff. What's your view on how that's affecting consumer sentiment and their willingness to spend. Yeah, I mean that's

exactly right. There's all this demand out there and there's limited supplies and unfortunately the supply chain issues have gotten worse, not better. Um So that's a real concern. And what that means is that there will be you know, higher prices that ready is being and they will continue. And if people are buying early in the holiday season, it means that you probably don't have the same level of discounting that you've had em prior holiday seasons, especially environment

low inventories. So what does that mean, Well, consumers are taking notice right look at the University of Michigan survey. You know, people are more discouraged because prices are high and they can't get some of the items that are

looking to purchase. Um So when you when you consider adding up for GDP, you know you're looking at in real terms, inflation adjusted terms, so you could get this bigger divide where nominal really you know, accelerates into the fourth quarter, but real GDP maybe struggles a bit more. So that's something that we're keeping an eye off. While when we think about the supply streams, your specialty is

the housing market. That's where you made your name, and we're watching the housing market actually embody this inflationary push, possibly more than any other. The idea of twenty year

over year gains month after month after month. How does this factor into discretionary spending to inflation more broadly at a time when J. Powell says a lot of this is just transitory and supply chain related, well, look, I mean, I think housing is a perfect his study of this imbalance between demand and supply in the market where demand has just you know, climbs higher in the housing market in a very constrained environment. Now builders are responding, that's good,

inventories picking up. Look at the new home sales report, the months apply figure there is now touching around six months UM. So that's that's quite good. We're making progress. But we're not at a point yet where home prices they're starting to cool. We're not at a point yet where you've kind of lost on with the frenzy in the market. Still there. When you look at the number of days in the market for sale and these homes things are moving quickly. There's also a lot more cash buyers,

there's a lot more investors in the market. Um So, so what does this mean broadly, Well, it does fuel this kind of inflation sentiment. It's one of the factors that you want to think about when you're considering inflation expectations and how people perceive the the the inflationary environment. But then also just more on a nuanced view, right, it does ultimately impact the rental market, which ultimately impacts owners equivalent rent and now starting to show through very

clearly in the hyperguency data. So we should anticipate that owners equivalent rent moves up into net year even if some of these more transitory factors that have been boosting inflation waiting. That's great, dear Michelle Myron or Wheelhouse when we first met our zillion years ago a lot, you know, Michelle, I want to talk here about transitory and it's what everybody's talking about in these two Americas, and one of them is in America flat on its back. Is a

negative real wage here to stay? Or is a negative real wage transitory? Well, right now, it's particularly painful in a year of a year basis because you've seen these extraordinary games and inflation. But when you look forward, I think the wage environment is quite positive, particularly for the lower income consumer that's gonna be a lot more sensitive

to moves and inflation. So I think, you know, given the incredible demand for workers that we've been saying, particularly in the lower income part of the population, wages have been rising and I would expect that to continue. Now. Of course, yes, you have to consider the case of wage increase is relative to the peace of underlying inflations and back out that real wage number. And right now

it is a bit more problematic. But I think into next year you get some cooling in some of these components where inflation has just been extraordinarily high, and meanwhile we just continue to creep up, and I think that's a favorable backdrop. I look where you know, I look

where we are, Michelle. I've got to interrupt the train of thought here when we see young go out through one twelve onto one thirteen dovetail Bank of America Foreign exchange analysis into your Great American economic view, How does strong dollar change your calculus? Look, I mean, the strong dollar presumably is a function the fact that it's a strong economy. So I would argue that the dollar strength that we've seen has not been unwarranted um or unsupported

by the fundamentals in the U S economy. Um so. But yeah, of course, when you have you think about the effets moves, do you think about the balance of trade, you think about the cost of goods, and all of those things are obviously going to be impacted negatively when

you have a strengthening in the dollar. But I would argue very much with our effect JADG just believe that the movement the dollar is justified and given what you're seeing in the US accom So before we let you go, Michelle, we've heard a lot of FED speak over the past couple of days. It will continue today, Uh Fetcher J. Powell on the hill? Is there anything that he has said over the past couple of sessions that we've heard from him that's been of interest? So, you know, you

kind of always have to read between the lines. And I think that there's been a real emphasis on the supply side of the economy because it seems like there's this discussion within the FED over whether or not all this demand side policy are accommodated monetary policy that stimulates the demand side is the right prescription if you're really

facing a bigger supply side shock. So they're trying to figure out how permanent the supply side issues are UM, and one of the ways to gage that, frankly, is just to go back to inflation. What you talked about before, Lesta, particularly long run inflation expectations UM. The extent to which long run inflation expectations move up will tell the fact that they have a more permanent constrain the supply side, and that will prompt them to pivot when it comes

to Douvich monitor policy. They're not seeing it yet, but they're obviously very very very keen to focus on this topic and looking at it very carefully, which makes a lot of them. Michelle, Happy Christmas to you the family. Thanks. I love that. Thank you dragging her kids out to see Santa pretending that it's fifth from Thanks America. That the wonderful. This is the Bloomberg Surveillance Podcast. Thanks for listening.

Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics. Finance, invest and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course, on the terminal. I'm Tom keene In. This is Bloomberg.