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We're gonna rip up the script and we do this with great respect for Blackrock because they took the mathematician of China and elevated her to fame. She's driving, of course, all of investment strategy for Blackrock. We've spoken many times about Wayee's accomplishments in her China, and in this hugely turmoil time, we rip up the script with Wayey Way. I do want to get to the market coverage here.
We've got an extended time with you on surveillance this morning, but I need to ask you to describe, and Zen, I want you to describe. You went to Cambridge, fine, but please describe the word respect that the Chinese government speaks about overnight. I'm sorry, Wyley, It's like Bill Murray in Tokyo. For Americans, it's lost in translation. Please translate.
Well, actually, what is happening right now is that nobody wants to call first, Nobody wants to call first, and each is apping the pressure. So there's a lot of postering happening on both sides before negotiation, which is why we think that it actually is not so rewarding to try to predict what is the next step of policy
making or the next rhetoric. It's more rewarding to try to understand what are the rules governing negotiation, governing policy making that will ultimately shape the destination of where heading towards Where.
We're heading is on a different timeline. You know that I love the XXSWAYI I'm very delta what's called in the Greek letters folks, theta driven. I would suggest the timeline of President Trump in America with their linkage into black Rock investment, is radically different than the Chinese timeline. Discuss that is there a huge separation in short term and long term between the two cultures.
Well, maybe there is some time pressure because we are heading into a meeton, for example, in the US next year, so things need to happen a bit more quickly. But what I meant by kind of rules that cannot be broken is more on the economic basis.
Specifically, you know.
We have the US looking to reduce strait deficits that cannot be reduced without reducing foreign lending by the same magnitude. So if you push that in that direction too quickly, it's going to raise interest rate and it's going to raise a future death servicing costs, which is why we saw the bond market route last week, and specifically we did this kind of bag of envelope calculation.
Twenty five basis point of long.
Term yields translate into roughly fifty to seventy five billion dollars per annon of additional debt servicing costs. And we're already at a point where we're spending more in the US right, like one hundred and fifty billion dollars more
than last year this time. So these are the kind of checks and balances and influencing factors that ultimately could drive where we're heading towards now on the On the China side, the impacts on from tarraffs on the growth picture is likely very severe, right, So if everything kind of go according to plan, which is not the expectation, but if that were to happen, we're talking about PEACH to GDP to the magnitude of two percent, which would
mean that the government would really risk kind of significantly under shooting the growth target of five percent this year. So both sides have tracks and constraints that they need to balance, and this is what we pay more attention to rather than what they're saying on a single day, because of course they do not want to put everything on the table as they are getting ready for negotiation.
You got to love a woman that went to Raffles Junior High School in Singapore. We welcome all of you on the Pacific rim basically in your evening here on YouTube Wayy of black Rock with this son truly in historic Wednesday, Paul Wait.
They talked to us about kind of how you think about the tariff backdrop here we did President Trump did talk initiate the ninety day kind of freeze here if you will on many of these reciprocal turfs. How do you just kind of factor all that in here? Because I'm listening to companies conference calls and I don't think corporate America knows what the thing. How are you guys approaching it?
I think the fact that you were just talking about, I think United Airline giving out guidance in scenario in a scenario way with two scenarios, that's really really unusual. But that has been how we think about kind of us our location already, So this is an unprecedented word.
Already, economic uncertainty.
Was at really extremely elevated levels because of mega forces, AI, low pub and transition, and now policy uncertainty is at a record high as well. So compounding economic uncertainty and policy uncertainty means that we cannot do point forecast anymore. We have to think about kind of investing through scenarios. So I see, I'm happy to see the corporates are doing that. But specifically in terms of the tariff backflop that you asked after April second, it was it was
very concerning for us. Not so much, yes, indeed yes, also because the magnitude of the tariffs were bigger than expected.
But more important than that is the fact that.
There didn't seem to be checks, didn't seem to be constrained in terms of how US is setting out to make policies, and that is why we were more concerned after April second. But the fact that they walked back last week, they walked back and they put in place the ninety day polls gave us some comfort that the checks are still in place, even though immediately after April second it didn't look like they were.
They still were in place.
They will help guide where we are heading towards, and that gives us more comfort to them think.
A little bit longer term.
Of course, in the Newton there's still going to be a huge amount of uncertainty as negotiations go ahead, both sides of negotiations. Talking about kind of all the bilateral negotiations that are taking place, it's likely going to throughout a lot of headlines drive market volatility. But knowing that there are checks in place that can influence the destination is important for us to be able to focus on fundamentals.
So we saw just in this quarter, this first quarter of twenty twenty five way just some reversal funds flows out of the US, selling bond, selling stocks, selling the dollar, and perhaps going into some European markets taking advantage of the more stable markets here. Is that kind of a short term trade or is that a longer term investment thesis?
From your perspective, I think it's too early to call this a longer term unwind of multi years of US exceptionalism. I think the reversal that we saw here today very much reflect the stretched positioning in US assets and also the greater gap of valuation between US aquitas and European aquitis for example, and the rest of the world for example.
But to say that this is kind of the end of US exceptionalism is premature, I would say, because drivers of US exceptionalism include the depth of capital market, the appetite for risk taking, energy independence, greater spent we see that on the FISCO from today is supported by exopitant privilege of making sure that the rest of the world can found it. I mean, all of those reasons why companies like in Video exist in the US and not elsewhere. So I think it's way too premature to say that
this is the end of US exceptionalism. I would also observe after April the second, the drawdown in terms of equities across the world are almost the same. Europe was selling off as much as US was selling off. After April second, I think it's very very early to say that Europe definitely be a winner, but they will be selectable.
Bring up the drawdown for you too. We're sub eighteen percent on this it's you know, it's a correction, it's a bear mark. But we've had a recovery. Way Ley in the zeitgeist this morning, and the blur is the basic idea that companies are buying back their shares, that senior executives have an optimism there's a horizon out there somewhere that we're going to get to. Where is Wayley's
horizon to solve to get beyond this crisis? Are you looking at it this quarter, this year or is your horizon distressingly out years?
Well, I think with the evolution of technology, hopefully we're all living longer, so I hope I have a longer term horizon, and with that longer term horizon, I would observe a lot of the correction drawdown that we have seen in quality quality.
Companies may have been over down right. If you think about.
Kind of the evaluation metrics for some of the quality TEG names in the US, they are at the lowest level since the beginning of chat GPT. Now you can say that valuations has lost or meaning because analysts are slow to adjust their earnings earnings revision. Maybe, but it still doesn't change the fact that some really good value names out there, and the drivers in terms of AI adoption hasn't changed, so I think there are some really good offenis longer term.
One final question, Waly, thank you so much generously you to take this time with us today. So I'm up at like two am or midnight or whatever, you know, I'm you know, Bracton's got me up looking at red SOX highlights. Wayly, I see that the government of China is going to ban the mailing of packages from Hong Kong to America. What does that signal to you?
I think this is an example of kind of each side up in pressure as they get ready for negotiation. Nobody wants to go first. They want to increase pressure to bring the other side to the table. This is one of those things I think, you know, like Boeing yesterday the news was another example, and then the H twenty chips another example.
I think we're going to see.
Quite a few examples of this as we get into negotiation. But then, really not as much attention should be paid to kind of the bit by bitch incremental news, but really pay attention to the laws, the checks that will govern where we're heading towards.
Is how I think about investing right now.
Really, thank you so much with black Rock this morning, just Brian, thank you so much.
You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to ten am. He's durn Listen on Applecarplay and Android Otto with the Bloomberg Business up or watch us live on YouTube.
Things have changed. There's a crisis in America and Dan Ives has piped it down. There was a color scheme going on back when there was American exceptionalism. And for those of you today, in honor of Louis Vauton the challenges they had yesterday, he's going with the washed pink shade today. Okay, i'lla LVMH. So we have a more subdued Dan Ives with this, Dan, how have you survived the last ten days? You've had to bring some price targets down? What has been the Ives methodology to reset?
A lot of coffee, a lot of calculators and look, to me, it's really it's talking to so many people throughout supply chain, customers, companies to understand basically scenarios. And that's how we viewed it, Like what are numbers? Cut's gonna look like, and then what does that mean for prices? And I think you're starting to now see the results of that, in Vidia being the first one in terms of the real effect from this tower.
For so, Dan, how do you think about I guess the underlying tech spend globally over the next twelve months. To what extent, if any, does that likely going to come down?
Yeah, so, Paul, I view it as let's say, three undred twenty five billion max seven spending on cap backs for AI that's assumed. Let's call that too eighty two ninety. In other words, that's right now what I think is baked in, like you already are gonna have probably ten percent cuts, could be more, but I think most investors are going to basically, you're not gonna have guidance. You're gonna toss out June, You're gonna toss out September quarter.
You assume some negotiation gets the cooler heads. And I think right now every investor I talked to you're looking at twenty six numbers to understand what the normalized numbers look like with some sort of base.
I mean, let's do it Nvidio quickly.
Here.
I want to get to Apple, which I think is the attention of our listeners and viewers. Were you surprised by the Nvidio markedown over naight?
I mean, I think it's a it's a knee jerk actually, and obviously it's a headline and it's it's negative news. But I mean, to me, Tom, I already assumed ten percent cuts.
Right, Okay, let's start with Apple here, and you and I have gone back and forth in this over the years and over the last thirty eight months, Dana and I just looked like a genius on Apple until this crisis. Is there persistency of cash flow that is provided for share buyback and dividend growth? Is it still there? It's that.
I mean, look, even you know when you scenario and sort of put pressure on the model and stress test that cash flow comes down five percent, maybe seven percent. The reality is is that a lot of that on Apple, I think starts to now get found in. It comes down to with with China numbers unless these tariffs in their current state stick for ninety days and longer than to me at Apple content right here, I mean, it is a name.
Does Jim Cook Dana eives with all of your specific room work, does he have a special relationship with Beijing.
Oh, I mean, look, cooks ten percent politician ninety CEO. No one understands Beijing's supply chain better than cook. The reality is, I mean, look, India gives some optionality where you could, you know, call maybe five ten percent, but they have no options outside Easia. I mean, and that's right now with they need to navigate and also make sure China there's no retaliatory toward Apple. There's no retaliatory,
and we talked about toward Tesla. I think right now, that's that's front and center what he needs to manage, as well as within the White House to make sure these tariffs don't impact to the extent. Look, you can't have two thousand hours iPhones, that'd be thirty percent demand destruction.
Wow.
So Dan, I mean, when you talk to the executives in Silicon Valley, do they expect this to be the new normal for at least the next four years?
I guess no.
I think I mean, look, whatever they'd probably say, I mean, I could tell they're figuring out what when negotiations happen, what the baseline gets to, what they're going to pass through, what they're going to eat what they're going to ultimately pass through to the rest of the spot, and that's what they're trying to figure out in terms of what the new baseline will be once we get through this. Basically, you know, a UFC battle between China and US.
Yeah, Dan, answer this folks here with the what bush we continue. We welcome all of you in your commute across the nation. Just a terrific set of conversations today out on YouTube, Fiery chat out on live chat there. Thank you so much for your attention on YouTube. Subscribe to Bloomberg Podcast. Just amazed by the permanence of YouTube and living rooms and offices around the world. Dan, I'm
not going to mince words. Reuters did a story out of Paris and Alvarado, Texas the other day on LVMH Louis vuittonm that they're having trouble with American labor manufacturing American bags. When tech people are politicians start spouting off about bringing those manufacturing processes of the Pacific rim over to America. Do we have the labor force with a discipline and the culture to make that stuff.
No, And we've talked about it a lot over the last two weeks. That's a fictional tal and the reality is that you could see me in America in terms like the reality in terms of the waver force, the cost inputs, where the raw materials are coming from, and also the ip ME and the supply chain. You have a factory here where the chips made.
They're main Asia.
And that's the reality.
Of this situation.
And that's why I've said, like this is something where for the first time in thirty years, US is ahead of China when it comes to tech. But if you don't navigate this third rail issue the right way, you'll cut the knees of tech, take it back years and guess who wins in it.
It's China tech.
Dan, is there a place in your coverage that is a safer place to be, whether it's software with Microsoft or work, I don't know.
Yeah, Penn state base play exactly exactly, I'd say, Paul, I'd say it's software and cybersecurity.
I mean those are sort of the buckets from IBM to Oracle to Microsoft. Cybersecurity, whether it's pal out or CrowdStrike, cyber arc checkpoint, those are almost the defensive safety blankets in tech. In terms of in soft friend cybersecurity, even though you know you have number cuts there too.
But again, no come is going to.
Give guidance in earning season and the streets already factoring and beep into this. You have ten percent cuts across the board.
Okay, out of the pandemic, Dan ives, I got a fancy standard deviation chart to Apple. It's well behaved, it's the great eyes rally. The people that hate you aren't aware that you nailed that. You know, as a generalization, you nailed to move up is an uber bowl. I'm not that far out of two standard deviations down on Apple. I mean the phrase Apple's cratered is not accurate, right, No, I mean, look, I think.
Because the reality is is that unless you assume just a black swan event Army get everyone understands that. Like it's about the friend, it's the free castlow, it's the services business, which is not really that impact from how that gives you massive downside protection in Apple, and that's why that stock is holding up the way it is relative to them being in the eye of this show.
So do you have a buy on Apple? Of course, dude to me Apple, upset to me Apple.
Over the next twelve to eighteen months.
You own Apple, you own a video.
I mean, I'd argue you own if.
You navigate these storms.
You have to navigate the storm over the next three to six months. You do not panic. You're in the You're in a game of high stakes poker that's playing out with opering economy, you know, with it.
I mean, Paul wants to get in here, and I'm sorry, I gotta do this. Can Penn State football meet meet Nevada August thirtieth?
Oh, that's gonna be a nice tune up game.
I mean yeah.
Look again, like I said, I for all the SEC fans out there, they had their they had their run. Now it's big Pens run Penn State twenty five Michigan, Ohios and then Penn State three in a row, right for Nanny's.
And then then they play FIU. I don't even know what fi you is. Dan, I's go away. I'm sorry, Paul, I know you want to get I just love busting his chops. Danipes, thank you so much. We're something colorful next time. He's the web Bush and serious conversation here, folks.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on applecarp Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa Play Bloomberg eleven thirty.
We're going to do this raptor on retail sales here, but not on retail sales. We're gonna get them on for a much much longer conversation here in the coming weeks. In two thousand and seven, the most famous strategist in the world was a guy named Matt King. He was definitive, definitive it trying to figure out the path for Lehman Brothers.
And before that did something that I featured in my book with David Goldman of Bank of America, which is, forget about the garbage out there in derivative science, look at the super senior tranches. Matt King over the years has devolved into Satori Insights and joins us now for far too short conversation. This is for Global at Wall Street,
Matt King live or Ois is dead. We have so for sofr is compared to the ten year yield of the two year yield that looks at the trust market out there is a trust of the financial plumbing system broken.
I think it's closer to breaking than many people make out. For me, what's going on at the moment is this big disconnect between you've heard all your equity and your credit guests focused on tariffs and on earnings and some of the trailing data, and then conversely what we see going on in treasury markets with the rising term premium, this evening of the real yuel curve, what increasingly looks like a run on the dollar, capital flight out of
the US, and then most obviously in gold. There's just this big disconnect, and it does remind me of some of those other periods of my career that you're kind enough to mention, where yeah, the people in one market looking at that and thinking, hey, this could come to dominate everything else, and other people need to wake up.
We did a seminar with lousy coffee years ago. I can't remember the hotel folks Is in New York, EMMT King. What we talked about was leverage within the system. Is there a leverage out there? Is there a Myron Shaw's lt CM leverage out there?
I can't see mostly no, or at least not in the way that people think. So people have been excited about the onlineer basis trades and some of the moves and swap spreads and pointing to hedge funds. And yes, there has been this big pickup in leverage and reproactivity, especially for multistrap funds, but I don't think that's the problem here. If anything, I would say that it's almost a diversifying element relative to all the long only money that is poured in over the last decade or so.
And so for me, there is this scary thing that sort of all my career, I focus on the thing that's about to blow up, and each time the crises seem to get bigger and bigger. The debt that's out there now is across non financial sectors as a whole, and more than anything with governments, including the US government. But it's not the financial leverage in quite the same way as it was previously, and on the one hand,
that makes it slower burning. But on the other hand, the feedback loop from markets through to the economy is larger ever than it's been in the past.
So, Matt, I guess you put into context the sell off in the equity markets. People selling treasuries selling the US dollar buying gold.
What does that tell you?
Usually you would think the treasuries in the US dollar a safe havens in a time of uncertainty.
We heard some of it from Jamie Diamond yesterday, except all the things he said could happen, the erosion of the US's safe haven status and potential exodus from US assets. I would argue that they're underway already. It's difficult to see in the data, but I think it's highly likely that we get more of that because many of the moves that the Trump administration are making, not only with tariffs, basically a direct assault on the foundation of rule of law.
We heard it in the news previously with the direct defiance of the Supreme Court ruling. And this is the foundation of markets and trust.
Effectively, Matt King was SATORI with us, we will continue with them around this retail sales every port, and I promise for Global Wall Street we'll get mister King on here for a much much longer conversation. Matt will continue
with you. Please stay with us. The vics thirty one point five to two into these retail sales futures at negative forty right now, the ten year yield four point three to two percent, the Sweeney yield four point two to one percent, and we'll see this important data come out. Of course, retail sales is a nominal number. It's before inflation. There's a month over month focus on it, and I focus on the control group where we're looking for a lessoning,
a tertiary statistic. The FEDCE Services business activity comes in worse than survey in a stark negative nineteen. As well, the control group comes in a little light at zero point four percent. That's lower than the zero point six percent expected. Futures do a little bit better than where we were, I mean, Paul, at the end of the day, it's it's sort of like where we were. I think, Yeah, I mean Jumble. Yeah.
You saw the retail sales come in at plus one point four percent. Last period was a zero point two percent, So you know, a little bit of front running the tariffs perhaps is what commers are suggesting.
Er economic coverage. All that we do there on Bloomberg Surveillance, it's bunched by Commonwealth. Join over two thousand independent financial advisors who are taking control of their growth with advisor centric support and future ready technologies, grow on your own terms with a partner dedicated to your success. Go to Commonwealth dot com to learn how we continue with Matt King of SATORI on the basis trade on the shock
of the leverage the system. How does something as esoteric Matt King is a basis trade affecting hedge funds that get it wrong. But what's it mean for the general public.
At the moment? I would say the basis trade in itself and the hedge fund positions in themselves not very much. Maybe they're the beginning of the inkling that we need to look a little bit more at the plumbing and at scope for flows, and the volatility may trigger some bigger moves, But for me in themselves, there's no real sign of stress in repo. It's no worse than it
would be over a quarter end. There's a little bit of on the runoff the run kind of lack of liquidity in some markets, but in general that's not where the problem is. The problem is this potential for long only money around the world to shift from riskirtation away from the US to outright risk reduction, and for investors in treasuries to take seriously and price seriously, some of the threats which increasingly are out there, and we start to see it in the dollar. We're just beginning to
see it in treasuries. But it can easily run much further and frankly feed on itself.
Met King, one more question. We got to go back to retail sales. Matt King, as simple as I can, with all of your decades of excellence, is American exceptionalism done?
Even if Trump were to wind back all of the tariffs even more than he's done already, I think it would be very difficult to recreate the trust which is at the heart of the financial system and the financial flows, which frankly are at the heart of everything that has made America great. That's what's under attack here. That's why it's so serious, and that's why I think it's not in the price.
I don't have you with us, Matt King, Iconic A's City Group and JP Morgan before that with his story and thank you so much, Satori Insights. I should say thank you so much.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Applecarplay and Android Auto with the Bloomberg business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.
I was up practicing and a currency knowledge. Yeah, you know. For Rebecca Patterson, she's with the Council on Foreign Relations as a shingle out at Vanguard as well. We're not going to ask her about ETFs bitcoin. I was going to ask her about the Swiss frank Maybe we'll get to that. But here's the future, folks. Seriously, right now, the World Trade Organization lowers their economic growth forecast for this year for next year. Some of these numbers are huge,
huge moves. Rebecca Patterson, you're expert at this. I mean, this is the future that we're seeing right now this morning. Yeah, you know.
I I've been trying to find when is the last time we saw a dollar bond and stock sell off in tantum that lasted for more than a few days, And I had to go back to my friend Mark Sobel, who is a longtime Treasury guy now the chair of the US at omfif at Think Tank nineteen seventy seven seventy eight. So we haven't seen what we're living through right now in a very very long time. And back then What caused it was inflation expectations, lack of confidence in the FED, lack of confidence in policy.
This is smart people like you taking the cacophony of news in lowering growth in the zeitgeist, Rebecca Patterson, Are we underestimating the decline in real GDP and nominal GDP from the Trump events?
The hard thing is you cannot have confidence in any view. We saw that with United's dual outlooks. Because we could get deals, we could have the whole tariff war go away tomorrow, like literally we could, and at the same time we probably won't. The ten percent universal tariff probably stays at a minimum something on China. At a minimum, those two things alone would take the tariff level significantly
higher than what we've seen in many decades. So I think looking for a major slow down in growth against that backdrop is reasonable. The only good news, and I think the people who aren't looking for recessions yet, is that we were starting from such a strong place right We had record household wealth at the end of last year. We had very little leverage on household balance sheets corporate
balance sheets relatively speaking. So I think people who are saying slow down but no recession, are looking at that and hopefully lots of deals. I'm a little more bearish. I think that we're probably looking at, at a minimum a mild recession later this year.
I'm just reading in a little bit more into this WTO news. They slash their global goods trade outlook and it's new forecast to The Geneva based WTO expects the volume of world merchandise trade to decline by zero point two percent in twenty twenty five, almost three percentage points lower than it would have been without the US led trade war.
So I mean that's a major hit to global growth. I mean basically, what we have between the US and China right now is a trade embargo. I mean, with a tariff rate at that level, we're effectively saying no trade. And the US imports half of its consumer goods from China. So right now, inventories are getting built up. We're getting
front loading, if you will, of inventories and spending. So we're going to see decent data for the next few months, but then we're going to have a wily coyote moment where tariffs come back in the reprieve is over, the inventories are used and We're going to be paying a lot more for shoes and clothes, and the consumer is going to get hit hard.
I think, so what do we do from an investor standpoint? I mean, is it's you know, you look at it and I think the only thing I see is gold out there is kind of where that the funds are flowing, but you know a.
Lot of it stocks.
Folks are saying, hey, find the good companies, the good names you know, and you can buy them cheaper.
Here there is an argument for active stock selection right now. With all the money in passive index funds, where you're just getting in and out of a country or an entire sector, you are going to see some stocks that have better fundamentals than our price. So I think that is one approach to this. I think leaning in on
large caps and on consumer staples, so defensive areas. I think if you want overseas diversification, the UK looks like they may get a trade deal with the White House, and they tend to be a more defensive market overall. That might be another place I'd nibble at. You mentioned Switzerland, Tom. Normally that's one of my go tos for downside protection, but with the pharmaceutical tariffs. I'm not sure that one works as well.
This time, we're going to.
Stop the show because this is what she does. She triangulates the issues of the moment. Yesterday we started in on antibiotics. Pharmaceuticals somewhere between eighty percent or whatever, and about it has come from China. There's a whole European drug trade as well. The media is way underplaying pharmaceuticals, aren't they like Apple, sexy cell phone and all that. Those antibiotics we take for granted are really under threat.
I mean, my hope is that, just with some of the exceptions we've seen in the last week, if supply chains become truly threatened later this year, we will see exceptions for pharmaceutical ingredients and actual pharmaceuticals, because there's no way the voting public is going to be okay if they can't get their meds on your commute.
This morning, Good morning, Bloomberg eleven three or the entire Patterson families listening in. We say good morning on your community across the nation on YouTube. Subscribe to YouTube a Bloomberg podcast. I should say just thank you so much for that interest. Okay, because Rebecca was here, Paul, I had to like go adult. Usually I go euroswissy, but I did dollars swissy logarithmic noot. You know, you get
some curve linear move here there. I was on a street in lais And Switzerland, Brady fifteen year old, and I was doing the math four point three Swiss franks to a dollar. I can't, I can't figure it out, and I'm sorry. It's a linear decline. But with a new Trump acceleration to ever ever stronger Swiss, I got gold at thirty two hundred dollars per else What is that signal to you on the JP Morgan desk years ago?
I think there is a flight to safety, and the dollar right now is not seen as that, I think, or bonds for that matter, to the same degree they are normally. And then I think there also is an element of repatriation of foreign investors who had been loading the boat with US assets for the last eighteen or so years, taking some money home for economic concerns, political concerns, et cetera.
All right, so can central banks have an impact here on this global trade issue, a global economic issue? I think that's central banks in general, and we'll hear from the Fed soon.
Yeah, so we're going to write we have power coming up. Cutting rates is hard if inflation rises or is sticky, so central banks, especially in that situation, will move slowly so they won't come to the rescue that way. If the bond market freezes up, we could see stabilization measures like we saw in March twenty twenty or around SVB, So we could get financial stability help, but we might not get growth help as quickly quickly.
As we like.
One thing I'm watching today, guys, is the meeting between Trump and the Japanese Trade delegation. Bonds are coming up. Japan owns one point one trillion dollars of US treasuries. I just have to think they're going to have a little discussion about that. What can Japan do to help lower US financing costs? I don't know what Japan would want to do, but it wouldn't surprise me if that's a topic.
Rebecca Person with the consopt formulations in the website, folks, I can't say enough about it. And Foreign Affairs Magazine just lights out Lawrence Friedman and the new issue on war truly an expert at one time with him years ago and Adam Poe's and everybody talking about his article of the last three, four or five days. So you don't know this, folks, But the cafeteria for the consol on Formulations is match on sixty fifth Street. Everybody goes
in there, you can sit there. It's like the number of PhDs at a lunch at match. And excuse me, Paul, lunch at the CFR is not twelve noon. We're talking one ish one point fifteen. And they're in there at the wonderful match on sixty fifth Street, there's like eighteen PhDs around a table. What are you and Froman talking about about negotiation? She's laughing at me.
I haven't negotiation, I know.
I'm just saying I haven't been invited to match. I'm like, I need to talk to Froman tonight over.
There and go to match. But the Rebecca, the issue here is there's this word negotiation and the president is of you know, I'm not being a critic of Trump. Don't give me a grief, folks, but he's got in his mind his negotiation and the Chinese are talking respect. I have no idea what the Japanese are talking about. To find the word negotiation, at CFR.
Well, there's what we've seen traditionally, and then there's what we're living through now. I think what we're living through now, you know, who knows what the number is, seventy seventy five countries in ninety days. You have to do a deal every thirty hours or something, so that's not going
to happen when they normally take quarters or years. I think our best hope is that we get a number of countries to sign, you know, understandings of what will happen the beginning of a trade deal, and it's enough of global GDP, enough of US trade to calm the markets at least somewhat that the worst case scenario is off the table. Japan would be a huge win, and I think from what we're hearing from the Japanese they
are hoping to do a deal. If we could see that come out later today, we'll have another relief rally. I don't know if it'll last. They want Japan to help pay more for the defense umbrella from the United States. They want a stronger en. Well, the n already strengthen ten percent this year against the dollar, so I don't know what else they want. They want Japan to keep raising rates. They want something with bonds. What will that package look like? More access for US farmers to Japanese
markets cars. But I do think Japan, Korea, Vietnam, there are a handful of countries that I think are relatively more likely to want deals. If the US can get that done quickly, that will help, again for the short term, at least stabilize things.
Would that be enough to keep the US economy out of a recession?
I don't think so, honestly. The ten percent universal tariff, and even if Chinese tariffs don't stay where they are, if they stay high, we're still looking at an average tariff rate in the United States that's going to be the equivalent of a one two thousand dollars tax hike per each US household. So I still think you have a pretty material hit.
Brilliant question, Paul.
Headline just out amd SE's up to eight hundred million charges from US export controls on m I three h eight. A stockdown seven percent seems to be a trend. We got to frame this. You failed there, Rebecca. If we have a ten percent tariff, that's only five times bigger than what it was before, four times but we need to explain to people, even if we get the best outcome, what it does to the real GDP spirit and confidence of America is I'm going to use this is a
this is a word best. I gave a speech once at Best. Yeah, sheried to use it. I got one in the time out here. It's a ginormous move up to ten percent.
It is, it is, and we're seeing the uncertain and the surveys now we're seeing the uncertainty coming from corporations. I think earning's guidance has to get pulled lower, growth expectations pulled lower. We're going to see it. We're starting to see it now. Bub blah blah credit markets.
So that's coming well to Paul's question.
On Paul today, take it over to the monetary space. We talked about a Jay curve with Rashudo. Do you suggest that this is yes inflation but then it reverts on a real GDP slowdown or nominal GDP slow down to some form of disinflation.
And that was Waller's comments right a few days ago. Governor Waller from the FED said that he had two scenarios. Of course, we all have more than one scenario. Now, but he believes that the shock to demand from the tariffs could overwhelm the inflation and eventually lead us to enough disinflation that you can cut rates.
That's possible.
I think that's if I get something wrong with my view. It's that that the hit to demand pulls inflation down.
Bronze that, folks, because what's important there as miss Patterson has a more inflationary view and demand won't crush.
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The newspapers. Maybe she'll be terriff free. What do you think?
I don't know.
What do you got?
I'll break a little tariff in there maybe, Okay. I'm starting with this big boom in ultra luxury cruises. Okay, the big ship, yes, Charlie Ballad. I don't know if he does these.
Extra luxury on him too.
Yeah, yeah, I want to know if he goes on the big luxury. Okay. So they're growing two and a half times faster than the overall industry because of that business, Bloomberg BusinessWeek says, and their words, not mine, snobs are enjoying cruising now, okay, so look at these amenities. I don't know if SI gets these, but amenities like private world tool, whirlpool tub, butler service, private pools, Starlet Cinema's free flowing sham or there you got me, there you
got the diamond dust facials. I mean all of this. Fourteen thousand dollars per week per couple.
You know what SIE doing?
Not doing that cruises Europe like they start up with the Polar Bears, okay, like halfway to Iceland and he ends up off crete somewhere, you know, sipping all the drinks.
I mean the basic I mean, I've never done this, but it's like I was in Venice saying, you know, the square and all that, and one of the ships went by. I couldn't believe it. And it's ginormous, is what Bloomberg Business Week is saying.
Yeah, And they're saying it's like the high end ones, like big names like four Seasons, like high in concepts from star cirls, like it's getting into this.
He gets a drink. Their is LVMH bags in it next.
So Guy Fieri, right, you know him as this one hundred million dollar contract with Food Network.
Wow.
But one thing he says he's tough with is passing his fortune onto his kids. And he tells Business Insider quote, if you want this cheese, you gotta get two degrees. Okay, And he took that actually from Shaquille O'Neil said, okay. But his oldest son Hunter, he graduated the NBA from University of Miami in May. Okay. His youngest son, Rider who's nineteen, finishing freshman year at San Diego State, and he's kind of fighting it, saying, you know what, Dad,
can we get out of this arrangement? Like I'm kind of done at this point right now. So his dad saying, you know what, you got it, you gotta go along.
Two things. Had a wonderful thing with guy you know, I don't know, he was coming to Times Square or whatever. I literally went down to his restaurant and we did the whole meal thing at the bar in that total class act. Yeah, I got I got all sorts of grief. How can a fancy bow tie like you be dealing with this guy? And he was a complete class act. And it's interesting. I mean, you know, he's like saying, get it done, kids, right he is.
You know he has he does a huge fortune. And you know, if the kids want it, they gotta get not one, but two new degrees. That's right, are you He's saying that's you know, his dad kind of passed down from his.
Dad, right, Yeah, Okay, thanks you one more?
Yes, I do. Oh, Citi's with the most affordable rent, right, because the cost of rent risen by more than fifty percent over the past ten years. We all know that who has the most affordable one? We had wallet hub. They got the job done. They analyzed a medium annual growth rent in more than one hundred and eighty cities. They compared it to the medium household income. So if you go by the lowest percent of income spent Bismarck, North Dakota, then you have Sioux Falls, South Dakota, and
then Cheyenne, Wyoming. And then you go to that highest percent of income spent, right, and you go to Oceanside, California, Jackson, Mississippi, and Birmingham, Alabama. It just goes to show you kind of bit different.
And Newark's on the list as well. Right, New Jersey, I think snuck into it as being really expensive.
It's getting their New New Jersey one hundred and eighty one. Yeah, highest percent of income spent so in Miami, Florida right behind that.
Yeah, are you doing?
They crunched the numbers they did.
Are you doing?
I see you know I want to go tariff. So I'm going to go tariff for you because you requested it. Okay, Canada and China tariff chaos hitting Vermont's Maple Syrup business.
Yeah.
And the reason why is because all the things dayless steel fixtures, like the machines to make it come from Canada, like all these different things. So they're saying now because of that for Mons Maple Syrup.
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