Trump Tariffs and the Impact on Markets
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This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Tina Fordham now with us and David Gurra with us as well. Tina, I want to focus on Ukraine.

And I want to go back to 1982, the Falklands War, where I learned how to spell Exocet. I remember the technological shock that a missile could take out not one, but two, but three British ships. That was stunning. Now we have the same thing. How will your world change with drones that can kill, take out armament from a distance?

Ukraine launched an incredibly bold and audacious attack 18 months in the making. You've talked about the idea that this could

signal a change in trend and others have have written about China being able to do the same thing. But when we look at the markets, guys, right, we don't see a very big reaction at all. I think just because of the amount of of news flow. So it's an example of something that is potentially, you know, a pivotal moment in geopolitics.

certainly one that means that in the short term, there isn't going to be sanctions relief likely anytime soon or a ceasefire. But there's so much going on for investors to digest that it's not moving the needle.

As we sift through that news flow, let me ask you about something that's complimentary. We had this presidential election in Poland over the weekend, and the nationalist candidate won that election, which is just going to, I think, provide further headaches for Donald Tusk, the prime minister of that country. But we have there a president-elect who is...

I guess you could say anti-Europe or not pro-Europe, we could say that. And what does that mean just for that country's attitude toward continued involvement in the war in Ukraine and in Europe's involvement more broadly, the outcome of that election in Poland?

But the Polish presidential election isn't the kind of thing that we would normally be talking about in a program like this. But because we're looking at Europe that feels increasingly isolated following the US security and economic reset,

who is in charge in Poland has a great deal to do with what kinds of decisions the European Union can take when it comes to security and when it comes again

back to Ukraine. So even though markets would like to put the Ukraine conflict behind them, in this new global context, which we've talked about in our new research on the geopolitics super cycle, a small kind of domestic vote like a Polish presidential election can actually have a big ripple effect

in a changed security and economic environment. Tina, you mentioned that super cycle. So that's a circumstance in which geopolitical risks are accelerating and accelerating quickly. Talk about that in the context of negotiation and dialogue and diplomacy.

On any given day, I get a statement from the State Department or from a European government indicating that talks are continuing when it comes to Ukraine or when it comes to trade negotiations or the tariffs and the trade war. Your sense of sort of the role that diplomacy is playing in that super cycle?

Well, the geopolitics super cycle is my term and it's the name of a new report that we've published. I filed from astronomy, the idea of an acceleration. And what we established in the first place before we get to the present day is that this isn't in fact new. We've seen a tripling of geopolitical risk events materializing. Over the past 15 years, we established the evidence base for that.

And in our framework, we look at the drivers of geopolitical risk against the guardrails. And whether we're talking about diplomacy, international institutions, or even global central banks, these are the guardrails. And unless these institutions function effectively, we're going to see more risk events. And I think that this heuristic is a useful way to look at this kind of...

You know, blizzard of events. This is so important, folks. And of course, the title of Tina Fordham's Global Foresight, their note is never going back to normal. If we're not going back to normal, Tina Fordham, how do we defend ourselves against not populism, because there's benefits there, but

but harmful populism. How do we defend ourselves from the harmful populism of other eras that ended ugly?

That's where rule of law and institutions come in. And these are the kinds of forces that are increasingly under attack and mistrusted. The problem is we don't really have alternatives to them. And any kind of revolutionary movement wants to burn down what came before it.

The idea being, of course, that you can build something newer and better in its place.

And this is where when people ask me this question at investor events or in board meetings, I talk about how unless we believe in predestination, there is contributions that we make as individuals, as citizens, as investors and business leaders, and even as parents into maintaining the guardrails that prevent fraud.

risks from turning into crises. Tina, one final question. I want to get this in. Kriti Gupta in London yesterday was absolutely riveting on the images of the migrants across the English Channel over the weekend. Is the phrasing here, migration is out of control in the United Kingdom? How would you call it that?

On a day like that, there were more border crossings. And again, if we put it back in the super cycle framework, climate change, corruption, erosion of civil rights and civil liberties, these are all drivers of more migration. And so as long as they proliferate, we should expect more efforts for people to leave their homes and come elsewhere. And without migration,

institutions, we're going to see that feed into the political process, into regulation, legislation, and the kind of low trust that we see in so many developed countries around the world right now. Tina, thank you for the time. Tina Fordham, she's with Fordham Global Foresight. Look for her report from Fordham Global Foresight.

If this government spending in defense goes towards things like R&D that have dual-use civilian purposes, you could get spillovers that actually end up enhancing productivity in Europe and so have a more long-lasting impact on growth.

To learn more about the intersection of national security and global trade, subscribe to PGM's The Outthinking Investor in your favorite podcast app.

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You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. I spent weeks trying to get Christopher Harvey in here. He's with Wells Fargo, head of equity strategy.

and joins us this morning. I love the tone of your optimism. How do you do it given the maelstrom of news flow? Literally hour by hour. How do you do it? How do you frame a view? Come on, Tom. What's not to like? You have rates going up. You have tariffs every day. You have tweets. You have concern about the consumer. You have uncertainty. It's perfect, right? But what we look at is we're looking at the data and we're looking at

Six months ahead of time right we think we have seen maximum uncertainty We think we have seen the bottom of the market and we think that we're going to work better from here, right? We're expecting to have not not a ton of information on trade and tariff But progress on trade and tariff and templates that we can work from as we go forward my my foundational thing Chris Harvey is corporations adapt

across the Wells Fargo span, how are you seeing corporations adapt so they have the optimism you have? Well, I think what corporations are doing is they're watching every day, they're looking at the same thing that we're doing. Every day they're saying, "Okay, are we seeing it in our business?" And again, getting back to Tony Capuano, he's saying, "Hey, we're seeing the consumer spend."

The U.S. consumer, I think, is really underappreciated. We start spending when we're five years old, and we continue to spend until, hopefully, until 95. We understand value intuitively. We understand utility. And what we do is we shift to where we're finding that utility. And that's what the consumer is doing. And as long as the consumer has a job, they will continue. And we're just not seeing that pain in the labor market that people are really worried about.

I just had a vision of the next Wells Fargo equity junket to the gritty in Venice. There you go, yeah. Thank you, Tony Capuano. It was hatched here on this Tuesday. How do you look at the soft data in complement with the hard data? I think that's what you're getting at here. And I've noted many members of the President's economic team have been highlighting this. There has been a lot of anxiety about where this might be headed. We've seen that in consumer sentiment. We've seen it in kind of the sentiment from employers as well.

the hard data hasn't met that and did you see them coming together at some point or should we be looking at them kind of differently when we look at them together so about two a couple weeks ago we sat down we had this conversation what's going to happen between the hard and soft data are they going to converge or should we actually be looking at the soft data and the conclusion we came to is we're not completely dismissing the soft data but what we realized is after the presidential election cycle we should be looking at the betting markets

placing more weight on the betting markets. And the betting markets, or the prediction markets, I should say, are where we're getting our quote-unquote soft data. And it's telling you a much different story on inflation, on recession, so on and so forth. So we discount significantly the soft data. We watch the hard data like a hawk every day. And when we want sentiment soft data, we're either talking to clients or we're looking at the

prediction markets. Talk a bit more about that. I'm very curious of how someone in your position approaches that world, which I think is a novel one or a new one to a lot of people. How do you make good use of the prediction markets? Well, you're talking to a guy that was seven years old, which reason the racing forms to his grandfather's.

So I've been involved in these types of markets for a while, and I think there's a lot of information in these markets. And we saw that during the presidential election cycle. And what we do is we're just always looking for that signal. We're always looking for information, and there's information there. When we start to deconstruct how the surveys are done, we get less confidence on the soft data. And while people look at it and we have to think about it and we have to react to it,

We're just not putting a whole lot of weight on it. And at the end of the day, we're talking to our economists. We're talking to companies. We're going through transcripts. We're trying to break our thesis every day. And we're just having a hard time doing that. How do you overlay...

the technology view forward and productivity forward onto a persistency of corporate earnings. To me, it's underestimated. Am I right? I think so. I was around in the late 90s, and I remember what was happening there. Way back. Watch yourself, Gunster. John, help me here.

And the comparison, it's not a comparison between today and back then. Back then, you had very levered companies. I'll throw out some goodies. WorldCom, Quest, Global Crossing, Level 3. I own them all. Thank you. God bless you.

But today, you have the hyperscarers, the AWS, the Microsofts, the Metas, the Googles of the world. These are companies that don't need to go to the capital markets and fund themselves. Furthermore, if you look at the technology, what we were doing is we were laying a dumb technology in the ground, fiber optic cable, which did not become obsolete for a good decade, decade plus. Today, what we have is really, and I'm using the phrase that Jensen used, we have

ai factories you have the um foundation and on top of that you have the innovation and it's a very nice symbolic really it's symbiotic release joy chris harvey with us with wells fargo we continue as chief u.s equity strategist here uh we do this at 809 here with futures improving how are we lifting the market futures negative 18 now negative nine the vix nicely under 2018

point five to dollar churning a little bit on DXY, a little bit of dollar strength fraction. I'll call it over the last two days. David Gurra in for Paul Sweeney. David. Chris, I want to ask you about AI. We've talked too much about NVIDIA yet. You mentioned it just a moment ago. We had this news this morning that Meta is going to contract for nuclear power with Constellation. You have this kind of picks and shovels portfolio when it comes to AI. So these are companies that are kind of ancillary maybe to the big ones that we talk a lot about.

Where do you see growth there? So it's not as if we've turned the page here from that last chapter to this one, the AI story continues. What's interesting to you about the sector today? Where do you see opportunity besides the big names, the handful of big names we talked so much about? I think the biggest near-term issue is the AI Diffusion Act. The AI Diffusion Act has been mitigated. So now what you can do is you can export that technology. And what I think is Jensen is probably the new Tim Cook.

It looks like he has the ear of the administration. And what they're realizing is we do need to be that base level of AI. We do need to export it. We do need U.S. technology all throughout the world. Because if we don't, somebody else will step in. That somebody else is probably China. And so I think the most important thing is...

the mitigation of the AI diffusion index, because now we can export, we can become that base layer. But this is a very different technology than what we saw in the late 90s. And we're still, I would say, in the mid-innings for this. There's a lot more to do. The computational power that you need, the actual power that you need is hard to comprehend.

In the grind of this, which ratio on the income statement is most efficacious right now? I mean, I think back to Tom Gelbin at DLJ was price to sales, price to sales. But coming down the income statement, which describes your optimism best?

It's still about earnings, right? If you look at the hyperscalers, the hyperscalers are making money. Up 32% versus, am I right, up 8%? I don't know off the top of my head, but they are making- Something like this. And the answer is we've never seen this. Right. That's right. They are spending CapEx, but they are getting a return for their CapEx. And they will continue to do that until that equation no longer works. And as we look at it-

It is working and it will continue to work. So this is critical. If I'm scared stiff, but Chris Harvey's telling me I got to participate, is my psychological relief to take my terminal value out a little bit farther and say, okay, I'm nervous. I'm going to own this stuff. But it's not a three-year vision. It's a five-year vision.

Is that the act? Well, I think what you want to do in any portfolio, you have to have an anchor. You have to have some sort of low volatility or defensive property to it. What we've been telling people, we started the year with anchoring it with staples. Now we're anchoring it with...

utilities. And so that's going to mitigate and has mitigated the uncertainty. If you want to get involved in Low Val, SPLV, or USMV, that's fine. But just anchor, right? Look for those really good risk awards. Look out three, five years, right? Take those good risk awards, but anchor that with something else because you do have to mitigate that uncertainty because the uncertainty, I'm not going to discount it, it's still quite real.

Maximum uncertainty. You're confident in that. How do you see all this playing out over the course of the summer? So we're coming up against some very hard deadlines here as the president continues to make threats and ratchet up the tariffs that he's put in place. Your sense of where we're headed?

So in these talks, these negotiations, you know, it's really I don't mean to be evasive, but it is really tough. What I'm looking for is I'm just looking for progress. I expect to hear progress out of Asia first. I am really surprised about the relationship between China and the US. I did not expect them to sit down as early as they did.

And that, I think, is a real positive. And that's a positive I hadn't been thinking about. I thought that was frozen. That's not happening. That's the last thing that's going to occur. So that's actually very encouraging. But we do need to see something either out of India or Japan or South Korea, something to set the template. If we don't see that by the end of June...

summer is going to be a little bit more choppy than I think. What is their, I mean you have the advantage of Jay Bryson, what is their incentive to provide an initial template? I see no incentive for Japan to act. Well if you're India I think there's a lot there, right? We have a lot of things that they want. Ag, aerospace, armament, power,

And they have many things that we need, right? They can help us disintermediate China. They have the ability to do that. One of the things that we do worry about and we've been talking about is what about the ports? How do you get things from point A to point B?

be and do they have enough ports. But I think India is the key and I think they will likely be the first or one of the first. Chris Harvey with us with his optimism on the equity market. He's with Wells Fargo. I want you to set up the polarity we've been talking about for the last couple days, which is

maybe three zip codes in Manhattan versus the rest of the country. You're advantaged at Wells Fargo by having, I think, really a breadth across America. What is the difference between the zeitgeist now almost of the eastern corridor and a little bit of the west coast and what's really going on out there? So what I think is really going on out there is people really do back up the administration. They really do feel like,

something has to be done on Trading Tower. And I think that we're making the right steps in that direction. When, for somebody like me and somebody like you, we're looking at every single tweet, we're looking at every single thing. People in the US and people on their day-to-day jobs, they just don't do that. And what they see is, have a job, things are good, kids are doing well,

economy seems to be fine and we're just going to keep moving forward. And we think the economy and the situation is moving forward. And they look at the technology and they say, Hey, this is an amazing technology. The world's an okay place. David, get one more. When it comes to this tax and spending bill, and you can talk about regular folks in this country are watching all of that unfold maybe from, from a distance. Um,

How much does that stand to sort of change your world, whether or not we see that passed in July or August or later this year? I don't think it changes for the average person all that much. We've been looking into the SALT tax, and I think that helps a lot of people in high-tax states but on the higher income. And that probably helps spending later over the next 12, 18 months and helps a little bit with regard to sentiment. I think the bigger issue is

is the deficit stabilizing? And it looks like the deficit is stabilizing. I'm a little bit concerned about the rhetoric and the talk about longer end rates. But if you think about it and you look at it, things haven't gotten worse. So I'm not really sure why the narrative is negative as it is today. It should have been much worse much sooner. So it's a little confounding. Chris, thank you. Generous of you to come in this morning. Chris Harvey with us with Wells Fargo with a real optimistic

take here, all of his literature is like, get on board, participate in America's future. This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7 a.m. Eastern on Apple CarPlay 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 1130. We're going to dive into the American labor economy right now. There's no one better qualified than Thomas Purcelli. He's chief U.S. economist at PGM,

definitive on America's wage growth or lack thereof, definitive on the barbell economy. And Tom, I'm going to go to Torsten Slack out with a morning paragraph this morning saying, look, we're at 130,000 nonfarm payrolls on Friday. He doesn't buy it, question mark, 64,000 NFP coming. With continuing claims, doing that little second derivative lift is a weaker job economy finally here. Yeah. So first of all, good to be with you all.

Look, I think that, you know, this is not, for us, this is not new information, right? I mean, that labor backdrop has been sort of showing these cracks for quite some time now. You know, whether you're looking at hiring rates or quit rates or labor differentials. And now, recently, this little curl up in continuing claims

I think all the evidence is pretty clear that labor is slowing down. So from our perspective, it's just a question of when now do you really start to see it show up in the payroll report? But I would hasten to add, everyone's waiting for it to show up in the payroll report. But once it shows up there...

it tends to be too late. I mean, it's like that's the last thing that breaks. But you have all these other all this other evidence that's already pointing in that direction. When it goes, it goes. I would suggest, folks, my reading back to World War Two. Thank you, Olivier Blanchard, for being with us yesterday in memory of Professor Fisher.

Tom Purcelli, when I look at unemployment rate, it goes 4.2%. When it goes, do you frame out a quiescent 5% or could it be worse? Yeah, I think by the end of the year, you could easily, you'll be up close to 5%. We don't think you necessarily break through that. I do think that there's an interesting sort of dynamic to consider in the context of, you know, immigration flows have obviously slowed down pretty notably. Uh,

And as long as the economy is not going to break in a meaningful way, I don't think the unemployment rate really has to sort of do a lot of heavy lifting. So we do expect the unemployment rate will rise. And in fact, that's sort of one of the key criteria for us as relates to our view on the Fed, which is to say they will be cutting before the end of the year. But I don't know that it has to get ugly, but it's going to happen.

Let me ask you a bit about inflation and sort of where you see that story going here. And we were talking earlier about the soft data and the hard data and the anxiety that we see among consumers and businesses. What do you think that will start to manifest itself more in the harder data as we see, again, I call them negotiations, I guess, back and forth over these trade deals and the prospect that they could manifest?

could be inflationary, could lead to higher inflation. Yeah, look, I think what's interesting is if you look at some of these company transcripts, right, like during the quarterly earnings calls, some companies took price in April. I mean, you didn't even have tariffs that really went through at that point. And this was early in April. And that's defensive or opportunistic? I think it's probably a little bit of both. And so, you know, and think back on yesterday's ISM. I mean,

There were some really interesting comments. Forget about the indexes within ISM. I mean, they're fine. But I think the sort of the, you know, the responding comments, I think, are always much more interesting. And responding comments were pretty clear. Like, they're pushing price through. There's no question that that is going to happen. So here's the thing, though. While we expect inflation will rise, again, that's a part of our call, has been a part of our call.

This is not the COVID lift in inflation. And I think that's especially true when you consider incomes. I mean, real incomes, right? Like real incomes X transfers is running at a slower pace than is consumption, real consumption. That's not a sustainable setup. And so I think that means that it probably breaks the spirit of the consumer to some extent. And extend the discussion with Tom Purcelli at PG. Tom, we had this warning that John Tucker mentioned just a moment ago from the OECD this morning about slowing growth globally.

US a part of that, seeing slowing growth here as well. What is your sense of where that's headed? Does it mirror with or dovetail with what the OECD said this morning? Yeah, I mean, look, I think those forecasts are just sort of catching up with some of the reality that I think that's already been in place. You know, the sort of the slower trajectory of economic activity in the United States and elsewhere, I think has been pretty known at this point.

You know, it's funny, we were having this conversation internally. You know, there's, I think you could break the backdrop up into structural and cyclical, right? Cyclically speaking, you know, we see slowing economic activity, like, you know, we're calling it the muddle through with a sort of, you know, a skew toward the left tail. I think over the more medium term, right, you know, medium to long term, you know, it's easy to see a sort of a fatter right tail. That will take time though. In fact, I've been saying, I think you got to go through the left tail before you get to the right tail.

But yeah, I think that that to me is it's already baked in the cake. That folds in. I wanted to ask you, you came from a wonderful house, RBC, like Halima Croft on hydrocarbons. You parachute in, you know, you get off the boat, the Hinkley, and you parachute into Pigeon.

And these guys are world-class bond geeks. Yes. What do they teach you? What does the Greg Peters and the rest, how do they inform your economics now that you're surrounded by this brain power? You know, I love this question. So,

I always said, you know, being on the, when I was on the sales side, you know, you would go into, you know, a meeting and you would just drop these ideas and then you'd get the hell out of there. And you never knew really what happened with those ideas because you'd be running off to the next meeting. But now, you know, my next meeting is sort of another internal meeting. So it's been great to sort of see my ideas sort of, you know, come to life as it relates to working with guys like Greg and Robert Tip and then, of course, Dilip Singh.

It's been a wonderful experience. How do you fold in then real yield dynamics? Ken Rogoff was on recently with my book of the summer, Our Dollar, Your Problem. And the bottom line is the inflation adjusted yields the heart of the debate. Yes. How do you lecture Greg Peters on the vector of the real yield? He does not want me to lecture him.

And I don't think I want to lecture him either. So, who I adore him, actually. He's great. Look, I think...

One thing that we're really trying to do, and I think that this is something that is sort of the Holy Grail, in my humble opinion, I think the marrying up, you know, look, PGM is first and foremost, the bottom up shop. And that has always been true. And so I think one thing that, you know, we're really trying to think about a lot is how do we marry that, right? How do we marry the bottom and the bottom up and the top down?

I think we've been doing a pretty good job of making some progress on that. And it's something I look forward to continuing with Greg and the rest of the team. It's actually been a really useful project. I was reading in this morning, and our friend Claudia Somm has a new piece out talking about what the Fed is thinking through at this moment in time. And she said kind of the fundamental question here is, will tariff-induced inflation be short-lived as the level of prices adjust to higher tariffs, or will it persist as a series of feedback loops lead to further price fluctuations?

increases. Where do you fall on that question? We were talking about the way that companies have been addressing this defensively or opportunistically, as I interjected. How worried are you about that feedback loop turning into something kind of crippling? It is very hard to see this inflation dynamic persist. And it's very hard to see it. I think, again, we all sort of have sort of short memories for this stuff. And I think people are looking back over this COVID window

And they're saying, hey, well, this is what happened then. Yeah, but there's so many differences. I mean, people were sitting on a mountain of cash. We shut down an otherwise pretty healthy economy, turned it back on like a light switch, creating a pent-up demand scenario. People were able to dip into this mountain of cash. We had massive supply shortages. So I think it was really easy to sort of build a case, or at least it was for us when I was at RBC, to build a case that you were going to see much more persistent inflation than was appreciated. This setup today is wildly different. I think what winds up happening is these businesses

these price increases that we are undoubtedly going to see will basically break the consumer. And I think ultimately that could give way to a recession, which is why we have that left tail is a little bit on the fat side for us. Is there evidence that they will lower prices if and when the tariffs are over?

I don't see that in my literature. I don't think that they're talking about that right now. I mean, in fact, if anything, companies want to take price as much as they can. It's been pretty clear on that. So I think that what that means to me is that the lift in inflation could actually be firmer than a lot of people think. I think people are sort of flirting with the idea of, hey, maybe you get to 3%, and maybe it peters out there.

My risk on that is that it can run. But I think ultimately, if you have a slowing labor backdrop, which is what we expect, then that'll give way. Here's the way the act works, folks. I'm overwhelmed. My email inbox is insane.

And young Turks show up and they have research reports. And the rule is if it's seven pages, I read the first two pages. And if it's 30 pages, I read the first four pages and that. Ages ago, this clown showed up from RBC Capital Markets. I'm like, who is this guy? And he's talking wage dynamics.

Here beginneth the discussion on the wages. What's our real wage look like? You own the high ground on this. - Yeah, well thank you for those nice words. You know, look, I think the way that I like to look at the backdrop right now is I'm looking at real incomes. And I think real incomes, ex-transfers, that running at a slower pace than real consumption, that is not sustainable. That is simply not sustainable. So it's really easy for us to build a case

on slower economic activity. Forget the continuum, the media frenzy of the phrase barbell. I don't buy it for a minute. I'll let you decide. On a decile or quintile basis, where does America break? To me, it's a way higher income.

And beneath that is painful. I agree with that. I think that that's exactly what we're seeing right now. I mean, you know, this is the, you know, the classic K shape recovery conversation that we've been having for, for quite some time. Uh, I think that there's almost no, no doubt that there's a lot more pain happening in those other quintiles that you just mentioned, but you know, you look at, and again, this gets into the hard versus soft data point. Just look at confidence at the upper income. Confidence in the upper income is also starting to break too. Uh,

And I think it look it's easy to sort of see that happen when you have equity markets that are also breaking them coming back. Equity markets coming back probably will ease some of that concern. But but I think but I think most folks get that in a in an environment where you're talking about significant tariffs and potentially significant price increases. I think that gives everyone a moment of pause.

Where do you see things going from here when it comes to the labor market? So there is a lot of happy talk from the administration about how this is going to usher in a lot of new jobs and manufacturing. And in particular, we're talking about diminution of the labor market. You say we're kind of late, late to the party recognizing that you were there earlier. But how do you see that ending and how much faith or optimism do you have that all of this will,

could lead to some sort of reimagined or a labor market renaissance of some sort. So I think over the, so this gets into the cyclical versus structural, right? Like cyclically, I think, again, I think you'll start to see the slowdown in labor and as a result, economic activity at large.

I think longer term. I think that there's... I think there's a real case to make for... I hate the term U.S. exceptionalism. I just think it's overused and there has to be a better way of saying it. But I think...

The idea of US exceptionalism over the more medium to long term, for lack of a better phrase, I think is real. And I think about that in the context of the pieces are in place for productivity to kill it. Again, it'll take time to get there. And I do think that some of the things that the administration is doing could actually help in that regard. The corporate tax part of that, of the tax cuts, I think that that can actually go a long way to sort of helping build the base

of productivity, but again, I think you're going to go through the left tail before you go to the right. You look tanned and rested. The Hinkley 40, it does 35 knots coming back down the East River.

He's going to be flying over to Jersey City. Tom Brunelli, thank you so much. Don't be a stranger. Please, please, please. If this government spending in defense goes towards things like R&D that have dual use civilian purposes, you could get spillovers that actually end up enhancing productivity in Europe and so have a more long lasting impact on growth.

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This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal. The new heart and soul of the New Yorker is Evan Osnos out with a new book on Greenwich, Connecticut, and it reads like McPhee. You read it, you keep reading it, David, because it's crafted.

Evan Osnos, great to have you with us. Staff writer at The New Yorker, as Tom alluded to there. The new book is called The Haves and Have Yachts, Dispatches on the Ultra-Rich. Congrats on the book. Congrats also on the title, which is excellent. Let's start with the warning that we heard from former President Biden as he prepared to leave office. He said, today an oligarchy is taking shape in America of extreme wealth, power, and influence that really threatens our entire democracy, our basic rights, and our

and freedom. He sounded the alarm as he was making his way to the exit. What has changed when it comes to wealth inequality in this country over the last five, six months?

- Thanks guys, by the way, Tom, you made my day. We live in a world John McPhee made. I'll say that what President Biden was getting at is something really important. To a lot of folks, frankly, it sounded almost belated. Look, the good news is this country has never been wealthier in so many respects. We are building companies, we're on the cusp of a new era of technology and all the ways you talk about on the show every day, whether it's AI and robotics,

And yet at the same time, as you know, there are about half of American adults who will tell you that they don't have a thousand dollars to spend on an emergency expense. We are at a point now, it's really sort of similar to where we've been at moments in our history, where we have tremendous technological opportunity, huge wealth creation. And we're also facing a fork in the road to make sure that that is also not

steering our government down a path that, you know, Henry Ford used to say that he wanted to make sure that his own employees, his own workers could afford the cars he was making. And those are some of the decisions we have to be making now. This is clearly a theme that has animated a lot of your work. I look at the Osnos Ufer going back to your first book, Age of Ambition, Chasing Fortune, Truth and Faith in the New China, which

I read on my first trip to Shanghai and you remarked then on just the abundance, the amount of wealth, the excitement about wealth and upward mobility in China. As you look at this particular book, are we looking at something that's uniquely American or has this rise of the ultra-rich been sort of shared globally?

Yeah, it's a fascinating parallel in many ways, David. I mean, I first started reading in a sense about the American Gilded Age when I was living in China because I was trying to understand what was happening. We were seeing railroads built at a pace we hadn't seen since America in the 19th century. It's fitting in some ways that I used the Great Gatsby when I lived in Beijing to conceptualize it. Here we are. It's 2025, 100th anniversary of that book. There are a lot of lessons in there.

About how do you take that sense of cultural energy that we might have had at certain moments in the roaring 20s, but also the awareness that without making really smart choices, we're not going to make sure that this money gets into the hands of people who can rise with the tide.

Evan, you grew up in the crucible of this Greenwich, Connecticut, where I'm sure three kids down the street did have Hinkley picnic boats. You didn't. Your father was acclaimed within journalism. But what does the crew do below the fancy people stage?

to try to get their kids to motivate and have a good life and even aspire to be richer. I mean, this is topic one right now between the buffeting of AI, the decline of liberal arts. What do the kids do just below those with the super yachts?

Yeah, I face these questions myself. I'm a dad. I've got two kids. I think about the challenges of people coming out of school today and how hard it's going to be to get those first jobs. But here's the thing. We have some pretty great models to inspire us in terms of

how to think about being energetic, being creative. I think about Warren Buffett. He's on our minds a lot, all of us these days. You know, he talks about how much he left, how much he will leave to his kids. He likes to say, as you know, Tom, he says, I want to leave them enough that they can do anything, but not so much that they can do nothing. I try, as I think about the opportunities that are coming, to say to people, look,

It's not enough for us to just say Elon Musk has now crossed the $400 billion threshold. We've never had somebody with that kind of prosperity. Isn't that a sign of strength? No, we have to be saying to people, if we don't make smart choices, it's going to end up with too many Musks and perhaps not enough Buffetts. And I think that's an important thing to keep in mind.

Spare a tear for the billionaire class, but I am interested in this element of loneliness that comes through in your book. So you have billionaires buying these super yachts. They can be in isolation on the open seas. You have another chapter or another piece that you've written about Silicon Valley billionaires who are looking to remote New Zealand as a place where they can go weather the storm if that's a nuclear disaster or something that's a natural disaster.

What explains it? And just I think the contrast is so stark to what you were talking about a moment ago, which is during the Gilded Age, you had billionaires, multimillionaires, I should say, maybe not billionaires who are interested in philanthropy and in helping the wider population, building libraries in towns across America. It seems like there is a stark contrast that exists now between the aspirations of a lot of these ultra wealthy than what we saw before.

Yeah, David, you know, for the reporting for this book, I went to New Zealand. I went to Monaco. Hardship pay was not forthcoming, despite my insistence. And it was a fascinating way of getting into the minds of people who have succeeded. And I think what you find in a lot of cases, and this is the surprise, is a sense of fear, frankly, a sense of vertigo. You know, a lot of people will say, look, you've made all the money in the world. What

What are you afraid of? Why do you need to stand on the stage with a president who you may not even necessarily ideologically agree with? And I think what that tells us is that the higher you get, you actually can end up feeling quite vulnerable, quite exposed. I mean, a Silicon Valley CEO said to me, I keep a helicopter gassed up all the time and I have a bunker with an air filtration system. And I think that is another former hedge fund manager said to me, look, there are 25 hedge fund managers in this country who make more money combined than all of the

kindergarten teachers. And he said, and it doesn't feel good to be one of those 25. That's the vertigo. Evan, we've got to leave it there, but don't be a stranger. Evan Osnos, congratulations from the New Yorker, the haves and the have not, have yachts, piece it together from a wonderful New York essays. Can't say enough about this as a general read on these odd, odd times. This is the Bloomberg Surveillance Podcast.

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