February 10, 2025 • 43 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg News Metals & Mining Reporter Joe Deaux discusses President Trump's plans to impose 25% tariffs on all US imports of steel and aluminum, applying to shipments from all countries, including major suppliers Mexico and Canada. Bloomberg News Global Economy Reporter Enda Curran shares the details of his Businessweek Magazine story Front-Loading Tariffs Undercuts Trump’s Pledge of Faster Growth. Dan Close, Head of Municipals at Nuveen, talks about the business of sports stadium financing. Broadridge CEO Tim Gokey explains how his company is enabling the tech revolution in investing. And we Drive to the Close with Eric Freedman, CIO at US Bank Asset Management.
Hosts: Carol Massar and Tim Stenovec. Producer: Paul Brennan.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
This is Bloomberg Business Week Insight from the reporters and
editors that bring you America's most trusted business magazine, plus
global business, finance and tech news. The Bloomberg Business Week
Podcast with Carol Masser and Tim Stenovek on Bloomberg Radio.
Speaker 3 (00:26):
President Donald Trump planning tim post twenty five percent tariffs
on all US imports of steel and aluminum, broadening his
trade restrictions to some of the country's top trading partners
and seeking to protect domestic industries here in the US
that helped him win battleground states last year, which made
us want to know a lot more about those markets
in the US, how much we import our export and
(00:47):
really tim the.
Speaker 4 (00:48):
Cost of a trade war tariff war here.
Speaker 5 (00:52):
Okay, so we start with US markets and steel and
aluminum in Bloomberg News Metals and mining heavy machinery reporter Jojo,
who joins us here in the Bloomberg Business Week Studio. Joe,
let's start with numbers. Yeah, how much steel or aluminum
does the US actually produce?
Speaker 6 (01:08):
Right now?
Speaker 7 (01:09):
US produces about ninety million tons of steel and nearly
three point five to four million tons of aluminum.
Speaker 5 (01:17):
Okay, put that into context of what we use versus
what we imp.
Speaker 7 (01:21):
We use about ninety two one hundred million tons. So
steel's kind of like made to order. That's the way
it works. Aluminum not the same situation. We we produce
what would I say, three point five, we're consuming double that.
But you know fifty percent of what we consume comes
from Canada. Okay, you mean our trading partners, like our
(01:42):
biggest You saw that Ontario ad Yesterida during the super Bowl,
that's right.
Speaker 5 (01:47):
Yeah, I was thinking to myself, when did they, you know,
put that into the mix?
Speaker 3 (01:51):
Well, I thought it was an interesting mix overall. So
what is the impact of these terraffs?
Speaker 4 (01:55):
So it sounds like, I mean, let's take steel first
of all, sure like, is it a problem?
Speaker 8 (02:00):
Well, it depends on who you ask.
Speaker 7 (02:01):
If you ask the steel makers today and the service
centers who buy the steel from them and sell to
the consumers, they're going to say, no, this is not
a problem. That sure rally, this is good for our profits.
We want more domestic produced steel, and so this will
give us the runway to feel confident that we can
make more mills or produce more and have hefty profits
(02:22):
from doing so, how.
Speaker 4 (02:23):
Quickly do we do something like that?
Speaker 3 (02:25):
I think about all of the you know, fracking craze
and the drilling, and you go up to you know,
the west of the United States, We're like, yeah, we've
seen these boom and busts before, So how quickly if
that's the case, can you actually build out the facilities
to ramp up.
Speaker 9 (02:38):
Yeah.
Speaker 7 (02:39):
Listen, if you're just building a new electric arc furnace, now,
which is your typical kind of steel mill in the
United States, Realistically you're probably talking two to three years,
depending on if you have any type like making a
manufacturing plant. Like it's not like you know, just like
producing toys from matel that go on the shelf. Like
sometimes you start building a plant, like things go wrong
(03:01):
and there's only like two consultants you can deal with,
and so it might take longer. I mean, we saw
this with Steel Dynamics. They had a mill down in
Texas that they spent years. It's fine, it's doing fine now,
but it took a year or two longer than I
think people were anticipating. I think the bottom line is,
like it's a two to three year time span. There
are not a lot of plans right now to be
building out a ton of new mills. There is obviously
(03:24):
or aluminum, well definitely not aluminum, right, so actual aluminum
plants that make primary aluminum. There are plans, no plans
to build new aluminum. There hasn't been a new aluminum
mill plant built in the United States in forty years.
What they do build in the United States are something
called re rolling facilities, where they buy already made metal,
(03:45):
they melt it down and turn it into products. We
do have a couple of new ones of those coming
online because listen, there's really good demand in the packaging
space and can making and the automakers are always going
to be on high demand. But listen, it's also not clear,
like what is the intention of the teriffs. I think
the intention that Donald Trump's going for this time around
(04:06):
is the idea of bringing more manufacturing back to the
United States or having others build new plants in the
United States.
Speaker 5 (04:13):
But as you mentioned, the timeline on that is not
even close to overnight, right, So does it could these
actually accomplish that goal long term?
Speaker 8 (04:21):
Yes?
Speaker 7 (04:21):
And I know this is like a crazy thing for
us all to think about, but in my world, of
metals and mining, where timelines are years not months. Right,
they do say, listen, if we want a chance in
certain production industries, we do need the timeline to say, yeah,
we can do this in three to four years. If
(04:42):
you put things like tariffs in place, they give us
the confidence that when the thing is finally done, will
actually be profitable because the prices are going to be
fair across the board.
Speaker 8 (04:50):
Well that's what they argue.
Speaker 3 (04:51):
FYI, in two years we've made term elections. In four
years we have another presidential election. Who a different president
could come out and say, you know, let's assume these tariffs. Laugh,
you know, could say no, no more tariffs. So like,
I'm wondering sue from a steel company's perspective or someone
who might create, you know, go back to aluminum production here.
I mean, how are they gaming this out to say,
(05:14):
do we make the bets to do the bill?
Speaker 7 (05:16):
I mean, there are some really profitable steel making companies
like New Core Corporation is a great company, Steel Dynamics
is a great company. They might be sitting there today
saying cool, this gives us the cover to feel confident
on some of these other projects that we've had in
the pipeline that we haven't talked about do look like
good bets going forward.
Speaker 8 (05:36):
Five ten years.
Speaker 7 (05:38):
I mean, I don't know for sure, but they could
be having that conversation today.
Speaker 5 (05:41):
What does it do to the steel and aluminum that
we import to use?
Speaker 7 (05:46):
Well, we're going to anger a lot of foreign producers.
I mean, we import a lot of aluminum and steal
from the United Era, Emirates, Brazil, Mexico, and Canada. Right Like,
they're not going to be happy about this. They have
major questions and concerns.
Speaker 8 (06:01):
And of course.
Speaker 7 (06:02):
Buyers right they're going to have to pay more if
you're buying steel right now, which people aren't. There is
no spot activity happening in the steel market right now.
They're just taking contracted metal. Suddenly you're telling them they're
going to be paying what one hundred and fifty dollars
per ton more? They're not going to be happy about that.
Inventories across the United States of steel right now are
the highest we've seen in y.
Speaker 8 (06:21):
Why is nobody buying it?
Speaker 7 (06:23):
The demand's not there? Remember, interest rates are still high,
Costs are still high. The construction industry is getting absolutely
torn up, and the construction industry is one of the
great demand industries for steel making.
Speaker 6 (06:36):
So what you're going to go.
Speaker 8 (06:37):
And you're gonna add these terrafts.
Speaker 7 (06:38):
It's not going to suddenly spur consumption in the construction industry.
Speaker 3 (06:43):
That's what I was kind of confused about the rally
that we're seeing in all of these material stocks, the
aluminum producers, because I'm just kind of like, wait a minute,
they've been really battered.
Speaker 7 (06:51):
They've been really Yeah, they're really batter I mean one
of the steel the major steel index, the S and
P sub Steel Index, by the most in twenty twenty
four since twenty eighteen. I mean, it was a terrible year.
Interest rates are still there, Inflation is still a problem.
And when you talk to these metal making industries, they're
(07:12):
the bottom line cost, right, and so if their consumers
are sitting there saying, yeah, just financing is way too
expensive right now, we're not going to move forward with
the project that we had in the pipeline, then you
know that's bad news.
Speaker 5 (07:25):
Is this a commodity in the sense of the steel
and aluminum you get from US producers is the same
as the steel and aluminum you get from producers outside
of the US. Yes, do customers care where it comes
from apart from price.
Speaker 8 (07:37):
For the most part. No.
Speaker 7 (07:38):
Now, when you get into products, you get into very
specific types of steel products and types of aluminum products,
they do care because that is a value add But
if you're just talking raw steel making and primary aluminum making.
I've heard this since I started covering this stuff ten
years ago. The Chinese do it just as well as
the Americans. Everybody figured out how to make great steel
(08:00):
forever ago. The chemistry's there. Now the steel makers will
say no, no, no, no, but our steel this is
an alloy, it is particularly better. But if you talk
to actual consumers in the market, they're like, no, Like
maybe I like the buyer who I'm buying from, I
like doing business with them, but like the steel itself.
Speaker 8 (08:18):
Like yeah, they all pretty much do it pretty well.
Speaker 3 (08:20):
How does how do you think about trade agreements and
where we buy things like steel or aluminum from and
what that means geopolitically and those alliances.
Speaker 7 (08:31):
I think in twenty sixteen we just we respected these alliances.
It was part of the post World War two union,
you know, of the world. The West kind of said, listen,
soft power is important in these open markets. Lead to
more efficiency and better profits across across the spectrum. But
I think Donald Trump changed the calculus and I think
(08:54):
he took a page out of the steel Maker Trade Book,
which is some people do cheat, they dumb, and they add,
you know, they add subsidies to whatever they're trying to sell,
and in that regard, it is unfair. So today, I
think that's where this conversation is now, right, is like, well,
do we care about the alliances, sure, but we also
(09:15):
have to make sure that things are fair on the
trade level.
Speaker 8 (09:18):
That's the thinking.
Speaker 5 (09:19):
One more context question, how big get in terms of
number of employees or just size of the economy. What
do we need to know about the steal and aluminum industry.
I think the best way to think of it is industrials.
The industry part of GDP is ten percent of GDP. Right, So,
like when I'm sitting down on the weekends and I'm
talking to my friends who are in tech or finance,
(09:41):
like I'm a blip on the radar talking about steel
and aluminum, but it is still a critical part building
block of the economy.
Speaker 3 (09:48):
Is this a critical moment in time where things are
going to change in terms of potentially aluminium and steel
production in the US.
Speaker 6 (09:55):
I don't know.
Speaker 7 (09:55):
I mean, listen, he did this in twenty eighteen. We're
producing eighty one million per year currently or eighty two
million per year. We're currently producing eighty one million.
Speaker 3 (10:04):
Nothing changed, all right, Good to know, some great context
as always, Joe, thank you so much. Jode, busy day
for him medals and mining heavy machinery.
Speaker 9 (10:11):
Recorder is so metal.
Speaker 6 (10:13):
I just wanted to say that.
Speaker 4 (10:14):
Do you play like, do you have a guitar? Do
you have a band like? Do you have a metal band?
Speaker 8 (10:17):
Piano?
Speaker 4 (10:19):
Forget about that.
Speaker 8 (10:20):
He's metal, all right.
Speaker 3 (10:22):
You asked though, about kind of the economics of this,
and we want to kind of we want to stay
with this subject and get into the possible economic impact
on the US of it all and how economists are
reevaluating the impact of Trump's policies on the US economy,
warning that the risks to growth are front loaded and
rewards may not be visible tim until next year.
Speaker 5 (10:40):
With that side of the story, back with us as
Bloomberg News Global Economy Reporter end occurrent. He joins us
from our Washington, DC bureau, and good to see you
this afternoon. If we think back to the first Trump administration,
there was also tax cuts and there were tariffs. This
time there are tariffs without tax cuts. What do we
need to know about that.
Speaker 10 (11:00):
Yeah, it's the sequencing of the policy rollout and the
pace and maybe breadth of the police roll out that's
unsettling some economists. I mean, on paper, of course, President
Trump's agenda promises to unleash, you know, cut the kind
of regulation that holds back investment in the infrastructure and
extraction of resources and energy. For example. He wants to
(11:21):
push through tariffs that are all part of a bigger
game plan to create investment in manufacturing at home and
create more jobs, and of course push through tax cuts
to take to relieve households and businesses. But economs are
saying that's fine on paper, but right here, right now,
things are moving pretty fast. In the tariffront, there was
a threat of tariffs against Columbia. There was a threat
(11:42):
of really punishing tariffs against Mexico and Canada. That came
pretty quickly and surprise a lot of people because you're
talking there about impacting a consumer goods basket. Think about
the food and the vege that the US buys from
Mexico for example. Then there are tariffs already in place
on China, and they're new in the sounds that they
are across the board on all tariff It not just
say targeted financial security or targeted on intermediate goods. It's
(12:04):
across the board, everything coming in ten percent and Shanna
has retaliated. And then at the same time, we have
lots of focus, of course down here on the spending cuts,
on the agency closures, on the federal staff layoffs being
pushed through by DOGE, question marks there over when that
ends and how it impacts overall. And we have deportation
(12:24):
going on, which of course is another variable when it
comes to the labor market. So you put it all together,
a lot of economists are saying, Okay, we get the
positive agenda here, but right now this feels pretty bumpy,
and they're wondering how it all stacks up in the end.
Speaker 3 (12:36):
I mean, and let me go there, and how difficult
is it at this point to really kind of figure
out the economic impact.
Speaker 11 (12:45):
Yep.
Speaker 10 (12:46):
So obviously absolutely right We're at the start of the administration,
so it's very early in all of this, but we
are seeing some tangible impacts. Now, take for example, the
tariff debate which dominates so much of the economic news
right now. We have had the University of Michigan survey
showing that consumer inflation expectations have risen sharply, and that's
(13:07):
the link directly to the tire story and the tirefs,
of course, being the threat of duties on the kind
of typical consumer goods coming out of Mexico, less so
from Canada, but certainly from China. So there has been
an impact there. Secondly, we have plenty of businesses, importers,
manufacturers making warnings making the point that these tariff threats
(13:27):
are impacting disruption, disrupting their supply lines, disrupting their plans
for investment that don't yet have certainly in terms of
what will the duties be, what will be impacted when,
and by how much. So there's a source of one
certainty there. And of course beyond that, now you have
now these job layofs in the federal sector, and so
(13:48):
there is impact.
Speaker 4 (13:49):
It's a lot of moving parts.
Speaker 8 (13:50):
You know.
Speaker 3 (13:50):
One thing I do think about, and I think about
from your perspective, is we are a global economy, and
what happens often in one developed major economy impacts others.
Speaker 4 (13:58):
As a global economic.
Speaker 3 (14:00):
Reporter, what's at stake for the US if it's neighbors
or trading partners or global allies are hurt economically by
these US tariffs. I mean, what's at stake in terms
of US growth, global growth, and really then geopolitical stability.
Speaker 10 (14:16):
Yeah, so the US has been the standout performer for
the world economy over the past few years. Germany is
in the Dulgens, China's economy is slogish. And when you
look at the international the observations from say that IMF,
for example, they made the point that the US is
the world leader for growth. It's driving the world economy.
It's the reason it upgraded global forecast this year. So
(14:36):
that's important in terms of supporting the overall world economy. Secondly,
if we get down the road of the US getting
involved in a kind of a tit for trade war
with key trading partners imposing tariffs on each other's goods
or other kind of restrictions, then obviously that will start
to weigh on business confidence, business sentiment, business investment, maybe
eventually employment, So that there are certainly risks going down
(15:00):
the road of the whole austray policy. Of course, trouble
administration says this will ultimately drive investment at home.
Speaker 4 (15:07):
All right, got to leave it on that note.
Speaker 3 (15:08):
Yeah, certainly something to think about that global investment right
potentially here into the United States. Endcur and Global Economy
reporter at Bloomberg News. Joining us from our DC bureau.
Speaker 2 (15:18):
You're listening to the Bloomberg Business Week Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 3 (15:32):
All right, Well, the state and local government debt market
is poised for another strong year in terms of issuance
and demand from retail buyers, provided federal lawmakers maintain the
bond's tax exempt status. Is according to investors and bankers
Tim who took part in a Bloomberg panel discussion that
was late last month.
Speaker 5 (15:49):
Meantime, the Bloomberg Muni Bond Index is up just under
one percent so far this year, with some thoughts on
the UNI market as well as a Super Bowl tie in. Yes,
there's ammunion connection to everything. We're gonna get to that moment.
We welcome Dan Close, head of municipals over at New
ven it's got one point three trillion dollars in assets
under management. Dan joins us from Chicago. Dan, We're going
to talk stadium financing in just a minute, but we
(16:11):
got to talk the tax exempt status of UNI bonds
because I'm wondering if you think the Republican Congress will
eliminate the tax exemption tall pay for the extension of
the Trump tax cuts.
Speaker 12 (16:23):
First, thank you so much for having me on the
program here today. You know, certainly this time around, there
is I think a threat to the UNI exemption that
we haven't had in a long time. And so if
you look at all the pafers that need to go
in and roll the Tax Cut and Jobs Act, you know,
the Houseways and Means did put out potentially all fifty
(16:44):
or so different payers and municipal exemption at least specific
to hospitals, private activity bonds, we're on that list. So
we're we're certainly watching this. We're monitoring it. But I
think given that all of infrastructure in the United States
is financed at a local level with the UNI exemption,
you know, our estimates eight hundred and twenty six billion
(17:07):
in savings over a ten year period for the exemption
for your like local high school, your local water and
sewer authority. We think we end up okay, but certainly
it's going to be a fight to keep the exemption this.
Speaker 3 (17:20):
Time around, it's safe to say, all right, so it
is a defining feature of the four trillion dollar asset class.
So what would it do to the muni market if
that exempt it was a.
Speaker 12 (17:30):
Way, yeah, started to cut off, it would it would
certainly raise the cost of any of your projects. So
if you're a local school district, your high school's overcrowded,
you need to go in and issue debt to go
in into finance a new high school. If all of
a sudden the exemption went away, you're going in and
financing that local infrastructure at a taxable level. So we
(17:51):
estimate that's another two hundred basis points two percent of
higher financing cost if that were to go away. So
all this local infrastructure project we think could get a
lot more expensive if the exemption were to We're not
to be rolled.
Speaker 3 (18:07):
So let me just ask one follow up to that.
So potentially that could if it's a higher cost to
do this project, it's more financial stress potentially on municipalities, right,
or is it a case that projects don't get done
because the cost.
Speaker 4 (18:21):
Has gone up? And I think about the economic impact
of that.
Speaker 12 (18:25):
Yeah, and I think it could certainly be both. You know,
projects that at the margin become too expensive don't get done.
We saw that in twenty two and twenty three, there
was a bunch of airports that were up on the
block to go in and to have expansions when materials
became too much, when the cost of inflation was up,
you know, we saw some of those projects get deferred.
(18:47):
And in the similar way, if it does become too expensive,
some of these critical infrastructure projects could be delayed or
at the very least become much more expensive, and that
would put some stress on municipalities or their finances.
Speaker 4 (19:01):
So it could be an economic impact, right.
Speaker 12 (19:03):
Certainly and certainly, And I think anytime you go in
and raise the cost of just providing you know, essential
service infrastructure at the local level, it could very much
have an economic impact. And we're certainly trying to make
the case. You know, every congress person has a home district.
We're making the case of all the different projects that
are being done and financed in each Congress person's home
(19:26):
district and how much more those projects could cost if,
in fact the exemption did go away.
Speaker 3 (19:31):
Well on that point, is New Vene specifically lobbying Congress
to keep the tax exemption for unis.
Speaker 12 (19:37):
Yeah, we're having conversations with with our government relations folks,
which is more at the state and local level, and
just reminding everyone in Congress again of all the different
ways that munifinance does go in help their district. And
you know, we think with such a narrow majority in
the House, with two very supportive members on the House,
(20:00):
ways and means will ultimately prevail. But you know, in
twenty seventeen, with the Tax Cut and Jobs Act, the
MENI market had to give up pre refunded bonds, and
it might be the case that private activity bonds, bonds
issued by healthcare providers higher ed for instance, might go
in and have part of their exemption chipped away. As
a potential paper.
Speaker 5 (20:21):
Hey, Dan, how do you look at the involvement in
the federal government with different states when it comes to munis.
For example, California and New York huge when it comes
to MUNI issuance. But Donald Trump not a big fan
of the way that these states are run. He's been
outspoken about that. What's the risk factor there?
Speaker 12 (20:39):
Yeah, I mean the Trump administration, just by our own history,
was very supportive of municipal bonds and of the market
during its first term. You know, if you look at
the numbers for trillion carol was the number you had mentioned.
As far as the size of the market, that's roughly
divided fairly equally between red states and blue states. As
far as what amounts of bonds are outstanding. So certainly,
(21:02):
you know, despite anyone's political leanings or states leaning one
way or another, certainly every local government, every state government
is availing themselves of this exemption and is certainly using that. So,
you know, we don't think that the administration is hostile
towards munist in any way. We think they see the
(21:22):
benefit of going in and having infrastructure choice, if you will,
that infrastructure decisions are made at a local level. And
I think that really is fairly congruent with what we
understand that this administration is trying to accomplish.
Speaker 3 (21:35):
Hey, we're kind of working our way across the country
with you kind of question about New Veen and if
it has plans to buy high yield bond being issued
to help finance Brightline West, that's that high speed rail
line that's going from southern California to Vegas.
Speaker 12 (21:51):
We are taking a close look at it. We just
had the bankers in the issue or into our office
just last week. We're taking a close look at it.
You know, we've certainly been a supporter of bright Line
East in Florida and certainly are taking a close look
at at this deal, which should be coming in the
next couple weeks.
Speaker 5 (22:10):
Okay, well, let's talk stadium financing when it comes to MUNI.
In the wake of last night's the Super Bowl. Just
how much are Munie's involved when it comes to stadium
financing around the country right now?
Speaker 6 (22:21):
Yeah, very much so.
Speaker 12 (22:23):
I mean there's currently an ask of about thirteen billion
or so in stadium financing by twelve different municipalities, and
just taking a step back, it's not going to finance
you know, the scoreboard. It's not going to finance actually
inside the stadium, the turf on the field. Most of
that is all privately raised. As far as actually building
(22:44):
the stadium itself. Where Munis come into play is just
all the wrap around financing. I'm here in Chicago, huge
Bears fan. The Bears are asking for two point four
billion for their new stadium on the lake Front, but
none of that is really for the stadium itself. It's
for public transportation, a new bus depot, extending the water lines,
(23:07):
the sewer lines, extending all of that critical infrastructure in
order to actually build the stadium. So we're seeing a
lot more asks of municipalities to go in and to
help finance that wrap around financing before the stadiums do
come in.
Speaker 3 (23:21):
All right, this was really cool. The MUNI market a
massive market. I feel like we covered so much ground. Dan,
come back soon. I hope we can do that.
Speaker 12 (23:28):
Thank you so very much.
Speaker 6 (23:29):
I do appreciate it.
Speaker 3 (23:30):
All right, same here, Dan, close head municipals over at
Nuveen one point three trillion dollars in assets under management.
As we know, Muni's about a four trillion dollar market,
so massive. Dan joining us there from Chicago.
Speaker 1 (23:41):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five these during this
listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 5 (23:55):
Well share to the twenty eight billion dollar market cap
fintech company, broad Ridge Financial Solutions hitting at all time
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(24:17):
Tim Gokey, CEO over at broad Ridge. He joined us
from New York. Tim explain exactly where broad Ridge plays
in the market.
Speaker 11 (24:27):
Yes, well, thank you, thank you for having me today,
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(24:50):
a unique vantage point at the center of capital markets,
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earnings up seventy percent. But we're a bit of a
seasonal business and there's some timing in there. So we affirmed,
as you said, earnings of eight to twelve percent for
(25:11):
our full year which ends in June, and also that
we expect to meet our three year guide which ends
a year from June.
Speaker 5 (25:18):
I think, what's yeah, Kam, I just want to jump in.
How dependent are you on companies ipoing?
Speaker 11 (25:26):
You know, most of our business is ongoing and it's
around companies that are in business today.
Speaker 9 (25:32):
So when there are IPOs, that's a good thing.
Speaker 11 (25:35):
That makes more companies and it's helpful, but it's it's
you know, our business is not dependent on that.
Speaker 9 (25:42):
It is. It's a nice tailwind when it happens.
Speaker 3 (25:44):
Hey, one of the things I want to ask you, Tim,
you said, you know this unique vantage point that you
have into capital markets and wealth creation. So tell me
that unique vantage point. What it does tell you about
what's going on in capital markets right now? What might
you are or what it is you're seeing in terms
of investor psyche and what you're seeing about wealth creation.
Speaker 11 (26:05):
Absolutely, I think I think we're really seeing an ongoing
revolution and how people invest, and I think there are
really three trends behind that. One is increased participation. We're
definitely seeing that in our numbers with the number of
positions that shareholders hold up by double in the last
five years. The second one is increased access to more products,
(26:31):
more financial products.
Speaker 9 (26:32):
We're seeing that with.
Speaker 11 (26:34):
Liquid alternatives, with managed accounts, but especially now with crypto
and where that is going to go over time. And
the third is really there's an increased interest in governance
and getting involved in what large companies are doing, especially
among younger people.
Speaker 3 (26:49):
What does governance mean, especially in an environment where when
it comes to factors like ESG or DEI, diversity, equity
and inclusion, you are seeing government company is roll back
on that, and you know, it's certainly I think it's
safe to say that folks would say they're taking their
cues from society, but really from what's going on in
the federal government. So does what does that really mean
(27:13):
increased governance?
Speaker 11 (27:14):
You know it is you know, shareholders have an opportunity
each year to vote for the board of directors and
for proposals that come forward, and most companies have their
annual meetings in the few months that are just coming up.
We're just beginning the proxy season between now and really
the end of May is when most companies will have
(27:34):
elections and shareholders have a chance to weigh in the
number of proposals, especially when ESG matters peaked a couple
of years ago, and also support for those proposals a
few years ago was as high as forty percent. It's
been coming down over time. Last year it fell again,
both the number of proposals and support specifically for ESG.
(27:55):
So shareholders do have the opportunity to to make their
voices heard, and I encourage everyone listening to vote when
they have that opportunity. I think a real innovation that's
happening though, is that fun companies are saying, we don't
want to be in the business of voting.
Speaker 9 (28:11):
On behalf of our shareholders.
Speaker 11 (28:13):
We want to push that opportunity back to the shareholders themselves,
and that is something called voter's choice or pass through voting.
We did that for eight funds two years ago, we
did it for one hundred funds last year, and this
year is going to be more than four hundred funds.
So that's a rapidly growing trend of giving people the
opportunity to vote not only in the companies that hold directly,
(28:35):
but if they have if they're on a mutual fund,
the opportunity to weigh in on the decisions for those
companies as well.
Speaker 5 (28:42):
I am very curious about crypto. You mentioned it and
you said that we'll see what happens. You basically said,
you know, we'll see what happens with crypto this year.
What do you think happens to crypto this year.
Speaker 11 (28:55):
Well, there's obviously a lot of investor interest in that,
and you know, there's been a lot of challenge the
past few years where really it's a new asset class,
there needs to be a strong a framework around it
so everyone understands how to play, and that hasn't happened.
Speaker 9 (29:12):
A few years.
Speaker 11 (29:13):
The past years has just been really enforcement but against
unclear rules. And I think the new administration is very
committed to working with Congress to put in place a
clear set of rules and guidelines around crypto. And you know,
we think the key to this, if you think about
the growth of other recent asset classes, take ets, which
(29:36):
are huge today, they were nowhere twenty five years ago.
One of the real things behind them was good disclosure
for retail investors. And ETFs took the disclosures that were
mutual funds were already using. They adopted that same framework.
And we think that adopting a similar sort of disclosure
framework for crypto assets could be something that would really
(29:58):
allow people to to invest in it with much more companies.
Speaker 3 (30:03):
In general, how do you see the new administration and
policies that might come out. I think businesses initially. I
think it's going to be an easier regulatory environment, much
more business friendly. But what does it mean specifically for
broad Ridge?
Speaker 9 (30:18):
Yeah, I think for broad Ridge.
Speaker 11 (30:22):
It's probably not as big an event as it is
for many other companies. Certainly, there's a lot of optimism
about capital markets, about the direction of the economy and
M and A, and those things are all mild positives
for us.
Speaker 9 (30:35):
As you asked me about the question about IPOs, so
it's a.
Speaker 11 (30:38):
Positive When you think about the biggest priorities administration around taxes, tariffs, immigration,
cultural issues, those are pretty neutral to what we do.
And then there's a set of issues that are specific
to financial services that are not nearly as much administration priorities,
but I think there will be change. Crypto is probably
(31:01):
the highest on those which you know it is that
is the more important one. I think there is also
interest around shareholder engagement and how to get that right,
as well as how to continue digitization in the economy.
Speaker 5 (31:13):
So how is your company preparing for So how is
broad Ridge preparing for an onslought of crypto customers and
how would they use you as as a client.
Speaker 11 (31:23):
Yeah, I think for us the biggest area is around
you know, what we do is helping have clear disclosure
of what is the risk in return for your different
investments so that investors can make their own choice aund
around risk. And with crypto, one of the challenges is
there's no real one source of truth because it's it's decentralized, right,
(31:47):
So we have created a product that is almost a
crowdsource and to say from all the different places we
boil it down, what is it that you're getting, what
are the rules behind it? How much float does it have?
Speaker 9 (31:59):
How much you know?
Speaker 11 (31:59):
All the thing thing is that investors are really curious
about and bringing that together in one place.
Speaker 9 (32:04):
We have introduced that to the market.
Speaker 11 (32:06):
We have a couple of designed clients for that, and
so we think that is something that can help help
the market and eventually as this grows, we think that
investors should receive the same source of sort of routine
disclosures like you would for a mutual fund or an
ETF about how much you're paying and what's the performance
(32:27):
and what are the other key parameters.
Speaker 3 (32:29):
Hey, one thing I want to ask you, you know,
and we've been talking about this for I feel like
many years tim in terms of you know, cheaper trading platforms,
the digitization, the fintech that has certainly innovated evolved over
the last few years, you know, maybe giving more individuals
access to investing in the markets. Having said that, you know,
(32:50):
you still continue to see the wealthiest owning the top
one percent holding about fifty percent of stocks, the bottom
fifty percent maybe holding only about one percent. So, you know, democratization,
has it really happened or what? What do you see
as the flaws maybe in the fintech that has evolved
(33:11):
over the last few years that maybe hasn't enabled more
Americans to tap into the equity markets. I'm not saying
it's the end all or be all, but for many
it's it's a way to wealth. And is it just
a case of Americans not being paid enough to be
able to tap into it or is there something around
the actual infrastructure that's out there.
Speaker 9 (33:32):
Yeah, it's definitely not the infrastructure.
Speaker 11 (33:34):
Because Americans have more access to more products at lower
cost than any place in the world. And that's been
the vitalization of why American capital markets are so are
so vital, and it's been a real growth storympowering us.
Speaker 9 (33:50):
It is It's.
Speaker 11 (33:51):
Definitely true that there are you know, big big gaps
between what the top half and and what others have,
but the numberumber of people investing has been has been
really going up, so the participation.
Speaker 9 (34:04):
Has been broader.
Speaker 11 (34:05):
And then the other thing that I would I point
out is when you look at the coming wealth transfer
and I know we've been talking about this for a
long time, from the silent generation and the boomer generation
to younger generations, that is going to spread this out
a lot as well, and some you know, as you know,
tens of trillions of dollars and those when that happens,
(34:27):
those newer, younger investors are using you know, they're investing
in a very different way. And so as that wealth
comes to them, you could see pretty big shifts in
wealth management and the kinds of expectations that the investors
that then in the future will have the money, the
expectations they have wealth management firms need to get ready
for that.
Speaker 3 (34:45):
Now, all right, interesting perspective, Hey, Tim, thank you so much.
Great to get some time for you or with you,
I should say, on this Monday, Tim Goki, his chief
executive officer broad Ridge, as we mentioned a company that
not necessarily a household name, but you know, you know,
certainly one. It's about a twenty eight billion dollar market
cap up about seven percent so far here, but certainly
(35:06):
plays a critical part in terms of the financial services structure.
So really interesting to get some time with him.
Speaker 8 (35:14):
Room.
Speaker 11 (35:16):
I'll bet you let me drive.
Speaker 5 (35:17):
Oh no, no, no no, this is not a toy.
Speaker 6 (35:20):
Who's going to dug honey?
Speaker 7 (35:22):
Please, I'll do the riding gravels.
Speaker 9 (35:25):
Let's wait, I want to drive.
Speaker 12 (35:26):
It's a good question that drives.
Speaker 8 (35:33):
This is the drive to the clothes.
Speaker 6 (35:35):
That plums for me a thing.
Speaker 9 (35:36):
Well, driver Jovin.
Speaker 3 (35:38):
Don on Bloomberg Radio, all right, everybody, about nineteen minutes
to go until we wrap up the clothes here on
this Monday. We want to mention though a story just
crossing the Bloomberg coming from the Wall Street Journal. A
consortium of investors led by Elon Musk is offering ninety
seven point four billion dollars to buy the nonprofit that
controls open AI, upping the stakes in his battle with
Sam Altman over the company behindt Let's not forget Elon,
(36:02):
one of the co founders of this company. There's kind
of a group of them, and he's been at odds
with Sam Altman. Yeah, I think that odds is a
good way to put it, Cheryl and diplomatic.
Speaker 5 (36:10):
The Wall Street journals Jessica Tunkle and berber Jin go
on to report that Mark Toberoff, the attorney for Elon Musk,
said he submitted the bid to open AI's board of
directors Monday. Here's what that letter said. Quote it's time
for open ai to return to the open source, safety
focused force for good at once was Musk said, in
a statement provided by toberof quote, we will make sure
(36:32):
that happens. Hey, raise is the question, Carol that I
have what he's got his own xai company, right? Why
does he need open ai if he's got xai, I mean,
or why does he want it?
Speaker 4 (36:43):
I don't know.
Speaker 3 (36:44):
Let's call it Elon now and ask him. But what's
interesting too, is you know Sam Altman has laid out
some plans for open AI's future, and that includes converting
it to a for profit company and spending up to
half a trillion dollars on AI infrastructure through a giant
venture called Stargate. So he and Musk have been fighting,
and just again in the Wall Street Journal recapping this
and what we have kind of talked about in terms
(37:05):
of the conflict between Sam Altman and Elon Musk.
Speaker 4 (37:08):
So definitely a new development in the world of AI.
Speaker 5 (37:11):
Is open ay for sale?
Speaker 4 (37:13):
I don't know right exactly, that's a good question. Yeah.
Speaker 3 (37:17):
So anyway, something to watch and something to add onto
the list of things that we are watching on this Monday.
Speaker 4 (37:22):
It's just Monday, lemon.
Speaker 3 (37:23):
Let's see what our next guest has to say about
all that is coming at investors. Eric Friedman is chief
investment Officer of US Bank Asset Management.
Speaker 4 (37:31):
He joins us from Chapel Hill, North Carolina.
Speaker 3 (37:34):
Hey, Eric, it is good to have you here another Monday,
another day where we are talking about potentially more tariffs
US imposed tariffs against nations that are trading partners.
Speaker 4 (37:47):
I don't know, how.
Speaker 3 (37:48):
Are you thinking, how does this all kind of roll
into the investment environment and whether or not you feel
comfortable enough to pull some levers here or do you
sit tight?
Speaker 13 (37:57):
Yeah, Carol, thanks for having us on we still think
this is a lass half full outlook for US.
Speaker 6 (38:03):
I think the key thing with tariffs, it.
Speaker 13 (38:05):
Really rolls into the broader conversation about inflation of course,
and brus We think that the barometer that's really gauge
is what happens with the US tenure treasure yield. That
has been, if you will, the governor of risk assets
for some time. So right now with the US ten
you're at four point five percent. We think we're actually
in a pretty good spot. Above five five and a
(38:26):
quarter on a sustained basis that we think would be
more problematic.
Speaker 6 (38:30):
So I think in general you saw.
Speaker 13 (38:31):
This a little bit from the University of Michigan data
yesterday I'm sorry, last week, as well as some of
the chatter over the weekend and then today on tariffs
that you know, the FED doesn't necessarily care about what
the source of inflation is. If inflation pushes them to
raise rates that tenure treasury we've been talking about, that
becomes more of a problem. So if anything, that would
(38:52):
be the common denominator we're most focused on is what
is the bottom market telling us? And for now they're
at least placated with the or and Trump plans.
Speaker 5 (39:01):
Why what is the bond market telling us. It's surprising
to see that it's not reacting more to tariff news.
What does that tell you?
Speaker 13 (39:10):
I think it tells us that there's a little bit
of negotiations left on the table. You think about the
dialogue with Canada and Mexico as perhaps the first solvo
that was a pretty big headline number. Then all of
a sudden at the eleventh hour, there was a change
in the news flow. So I think that what the
the bond market is saying is we're actually want to
(39:30):
see actually a finish line before completing our thoughts on.
Speaker 6 (39:35):
Is this a done deal?
Speaker 13 (39:36):
So I think that because there's been both the FED
which has said, look, you know, we're going to be
guilty until proven innocent with respect to the overall inflationary environment,
and you've had this back and forth across global players
with respect to tariffs that we're not yet you know,
completed if you will, with a definitive view on tariffs.
I think that's really why the bond market wants a
(39:57):
little bit of optionality as opposed to to making a
definitive move.
Speaker 3 (40:01):
Here, is it safe to say that you're okay still
investing in the US equity markets as long as yield
stay below five percent.
Speaker 6 (40:10):
Yeah, it's very fair, Carol.
Speaker 13 (40:11):
I think, if anything, we're seeing a level of participation
from non US equities which is certainly becoming more of
a consensus long for people in mind share and other chairs.
So you know, you have a decent global consumer, not
so much in China, but Europe is in okay shape,
not great shape. Again, as investors, we care most about
(40:32):
marginal change. Our thing is getting better than getting worse.
We think that in the US things are really staying
the same and with respect to especially the European consumer
actually getting incrementally a little bit better. So, if anything,
we're still very excited about the US secuity market, even
though valuations are stretched. Valuations never catalyst, but we're seeing
(40:54):
some improvements in trend data within Europe. We're seeing a
still healthy consumer. That leaves us a little more excited
about the international picture as well.
Speaker 5 (41:03):
Where specifically internationally, Yeah, I.
Speaker 13 (41:06):
Think if anything, you know, you know to the idea
tim that you know, things get marginally better before the
news does. I think that northern Europe, specifically Germany, is
a decent spot to be, you know, clearly there's a
lot of political back and forth with what may happen.
We also think that if you look at some of
the countries that are there's perhaps a little bit of
an over index thing about about concerns on on inflation.
(41:28):
Think about a lot of the petrochemical countries of places
like Brazil.
Speaker 6 (41:33):
Again, Brazil has been in a very tough spot.
Speaker 13 (41:35):
Technically speaking, Brazil is actually okay, And so I think
you have those stories where the prices will move before
the news does, and so you know, we think that
northern Europe is not a bad spot to be. We
also think that some of the energy exporters is a
good place to be as well.
Speaker 4 (41:52):
Yeah, it's interesting.
Speaker 3 (41:53):
As much as we talk about American exceptionalism, right, we
also talk about the high valuations here in the US.
Speaker 4 (41:57):
So if you're looking for.
Speaker 3 (41:58):
Opportunity, although people have been talking about looking overseas for
a while, it is hard to ignore maybe some of
what's going on overseas. Where don't you want to be
in this market environment right now?
Speaker 13 (42:09):
Yeah, probably the area that we're most it's called concern
with in the very very near term would be just
the long end of the bond marketing and we think
that fair value for the US ten year is probably
like four twenty four twenty five, so actually a little
bit lower in terms up in price from where we
are right now. But we still think that next leg
to get us excited about duration would have to be,
(42:32):
you know, a successive positive events on the tear front.
The one area that's really we think under love, Carol,
is that part of the bond market that not many
people talk about is structured credit more acid based financing.
Those are actually sporting some pretty interesting yields and you
can actually get access to them through a number of
different ETFs and other hard to access managers. But you know,
(42:54):
we think that in general, the long end of the
bond market is still an area that we're not as
excited about.
Speaker 6 (42:59):
Communis would be the exception of that. Structure credit wu
be the exception of that as well.
Speaker 13 (43:03):
Those are spots that we like more than just owning
four old long US government bonds.
Speaker 3 (43:09):
All right, We're gonna leave it on that note. Hey, Eric,
thank you so much. Great to get some time with
you on this Monday. Eric Friedman, he's chief investment officer
at US Bank Asset Management.
Speaker 2 (43:17):
Joining us This is the Bloomberg Business Week podcast, available
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Listen live weekday afternoons from two to five pm Eastern
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Speaker 2 (00:08):
This is Bloomberg Business Week Insight from the reporters and
editors that bring you America's most trusted business magazine, plus
global business, finance and tech news. The Bloomberg Business Week
Podcast with Carol Masser and Tim Stenovek on Bloomberg Radio.
Speaker 3 (00:26):
President Donald Trump planning tim post twenty five percent tariffs
on all US imports of steel and aluminum, broadening his
trade restrictions to some of the country's top trading partners
and seeking to protect domestic industries here in the US
that helped him win battleground states last year, which made
us want to know a lot more about those markets
in the US, how much we import our export and
(00:47):
really tim the.
Speaker 4 (00:48):
Cost of a trade war tariff war here.
Speaker 5 (00:52):
Okay, so we start with US markets and steel and
aluminum in Bloomberg News Metals and mining heavy machinery reporter Jojo,
who joins us here in the Bloomberg Business Week Studio. Joe,
let's start with numbers. Yeah, how much steel or aluminum
does the US actually produce?
Speaker 6 (01:08):
Right now?
Speaker 7 (01:09):
US produces about ninety million tons of steel and nearly
three point five to four million tons of aluminum.
Speaker 5 (01:17):
Okay, put that into context of what we use versus
what we imp.
Speaker 7 (01:21):
We use about ninety two one hundred million tons. So
steel's kind of like made to order. That's the way
it works. Aluminum not the same situation. We we produce
what would I say, three point five, we're consuming double that.
But you know fifty percent of what we consume comes
from Canada. Okay, you mean our trading partners, like our
(01:42):
biggest You saw that Ontario ad Yesterida during the super Bowl,
that's right.
Speaker 5 (01:47):
Yeah, I was thinking to myself, when did they, you know,
put that into the mix?
Speaker 3 (01:51):
Well, I thought it was an interesting mix overall. So
what is the impact of these terraffs?
Speaker 4 (01:55):
So it sounds like, I mean, let's take steel first
of all, sure like, is it a problem?
Speaker 8 (02:00):
Well, it depends on who you ask.
Speaker 7 (02:01):
If you ask the steel makers today and the service
centers who buy the steel from them and sell to
the consumers, they're going to say, no, this is not
a problem. That sure rally, this is good for our profits.
We want more domestic produced steel, and so this will
give us the runway to feel confident that we can
make more mills or produce more and have hefty profits
(02:22):
from doing so, how.
Speaker 4 (02:23):
Quickly do we do something like that?
Speaker 3 (02:25):
I think about all of the you know, fracking craze
and the drilling, and you go up to you know,
the west of the United States, We're like, yeah, we've
seen these boom and busts before, So how quickly if
that's the case, can you actually build out the facilities
to ramp up.
Speaker 9 (02:38):
Yeah.
Speaker 7 (02:39):
Listen, if you're just building a new electric arc furnace, now,
which is your typical kind of steel mill in the
United States, Realistically you're probably talking two to three years,
depending on if you have any type like making a
manufacturing plant. Like it's not like you know, just like
producing toys from matel that go on the shelf. Like
sometimes you start building a plant, like things go wrong
(03:01):
and there's only like two consultants you can deal with,
and so it might take longer. I mean, we saw
this with Steel Dynamics. They had a mill down in
Texas that they spent years. It's fine, it's doing fine now,
but it took a year or two longer than I
think people were anticipating. I think the bottom line is,
like it's a two to three year time span. There
are not a lot of plans right now to be
building out a ton of new mills. There is obviously
(03:24):
or aluminum, well definitely not aluminum, right, so actual aluminum
plants that make primary aluminum. There are plans, no plans
to build new aluminum. There hasn't been a new aluminum
mill plant built in the United States in forty years.
What they do build in the United States are something
called re rolling facilities, where they buy already made metal,
(03:45):
they melt it down and turn it into products. We
do have a couple of new ones of those coming
online because listen, there's really good demand in the packaging
space and can making and the automakers are always going
to be on high demand. But listen, it's also not clear,
like what is the intention of the teriffs. I think
the intention that Donald Trump's going for this time around
(04:06):
is the idea of bringing more manufacturing back to the
United States or having others build new plants in the
United States.
Speaker 5 (04:13):
But as you mentioned, the timeline on that is not
even close to overnight, right, So does it could these
actually accomplish that goal long term?
Speaker 8 (04:21):
Yes?
Speaker 7 (04:21):
And I know this is like a crazy thing for
us all to think about, but in my world, of
metals and mining, where timelines are years not months. Right,
they do say, listen, if we want a chance in
certain production industries, we do need the timeline to say, yeah,
we can do this in three to four years. If
(04:42):
you put things like tariffs in place, they give us
the confidence that when the thing is finally done, will
actually be profitable because the prices are going to be
fair across the board.
Speaker 8 (04:50):
Well that's what they argue.
Speaker 3 (04:51):
FYI, in two years we've made term elections. In four
years we have another presidential election. Who a different president
could come out and say, you know, let's assume these tariffs. Laugh,
you know, could say no, no more tariffs. So like,
I'm wondering sue from a steel company's perspective or someone
who might create, you know, go back to aluminum production here.
I mean, how are they gaming this out to say,
(05:14):
do we make the bets to do the bill?
Speaker 7 (05:16):
I mean, there are some really profitable steel making companies
like New Core Corporation is a great company, Steel Dynamics
is a great company. They might be sitting there today
saying cool, this gives us the cover to feel confident
on some of these other projects that we've had in
the pipeline that we haven't talked about do look like
good bets going forward.
Speaker 8 (05:36):
Five ten years.
Speaker 7 (05:38):
I mean, I don't know for sure, but they could
be having that conversation today.
Speaker 5 (05:41):
What does it do to the steel and aluminum that
we import to use?
Speaker 7 (05:46):
Well, we're going to anger a lot of foreign producers.
I mean, we import a lot of aluminum and steal
from the United Era, Emirates, Brazil, Mexico, and Canada. Right Like,
they're not going to be happy about this. They have
major questions and concerns.
Speaker 8 (06:01):
And of course.
Speaker 7 (06:02):
Buyers right they're going to have to pay more if
you're buying steel right now, which people aren't. There is
no spot activity happening in the steel market right now.
They're just taking contracted metal. Suddenly you're telling them they're
going to be paying what one hundred and fifty dollars
per ton more? They're not going to be happy about that.
Inventories across the United States of steel right now are
the highest we've seen in y.
Speaker 8 (06:21):
Why is nobody buying it?
Speaker 7 (06:23):
The demand's not there? Remember, interest rates are still high,
Costs are still high. The construction industry is getting absolutely
torn up, and the construction industry is one of the
great demand industries for steel making.
Speaker 6 (06:36):
So what you're going to go.
Speaker 8 (06:37):
And you're gonna add these terrafts.
Speaker 7 (06:38):
It's not going to suddenly spur consumption in the construction industry.
Speaker 3 (06:43):
That's what I was kind of confused about the rally
that we're seeing in all of these material stocks, the
aluminum producers, because I'm just kind of like, wait a minute,
they've been really battered.
Speaker 7 (06:51):
They've been really Yeah, they're really batter I mean one
of the steel the major steel index, the S and
P sub Steel Index, by the most in twenty twenty
four since twenty eighteen. I mean, it was a terrible year.
Interest rates are still there, Inflation is still a problem.
And when you talk to these metal making industries, they're
(07:12):
the bottom line cost, right, and so if their consumers
are sitting there saying, yeah, just financing is way too
expensive right now, we're not going to move forward with
the project that we had in the pipeline, then you
know that's bad news.
Speaker 5 (07:25):
Is this a commodity in the sense of the steel
and aluminum you get from US producers is the same
as the steel and aluminum you get from producers outside
of the US. Yes, do customers care where it comes
from apart from price.
Speaker 8 (07:37):
For the most part. No.
Speaker 7 (07:38):
Now, when you get into products, you get into very
specific types of steel products and types of aluminum products,
they do care because that is a value add But
if you're just talking raw steel making and primary aluminum making.
I've heard this since I started covering this stuff ten
years ago. The Chinese do it just as well as
the Americans. Everybody figured out how to make great steel
(08:00):
forever ago. The chemistry's there. Now the steel makers will
say no, no, no, no, but our steel this is
an alloy, it is particularly better. But if you talk
to actual consumers in the market, they're like, no, Like
maybe I like the buyer who I'm buying from, I
like doing business with them, but like the steel itself.
Speaker 8 (08:18):
Like yeah, they all pretty much do it pretty well.
Speaker 3 (08:20):
How does how do you think about trade agreements and
where we buy things like steel or aluminum from and
what that means geopolitically and those alliances.
Speaker 7 (08:31):
I think in twenty sixteen we just we respected these alliances.
It was part of the post World War two union,
you know, of the world. The West kind of said, listen,
soft power is important in these open markets. Lead to
more efficiency and better profits across across the spectrum. But
I think Donald Trump changed the calculus and I think
(08:54):
he took a page out of the steel Maker Trade Book,
which is some people do cheat, they dumb, and they add,
you know, they add subsidies to whatever they're trying to sell,
and in that regard, it is unfair. So today, I
think that's where this conversation is now, right, is like, well,
do we care about the alliances, sure, but we also
(09:15):
have to make sure that things are fair on the
trade level.
Speaker 8 (09:18):
That's the thinking.
Speaker 5 (09:19):
One more context question, how big get in terms of
number of employees or just size of the economy. What
do we need to know about the steal and aluminum industry.
I think the best way to think of it is industrials.
The industry part of GDP is ten percent of GDP. Right, So,
like when I'm sitting down on the weekends and I'm
talking to my friends who are in tech or finance,
(09:41):
like I'm a blip on the radar talking about steel
and aluminum, but it is still a critical part building
block of the economy.
Speaker 3 (09:48):
Is this a critical moment in time where things are
going to change in terms of potentially aluminium and steel
production in the US.
Speaker 6 (09:55):
I don't know.
Speaker 7 (09:55):
I mean, listen, he did this in twenty eighteen. We're
producing eighty one million per year currently or eighty two
million per year. We're currently producing eighty one million.
Speaker 3 (10:04):
Nothing changed, all right, Good to know, some great context
as always, Joe, thank you so much. Jode, busy day
for him medals and mining heavy machinery.
Speaker 9 (10:11):
Recorder is so metal.
Speaker 6 (10:13):
I just wanted to say that.
Speaker 4 (10:14):
Do you play like, do you have a guitar? Do
you have a band like? Do you have a metal band?
Speaker 8 (10:17):
Piano?
Speaker 4 (10:19):
Forget about that.
Speaker 8 (10:20):
He's metal, all right.
Speaker 3 (10:22):
You asked though, about kind of the economics of this,
and we want to kind of we want to stay
with this subject and get into the possible economic impact
on the US of it all and how economists are
reevaluating the impact of Trump's policies on the US economy,
warning that the risks to growth are front loaded and
rewards may not be visible tim until next year.
Speaker 5 (10:40):
With that side of the story, back with us as
Bloomberg News Global Economy Reporter end occurrent. He joins us
from our Washington, DC bureau, and good to see you
this afternoon. If we think back to the first Trump administration,
there was also tax cuts and there were tariffs. This
time there are tariffs without tax cuts. What do we
need to know about that.
Speaker 10 (11:00):
Yeah, it's the sequencing of the policy rollout and the
pace and maybe breadth of the police roll out that's
unsettling some economists. I mean, on paper, of course, President
Trump's agenda promises to unleash, you know, cut the kind
of regulation that holds back investment in the infrastructure and
extraction of resources and energy. For example. He wants to
(11:21):
push through tariffs that are all part of a bigger
game plan to create investment in manufacturing at home and
create more jobs, and of course push through tax cuts
to take to relieve households and businesses. But economs are
saying that's fine on paper, but right here, right now,
things are moving pretty fast. In the tariffront, there was
a threat of tariffs against Columbia. There was a threat
(11:42):
of really punishing tariffs against Mexico and Canada. That came
pretty quickly and surprise a lot of people because you're
talking there about impacting a consumer goods basket. Think about
the food and the vege that the US buys from
Mexico for example. Then there are tariffs already in place
on China, and they're new in the sounds that they
are across the board on all tariff It not just
say targeted financial security or targeted on intermediate goods. It's
(12:04):
across the board, everything coming in ten percent and Shanna
has retaliated. And then at the same time, we have
lots of focus, of course down here on the spending cuts,
on the agency closures, on the federal staff layoffs being
pushed through by DOGE, question marks there over when that
ends and how it impacts overall. And we have deportation
(12:24):
going on, which of course is another variable when it
comes to the labor market. So you put it all together,
a lot of economists are saying, Okay, we get the
positive agenda here, but right now this feels pretty bumpy,
and they're wondering how it all stacks up in the end.
Speaker 3 (12:36):
I mean, and let me go there, and how difficult
is it at this point to really kind of figure
out the economic impact.
Speaker 11 (12:45):
Yep.
Speaker 10 (12:46):
So obviously absolutely right We're at the start of the administration,
so it's very early in all of this, but we
are seeing some tangible impacts. Now, take for example, the
tariff debate which dominates so much of the economic news
right now. We have had the University of Michigan survey
showing that consumer inflation expectations have risen sharply, and that's
(13:07):
the link directly to the tire story and the tirefs,
of course, being the threat of duties on the kind
of typical consumer goods coming out of Mexico, less so
from Canada, but certainly from China. So there has been
an impact there. Secondly, we have plenty of businesses, importers,
manufacturers making warnings making the point that these tariff threats
(13:27):
are impacting disruption, disrupting their supply lines, disrupting their plans
for investment that don't yet have certainly in terms of
what will the duties be, what will be impacted when,
and by how much. So there's a source of one
certainty there. And of course beyond that, now you have
now these job layofs in the federal sector, and so
(13:48):
there is impact.
Speaker 4 (13:49):
It's a lot of moving parts.
Speaker 8 (13:50):
You know.
Speaker 3 (13:50):
One thing I do think about, and I think about
from your perspective, is we are a global economy, and
what happens often in one developed major economy impacts others.
Speaker 4 (13:58):
As a global economic.
Speaker 3 (14:00):
Reporter, what's at stake for the US if it's neighbors
or trading partners or global allies are hurt economically by
these US tariffs. I mean, what's at stake in terms
of US growth, global growth, and really then geopolitical stability.
Speaker 10 (14:16):
Yeah, so the US has been the standout performer for
the world economy over the past few years. Germany is
in the Dulgens, China's economy is slogish. And when you
look at the international the observations from say that IMF,
for example, they made the point that the US is
the world leader for growth. It's driving the world economy.
It's the reason it upgraded global forecast this year. So
(14:36):
that's important in terms of supporting the overall world economy. Secondly,
if we get down the road of the US getting
involved in a kind of a tit for trade war
with key trading partners imposing tariffs on each other's goods
or other kind of restrictions, then obviously that will start
to weigh on business confidence, business sentiment, business investment, maybe
eventually employment, So that there are certainly risks going down
(15:00):
the road of the whole austray policy. Of course, trouble
administration says this will ultimately drive investment at home.
Speaker 4 (15:07):
All right, got to leave it on that note.
Speaker 3 (15:08):
Yeah, certainly something to think about that global investment right
potentially here into the United States. Endcur and Global Economy
reporter at Bloomberg News. Joining us from our DC bureau.
Speaker 2 (15:18):
You're listening to the Bloomberg Business Week Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 3 (15:32):
All right, Well, the state and local government debt market
is poised for another strong year in terms of issuance
and demand from retail buyers, provided federal lawmakers maintain the
bond's tax exempt status. Is according to investors and bankers
Tim who took part in a Bloomberg panel discussion that
was late last month.
Speaker 5 (15:49):
Meantime, the Bloomberg Muni Bond Index is up just under
one percent so far this year, with some thoughts on
the UNI market as well as a Super Bowl tie in. Yes,
there's ammunion connection to everything. We're gonna get to that moment.
We welcome Dan Close, head of municipals over at New
ven it's got one point three trillion dollars in assets
under management. Dan joins us from Chicago. Dan, We're going
to talk stadium financing in just a minute, but we
(16:11):
got to talk the tax exempt status of UNI bonds
because I'm wondering if you think the Republican Congress will
eliminate the tax exemption tall pay for the extension of
the Trump tax cuts.
Speaker 12 (16:23):
First, thank you so much for having me on the
program here today. You know, certainly this time around, there
is I think a threat to the UNI exemption that
we haven't had in a long time. And so if
you look at all the pafers that need to go
in and roll the Tax Cut and Jobs Act, you know,
the Houseways and Means did put out potentially all fifty
(16:44):
or so different payers and municipal exemption at least specific
to hospitals, private activity bonds, we're on that list. So
we're we're certainly watching this. We're monitoring it. But I
think given that all of infrastructure in the United States
is financed at a local level with the UNI exemption,
you know, our estimates eight hundred and twenty six billion
(17:07):
in savings over a ten year period for the exemption
for your like local high school, your local water and
sewer authority. We think we end up okay, but certainly
it's going to be a fight to keep the exemption this.
Speaker 3 (17:20):
Time around, it's safe to say, all right, so it
is a defining feature of the four trillion dollar asset class.
So what would it do to the muni market if
that exempt it was a.
Speaker 12 (17:30):
Way, yeah, started to cut off, it would it would
certainly raise the cost of any of your projects. So
if you're a local school district, your high school's overcrowded,
you need to go in and issue debt to go
in into finance a new high school. If all of
a sudden the exemption went away, you're going in and
financing that local infrastructure at a taxable level. So we
(17:51):
estimate that's another two hundred basis points two percent of
higher financing cost if that were to go away. So
all this local infrastructure project we think could get a
lot more expensive if the exemption were to We're not
to be rolled.
Speaker 3 (18:07):
So let me just ask one follow up to that.
So potentially that could if it's a higher cost to
do this project, it's more financial stress potentially on municipalities, right,
or is it a case that projects don't get done
because the cost.
Speaker 4 (18:21):
Has gone up? And I think about the economic impact
of that.
Speaker 12 (18:25):
Yeah, and I think it could certainly be both. You know,
projects that at the margin become too expensive don't get done.
We saw that in twenty two and twenty three, there
was a bunch of airports that were up on the
block to go in and to have expansions when materials
became too much, when the cost of inflation was up,
you know, we saw some of those projects get deferred.
(18:47):
And in the similar way, if it does become too expensive,
some of these critical infrastructure projects could be delayed or
at the very least become much more expensive, and that
would put some stress on municipalities or their finances.
Speaker 4 (19:01):
So it could be an economic impact, right.
Speaker 12 (19:03):
Certainly and certainly, And I think anytime you go in
and raise the cost of just providing you know, essential
service infrastructure at the local level, it could very much
have an economic impact. And we're certainly trying to make
the case. You know, every congress person has a home district.
We're making the case of all the different projects that
are being done and financed in each Congress person's home
(19:26):
district and how much more those projects could cost if,
in fact the exemption did go away.
Speaker 3 (19:31):
Well on that point, is New Vene specifically lobbying Congress
to keep the tax exemption for unis.
Speaker 12 (19:37):
Yeah, we're having conversations with with our government relations folks,
which is more at the state and local level, and
just reminding everyone in Congress again of all the different
ways that munifinance does go in help their district. And
you know, we think with such a narrow majority in
the House, with two very supportive members on the House,
(20:00):
ways and means will ultimately prevail. But you know, in
twenty seventeen, with the Tax Cut and Jobs Act, the
MENI market had to give up pre refunded bonds, and
it might be the case that private activity bonds, bonds
issued by healthcare providers higher ed for instance, might go
in and have part of their exemption chipped away. As
a potential paper.
Speaker 5 (20:21):
Hey, Dan, how do you look at the involvement in
the federal government with different states when it comes to munis.
For example, California and New York huge when it comes
to MUNI issuance. But Donald Trump not a big fan
of the way that these states are run. He's been
outspoken about that. What's the risk factor there?
Speaker 12 (20:39):
Yeah, I mean the Trump administration, just by our own history,
was very supportive of municipal bonds and of the market
during its first term. You know, if you look at
the numbers for trillion carol was the number you had mentioned.
As far as the size of the market, that's roughly
divided fairly equally between red states and blue states. As
far as what amounts of bonds are outstanding. So certainly,
(21:02):
you know, despite anyone's political leanings or states leaning one
way or another, certainly every local government, every state government
is availing themselves of this exemption and is certainly using that. So,
you know, we don't think that the administration is hostile
towards munist in any way. We think they see the
(21:22):
benefit of going in and having infrastructure choice, if you will,
that infrastructure decisions are made at a local level. And
I think that really is fairly congruent with what we
understand that this administration is trying to accomplish.
Speaker 3 (21:35):
Hey, we're kind of working our way across the country
with you kind of question about New Veen and if
it has plans to buy high yield bond being issued
to help finance Brightline West, that's that high speed rail
line that's going from southern California to Vegas.
Speaker 12 (21:51):
We are taking a close look at it. We just
had the bankers in the issue or into our office
just last week. We're taking a close look at it.
You know, we've certainly been a supporter of bright Line
East in Florida and certainly are taking a close look
at at this deal, which should be coming in the
next couple weeks.
Speaker 5 (22:10):
Okay, well, let's talk stadium financing when it comes to MUNI.
In the wake of last night's the Super Bowl. Just
how much are Munie's involved when it comes to stadium
financing around the country right now?
Speaker 6 (22:21):
Yeah, very much so.
Speaker 12 (22:23):
I mean there's currently an ask of about thirteen billion
or so in stadium financing by twelve different municipalities, and
just taking a step back, it's not going to finance
you know, the scoreboard. It's not going to finance actually
inside the stadium, the turf on the field. Most of
that is all privately raised. As far as actually building
(22:44):
the stadium itself. Where Munis come into play is just
all the wrap around financing. I'm here in Chicago, huge
Bears fan. The Bears are asking for two point four
billion for their new stadium on the lake Front, but
none of that is really for the stadium itself. It's
for public transportation, a new bus depot, extending the water lines,
(23:07):
the sewer lines, extending all of that critical infrastructure in
order to actually build the stadium. So we're seeing a
lot more asks of municipalities to go in and to
help finance that wrap around financing before the stadiums do
come in.
Speaker 3 (23:21):
All right, this was really cool. The MUNI market a
massive market. I feel like we covered so much ground. Dan,
come back soon. I hope we can do that.
Speaker 12 (23:28):
Thank you so very much.
Speaker 6 (23:29):
I do appreciate it.
Speaker 3 (23:30):
All right, same here, Dan, close head municipals over at
Nuveen one point three trillion dollars in assets under management.
As we know, Muni's about a four trillion dollar market,
so massive. Dan joining us there from Chicago.
Speaker 1 (23:41):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five these during this
listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 5 (23:55):
Well share to the twenty eight billion dollar market cap
fintech company, broad Ridge Financial Solutions hitting at all time
hi today. Broad Ridge provides infrastructure for capital markets. They
do wealth management, corporate governance and more. The company did
report earnings at the end of last month. The reported
revenue and EPs for the second quarter that came in
above estimates. The company also reaffirmed its adjusted earnings per
share forecast for the full year. We've got with us
(24:17):
Tim Gokey, CEO over at broad Ridge. He joined us
from New York. Tim explain exactly where broad Ridge plays
in the market.
Speaker 11 (24:27):
Yes, well, thank you, thank you for having me today,
and broad Ridge is we have a unique position because
the real core of what we do is a network
that connects every individual investor, to every public company, to
every wealth manager and every fund all around the topic
of corporate governance and communications. And that it gives us
(24:50):
a unique vantage point at the center of capital markets,
wealth management, and corporate governance. And we did have good
results in the quarter with recurring revenues up nine percent,
earnings up seventy percent. But we're a bit of a
seasonal business and there's some timing in there. So we affirmed,
as you said, earnings of eight to twelve percent for
(25:11):
our full year which ends in June, and also that
we expect to meet our three year guide which ends
a year from June.
Speaker 5 (25:18):
I think, what's yeah, Kam, I just want to jump in.
How dependent are you on companies ipoing?
Speaker 11 (25:26):
You know, most of our business is ongoing and it's
around companies that are in business today.
Speaker 9 (25:32):
So when there are IPOs, that's a good thing.
Speaker 11 (25:35):
That makes more companies and it's helpful, but it's it's
you know, our business is not dependent on that.
Speaker 9 (25:42):
It is. It's a nice tailwind when it happens.
Speaker 3 (25:44):
Hey, one of the things I want to ask you, Tim,
you said, you know this unique vantage point that you
have into capital markets and wealth creation. So tell me
that unique vantage point. What it does tell you about
what's going on in capital markets right now? What might
you are or what it is you're seeing in terms
of investor psyche and what you're seeing about wealth creation.
Speaker 11 (26:05):
Absolutely, I think I think we're really seeing an ongoing
revolution and how people invest, and I think there are
really three trends behind that. One is increased participation. We're
definitely seeing that in our numbers with the number of
positions that shareholders hold up by double in the last
five years. The second one is increased access to more products,
(26:31):
more financial products.
Speaker 9 (26:32):
We're seeing that with.
Speaker 11 (26:34):
Liquid alternatives, with managed accounts, but especially now with crypto
and where that is going to go over time. And
the third is really there's an increased interest in governance
and getting involved in what large companies are doing, especially
among younger people.
Speaker 3 (26:49):
What does governance mean, especially in an environment where when
it comes to factors like ESG or DEI, diversity, equity
and inclusion, you are seeing government company is roll back
on that, and you know, it's certainly I think it's
safe to say that folks would say they're taking their
cues from society, but really from what's going on in
the federal government. So does what does that really mean
(27:13):
increased governance?
Speaker 11 (27:14):
You know it is you know, shareholders have an opportunity
each year to vote for the board of directors and
for proposals that come forward, and most companies have their
annual meetings in the few months that are just coming up.
We're just beginning the proxy season between now and really
the end of May is when most companies will have
(27:34):
elections and shareholders have a chance to weigh in the
number of proposals, especially when ESG matters peaked a couple
of years ago, and also support for those proposals a
few years ago was as high as forty percent. It's
been coming down over time. Last year it fell again,
both the number of proposals and support specifically for ESG.
(27:55):
So shareholders do have the opportunity to to make their
voices heard, and I encourage everyone listening to vote when
they have that opportunity. I think a real innovation that's
happening though, is that fun companies are saying, we don't
want to be in the business of voting.
Speaker 9 (28:11):
On behalf of our shareholders.
Speaker 11 (28:13):
We want to push that opportunity back to the shareholders themselves,
and that is something called voter's choice or pass through voting.
We did that for eight funds two years ago, we
did it for one hundred funds last year, and this
year is going to be more than four hundred funds.
So that's a rapidly growing trend of giving people the
opportunity to vote not only in the companies that hold directly,
(28:35):
but if they have if they're on a mutual fund,
the opportunity to weigh in on the decisions for those
companies as well.
Speaker 5 (28:42):
I am very curious about crypto. You mentioned it and
you said that we'll see what happens. You basically said,
you know, we'll see what happens with crypto this year.
What do you think happens to crypto this year.
Speaker 11 (28:55):
Well, there's obviously a lot of investor interest in that,
and you know, there's been a lot of challenge the
past few years where really it's a new asset class,
there needs to be a strong a framework around it
so everyone understands how to play, and that hasn't happened.
Speaker 9 (29:12):
A few years.
Speaker 11 (29:13):
The past years has just been really enforcement but against
unclear rules. And I think the new administration is very
committed to working with Congress to put in place a
clear set of rules and guidelines around crypto. And you know,
we think the key to this, if you think about
the growth of other recent asset classes, take ets, which
(29:36):
are huge today, they were nowhere twenty five years ago.
One of the real things behind them was good disclosure
for retail investors. And ETFs took the disclosures that were
mutual funds were already using. They adopted that same framework.
And we think that adopting a similar sort of disclosure
framework for crypto assets could be something that would really
(29:58):
allow people to to invest in it with much more companies.
Speaker 3 (30:03):
In general, how do you see the new administration and
policies that might come out. I think businesses initially. I
think it's going to be an easier regulatory environment, much
more business friendly. But what does it mean specifically for
broad Ridge?
Speaker 9 (30:18):
Yeah, I think for broad Ridge.
Speaker 11 (30:22):
It's probably not as big an event as it is
for many other companies. Certainly, there's a lot of optimism
about capital markets, about the direction of the economy and
M and A, and those things are all mild positives
for us.
Speaker 9 (30:35):
As you asked me about the question about IPOs, so
it's a.
Speaker 11 (30:38):
Positive When you think about the biggest priorities administration around taxes, tariffs, immigration,
cultural issues, those are pretty neutral to what we do.
And then there's a set of issues that are specific
to financial services that are not nearly as much administration priorities,
but I think there will be change. Crypto is probably
(31:01):
the highest on those which you know it is that
is the more important one. I think there is also
interest around shareholder engagement and how to get that right,
as well as how to continue digitization in the economy.
Speaker 5 (31:13):
So how is your company preparing for So how is
broad Ridge preparing for an onslought of crypto customers and
how would they use you as as a client.
Speaker 11 (31:23):
Yeah, I think for us the biggest area is around
you know, what we do is helping have clear disclosure
of what is the risk in return for your different
investments so that investors can make their own choice aund
around risk. And with crypto, one of the challenges is
there's no real one source of truth because it's it's decentralized, right,
(31:47):
So we have created a product that is almost a
crowdsource and to say from all the different places we
boil it down, what is it that you're getting, what
are the rules behind it? How much float does it have?
Speaker 9 (31:59):
How much you know?
Speaker 11 (31:59):
All the thing thing is that investors are really curious
about and bringing that together in one place.
Speaker 9 (32:04):
We have introduced that to the market.
Speaker 11 (32:06):
We have a couple of designed clients for that, and
so we think that is something that can help help
the market and eventually as this grows, we think that
investors should receive the same source of sort of routine
disclosures like you would for a mutual fund or an
ETF about how much you're paying and what's the performance
(32:27):
and what are the other key parameters.
Speaker 3 (32:29):
Hey, one thing I want to ask you, you know,
and we've been talking about this for I feel like
many years tim in terms of you know, cheaper trading platforms,
the digitization, the fintech that has certainly innovated evolved over
the last few years, you know, maybe giving more individuals
access to investing in the markets. Having said that, you know,
(32:50):
you still continue to see the wealthiest owning the top
one percent holding about fifty percent of stocks, the bottom
fifty percent maybe holding only about one percent. So, you know, democratization,
has it really happened or what? What do you see
as the flaws maybe in the fintech that has evolved
(33:11):
over the last few years that maybe hasn't enabled more
Americans to tap into the equity markets. I'm not saying
it's the end all or be all, but for many
it's it's a way to wealth. And is it just
a case of Americans not being paid enough to be
able to tap into it or is there something around
the actual infrastructure that's out there.
Speaker 9 (33:32):
Yeah, it's definitely not the infrastructure.
Speaker 11 (33:34):
Because Americans have more access to more products at lower
cost than any place in the world. And that's been
the vitalization of why American capital markets are so are
so vital, and it's been a real growth storympowering us.
Speaker 9 (33:50):
It is It's.
Speaker 11 (33:51):
Definitely true that there are you know, big big gaps
between what the top half and and what others have,
but the numberumber of people investing has been has been
really going up, so the participation.
Speaker 9 (34:04):
Has been broader.
Speaker 11 (34:05):
And then the other thing that I would I point
out is when you look at the coming wealth transfer
and I know we've been talking about this for a
long time, from the silent generation and the boomer generation
to younger generations, that is going to spread this out
a lot as well, and some you know, as you know,
tens of trillions of dollars and those when that happens,
(34:27):
those newer, younger investors are using you know, they're investing
in a very different way. And so as that wealth
comes to them, you could see pretty big shifts in
wealth management and the kinds of expectations that the investors
that then in the future will have the money, the
expectations they have wealth management firms need to get ready
for that.
Speaker 3 (34:45):
Now, all right, interesting perspective, Hey, Tim, thank you so much.
Great to get some time for you or with you,
I should say, on this Monday, Tim Goki, his chief
executive officer broad Ridge, as we mentioned a company that
not necessarily a household name, but you know, you know,
certainly one. It's about a twenty eight billion dollar market
cap up about seven percent so far here, but certainly
(35:06):
plays a critical part in terms of the financial services structure.
So really interesting to get some time with him.
Speaker 8 (35:14):
Room.
Speaker 11 (35:16):
I'll bet you let me drive.
Speaker 5 (35:17):
Oh no, no, no no, this is not a toy.
Speaker 6 (35:20):
Who's going to dug honey?
Speaker 7 (35:22):
Please, I'll do the riding gravels.
Speaker 9 (35:25):
Let's wait, I want to drive.
Speaker 12 (35:26):
It's a good question that drives.
Speaker 8 (35:33):
This is the drive to the clothes.
Speaker 6 (35:35):
That plums for me a thing.
Speaker 9 (35:36):
Well, driver Jovin.
Speaker 3 (35:38):
Don on Bloomberg Radio, all right, everybody, about nineteen minutes
to go until we wrap up the clothes here on
this Monday. We want to mention though a story just
crossing the Bloomberg coming from the Wall Street Journal. A
consortium of investors led by Elon Musk is offering ninety
seven point four billion dollars to buy the nonprofit that
controls open AI, upping the stakes in his battle with
Sam Altman over the company behindt Let's not forget Elon,
(36:02):
one of the co founders of this company. There's kind
of a group of them, and he's been at odds
with Sam Altman. Yeah, I think that odds is a
good way to put it, Cheryl and diplomatic.
Speaker 5 (36:10):
The Wall Street journals Jessica Tunkle and berber Jin go
on to report that Mark Toberoff, the attorney for Elon Musk,
said he submitted the bid to open AI's board of
directors Monday. Here's what that letter said. Quote it's time
for open ai to return to the open source, safety
focused force for good at once was Musk said, in
a statement provided by toberof quote, we will make sure
(36:32):
that happens. Hey, raise is the question, Carol that I
have what he's got his own xai company, right? Why
does he need open ai if he's got xai, I mean,
or why does he want it?
Speaker 4 (36:43):
I don't know.
Speaker 3 (36:44):
Let's call it Elon now and ask him. But what's
interesting too, is you know Sam Altman has laid out
some plans for open AI's future, and that includes converting
it to a for profit company and spending up to
half a trillion dollars on AI infrastructure through a giant
venture called Stargate. So he and Musk have been fighting,
and just again in the Wall Street Journal recapping this
and what we have kind of talked about in terms
(37:05):
of the conflict between Sam Altman and Elon Musk.
Speaker 4 (37:08):
So definitely a new development in the world of AI.
Speaker 5 (37:11):
Is open ay for sale?
Speaker 4 (37:13):
I don't know right exactly, that's a good question. Yeah.
Speaker 3 (37:17):
So anyway, something to watch and something to add onto
the list of things that we are watching on this Monday.
Speaker 4 (37:22):
It's just Monday, lemon.
Speaker 3 (37:23):
Let's see what our next guest has to say about
all that is coming at investors. Eric Friedman is chief
investment Officer of US Bank Asset Management.
Speaker 4 (37:31):
He joins us from Chapel Hill, North Carolina.
Speaker 3 (37:34):
Hey, Eric, it is good to have you here another Monday,
another day where we are talking about potentially more tariffs
US imposed tariffs against nations that are trading partners.
Speaker 4 (37:47):
I don't know, how.
Speaker 3 (37:48):
Are you thinking, how does this all kind of roll
into the investment environment and whether or not you feel
comfortable enough to pull some levers here or do you
sit tight?
Speaker 13 (37:57):
Yeah, Carol, thanks for having us on we still think
this is a lass half full outlook for US.
Speaker 6 (38:03):
I think the key thing with tariffs, it.
Speaker 13 (38:05):
Really rolls into the broader conversation about inflation of course,
and brus We think that the barometer that's really gauge
is what happens with the US tenure treasure yield. That
has been, if you will, the governor of risk assets
for some time. So right now with the US ten
you're at four point five percent. We think we're actually
in a pretty good spot. Above five five and a
(38:26):
quarter on a sustained basis that we think would be
more problematic.
Speaker 6 (38:30):
So I think in general you saw.
Speaker 13 (38:31):
This a little bit from the University of Michigan data
yesterday I'm sorry, last week, as well as some of
the chatter over the weekend and then today on tariffs
that you know, the FED doesn't necessarily care about what
the source of inflation is. If inflation pushes them to
raise rates that tenure treasury we've been talking about, that
becomes more of a problem. So if anything, that would
(38:52):
be the common denominator we're most focused on is what
is the bottom market telling us? And for now they're
at least placated with the or and Trump plans.
Speaker 5 (39:01):
Why what is the bond market telling us. It's surprising
to see that it's not reacting more to tariff news.
What does that tell you?
Speaker 13 (39:10):
I think it tells us that there's a little bit
of negotiations left on the table. You think about the
dialogue with Canada and Mexico as perhaps the first solvo
that was a pretty big headline number. Then all of
a sudden at the eleventh hour, there was a change
in the news flow. So I think that what the
the bond market is saying is we're actually want to
(39:30):
see actually a finish line before completing our thoughts on.
Speaker 6 (39:35):
Is this a done deal?
Speaker 13 (39:36):
So I think that because there's been both the FED
which has said, look, you know, we're going to be
guilty until proven innocent with respect to the overall inflationary environment,
and you've had this back and forth across global players
with respect to tariffs that we're not yet you know,
completed if you will, with a definitive view on tariffs.
I think that's really why the bond market wants a
(39:57):
little bit of optionality as opposed to to making a
definitive move.
Speaker 3 (40:01):
Here, is it safe to say that you're okay still
investing in the US equity markets as long as yield
stay below five percent.
Speaker 6 (40:10):
Yeah, it's very fair, Carol.
Speaker 13 (40:11):
I think, if anything, we're seeing a level of participation
from non US equities which is certainly becoming more of
a consensus long for people in mind share and other chairs.
So you know, you have a decent global consumer, not
so much in China, but Europe is in okay shape,
not great shape. Again, as investors, we care most about
(40:32):
marginal change. Our thing is getting better than getting worse.
We think that in the US things are really staying
the same and with respect to especially the European consumer
actually getting incrementally a little bit better. So, if anything,
we're still very excited about the US secuity market, even
though valuations are stretched. Valuations never catalyst, but we're seeing
(40:54):
some improvements in trend data within Europe. We're seeing a
still healthy consumer. That leaves us a little more excited
about the international picture as well.
Speaker 5 (41:03):
Where specifically internationally, Yeah, I.
Speaker 13 (41:06):
Think if anything, you know, you know to the idea
tim that you know, things get marginally better before the
news does. I think that northern Europe, specifically Germany, is
a decent spot to be, you know, clearly there's a
lot of political back and forth with what may happen.
We also think that if you look at some of
the countries that are there's perhaps a little bit of
an over index thing about about concerns on on inflation.
(41:28):
Think about a lot of the petrochemical countries of places
like Brazil.
Speaker 6 (41:33):
Again, Brazil has been in a very tough spot.
Speaker 13 (41:35):
Technically speaking, Brazil is actually okay, And so I think
you have those stories where the prices will move before
the news does, and so you know, we think that
northern Europe is not a bad spot to be. We
also think that some of the energy exporters is a
good place to be as well.
Speaker 4 (41:52):
Yeah, it's interesting.
Speaker 3 (41:53):
As much as we talk about American exceptionalism, right, we
also talk about the high valuations here in the US.
Speaker 4 (41:57):
So if you're looking for.
Speaker 3 (41:58):
Opportunity, although people have been talking about looking overseas for
a while, it is hard to ignore maybe some of
what's going on overseas. Where don't you want to be
in this market environment right now?
Speaker 13 (42:09):
Yeah, probably the area that we're most it's called concern
with in the very very near term would be just
the long end of the bond marketing and we think
that fair value for the US ten year is probably
like four twenty four twenty five, so actually a little
bit lower in terms up in price from where we
are right now. But we still think that next leg
to get us excited about duration would have to be,
(42:32):
you know, a successive positive events on the tear front.
The one area that's really we think under love, Carol,
is that part of the bond market that not many
people talk about is structured credit more acid based financing.
Those are actually sporting some pretty interesting yields and you
can actually get access to them through a number of
different ETFs and other hard to access managers. But you know,
(42:54):
we think that in general, the long end of the
bond market is still an area that we're not as
excited about.
Speaker 6 (42:59):
Communis would be the exception of that. Structure credit wu
be the exception of that as well.
Speaker 13 (43:03):
Those are spots that we like more than just owning
four old long US government bonds.
Speaker 3 (43:09):
All right, We're gonna leave it on that note. Hey, Eric,
thank you so much. Great to get some time with
you on this Monday. Eric Friedman, he's chief investment officer
at US Bank Asset Management.
Speaker 2 (43:17):
Joining us This is the Bloomberg Business Week podcast, available
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Listen live weekday afternoons from two to five pm Eastern
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