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Joe Matthew
At CES. Michael McDermott, EVP of Samsung, spoke with Bloomberg Media Studios about what the company calls its next AI chapter, your companion to AI Living. It's a shift from AI as a feature to AI as a trusted partner in everyday life. Bloomberg Audio Studios Podcasts Radio news.
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Bloomberg Host 1
You're listening to the Bloomberg Balance of Power podcast.
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Bloomberg Host 2
Catch us live weekdays at noon and.
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Bloomberg Host 1
5Pm Eastern on Apple CarPlay and Android Auto with the Bloomberg business app Listen on Demand wherever you get your podcasts.
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Joe Matthew
Or watch us live on YouTube. Thanks for being with us on the Wednesday edition of Balance of power on Bloomberg TV and radio, streaming live right now on YouTube. We have a lot to talk about following the president's address in Davos this morning, his ruling out of military activity in Greenland, and of course, the conversation about affordability that he tried to inject into that speech. His claims of economic growth all will be tested when we spend some time with Lael Brainard. But we've also got our eyes on the Supreme Court today, and there is some major crossover here as the court weighs a very simple question, whether President Trump can fire Fed governor Lisa Cook over mortgage fraud allegations that, of course, she has consistently denied. We heard the president's side of this case, speaking for the administration, Solicitor General John Sauer in arguments just a couple of hours ago. Listen, we would contend there's judicial review kind of at the outer perimeters of cause, whether something goes to conduct, fitness, ability or competence at all. But once you're within that, and we clearly are here, then there would be deference to the president, the statutory language caused without further qualifications itself, in its plain language, a broad conferral of authority on the president himself. Remembering that the Federal Reserve has been qualified as a different entity than every other federal agency in the court's declaration last May describing it as a uniquely structured quasi private entity that follows in the distinct historical tradition of the first and Second Banks of the United States. As we try to get closer to the center of this case, we bring in Tyler Kendall, Bloomberg Washington correspondent, has spent the day at the courthouse listening to arguments. Tyler the headline that we're running here on the terminal is that justices are skeptical of the White House's case. What are you hearing.
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Tyler Kendall
Right exactly, Joe and that was the indication that we got as we listened to the justices questioning not just of the solicitor General but also of Lisa Cook's lawyer as well, signaling this weariness over the Trump administration's efforts to oust Fed governor Lisa Cook and citing, interestingly enough, the potential ripple impacts when it comes to the economy, the markets, and, of course, the central bank's independence. Now, if we take a step back here, it's important to note that the case in front of the Supreme Court today has to do with the Trump administration's request for what's known as a stay of a preliminary injunction that has allowed Lisa Cook to retain her position while the broader issue of her firing plays out in court. So essentially, they're asking the justices if President Trump can fire Lisa Cook for now. However, it does have implications for down the road, because the justices were really asking questions that get to the heart of Lisa Cook's firing. And those themes that we saw the justices pull on really have to do with three different buckets. One is, does President Trump have sufficient cause to fire Cook? The second is what she afforded due process. And the third are these potential impacts down the road when it comes to the economy and the central bank's independence. And it was interesting because we did hear from one of those justices appointed by President Trump, Brett Kavanaugh, who in particular honed in on that last bucket, about what those impacts could be, saying that he is thinking about the, quote, real world, downstream effects and any precedent that this could set, not just for the future of the Trump administration, but any administration down the line. So, Joe, while it seemed that we were getting this sort of consensus for how the justices were feeling, there was less of a consensus about what they're going to do next. We could see them issue perhaps a narrow ruling citing concerns that Lisa Cook didn't have enough time to address these allegations of mortgage fraud against her. We could see a broader ruling where they define what cause means, what that legal standard actually should be defined as, since it's not explicitly known in the law. Or ultimately, Joe, they could just kick this back to the lower court and not issue an opinion at all. So there's a lot of different threads that we're watching here, and it's something that's going to develop in the weeks and months to come.
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Joe Matthew
All right, Tyler, before you blow away, just very quickly, did you get eyes on Jay Powell? Did anybody see him coming out of the Supreme Court today?
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Tyler Kendall
So we can confirm one of our colleagues inside the room did lay eyes on Jerome Powell, as well as Ben Bernanke. He was also in the room alongside Fed Governor Lisa Cook. However, it's our understanding that he did not not go out of the main public entrance here. There's a few different entrances at the Supreme Court that Jerome Powell could have used.
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Joe Matthew
Got it, Tyler. Thank you. Get warm, Tyler. Kendall, in front of the U.S. supreme Court today with arguments being had. We discussed this a bit with Kevin Hassett earlier, my colleague Anne Marie Hordern. Bringing us back to our other big story today. The president, the administration on the ground in Davos. And we spoke with Kevin Hassett, director of the National Economic Council, said to be on the shortlist to replace Jay Powell as Fed chair specific to the concept of Fed independence. Listen to what he said. I was a young economist at the Fed a long time ago, and I worked with Alan Greenspan, and he was really, really careful about keeping the Fed out of politics and keeping the Fed focused on monetary policy and interest rates and the dual mandate. And even to one point, I wrote a paper, an academic paper that he refused to publish for the Fed for over a year because it was about carbon taxes and BTU taxes. And he didn't want the Fed to, to get involved in that fight with Al Gore and Bill Clinton while it was still going on. And so I think that I really regrettably, the bank presidents and the Federal Reserve members seem to want to have an opinion about everything every day, not just monetary policy. So, for example, you could go in and right after President Trump took office, Austan Goolsbee gave a speech where he said, well, economists all agree that if there's a tariff that it doesn't have an effect on inflation, it just affects the price level. But he said, here's why you shouldn't think about it that way. And I think that that's actually going into a politically dangerous place for the Fed. I mean, for sure, you want to talk about inflation, but precisely then, right when President Trump's coming in and setting his tariff agenda, to have the Fed criticize him so vehemently, I think is inconsistent with the desire for independence.
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Bloomberg Host 2
Do you think it was appropriate that.
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President Donald Trump
Jay Powell went to the Supreme Court today?
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Joe Matthew
I do not. Interesting. He did not think it was appropriate. As we heard, Jay Powell was, in fact, there. And that's Kevin Hassett speaking with Anne Marie Hordern after in Davos. The president still making his way through the World Economic Forum, and we might catch him at a couple of different events. He's got some sideline meetings with other world leaders following his conversation with business leaders that just concluded. So we'll let you know if he starts to speak and make some news. We want to seize on this moment, though, following the arguments before the Supreme Court, knowing that we have a lot to talk about with our economy. And a special conversation with Lael Brainard, if there was one voice we wanted to hear respond to the President and this entire conversation about Lisa Cook's possible firing, we turn to the former director of the National Economic Council in the Biden administration, former vice chair of the Federal Reserve, distinguished Fellow now at the Georgetown Soros center for Financial Markets and Policy, Lael Brainard. Welcome back to Bloomberg. It's great to see you. Can I just start with what happened at the Supreme Court today? Did you think it was appropriate for Jay Powell to be in attendance?
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Bloomberg Host 2
Look, I don't know whether it's appropriate, not appropriate. But I do know Treasury Secretary Bessant showed up when there were debates over tariffs.
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Joe Matthew
Sure did.
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Bloomberg Host 2
And could anything be more important to the Federal Reserve chair right now than how the Supreme Court delineates the President's authorities on for cause firing of board members?
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Joe Matthew
Yeah, well, look, this is obviously something that will not be resolved today and we understand it could be months before we know. Lisa Cook did issue a statement following the arguments this morning and talked about the insulation that Congress has put together to insulate the Fed from political threats, holding it accountable for delivering on the mandate. For as long as I serve at the Federal Reserve, she writes, I will uphold the principle of political independence in service to the American people. We could be in a world where she has another three or four Fed meetings before this case is decided. Should she be in those meetings?
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Bloomberg Host 2
Well, look, I think what Justice Kavanaugh got to in his questioning, which is if a governor can be fired without any hearing, without any due process, without any real establishment of for cause, it really fundamentally means that the American economy can be in for higher inflation, less credibility on the part of the central bank, because that is what central bank independence is so important for. So I do think this issue about making sure that the President's ability to fire for cause is carefully delineated, because otherwise we will lose that fundamental bedrock of the American economic dynamism.
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Joe Matthew
I want to get your take on the state of the economy, but as long as we're talking about this, you have the case involving Lisa Cook and you now have a criminal investigation into Chairman Jay Powell. What is it that the President is trying to do in reshaping the Fed, if nothing short of that?
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Bloomberg Host 2
Yeah, well, I think really the criminal investigation just seems like a spectacular misstep on his part. If anything, it has really raised concerns. We've heard from financial market leaders. We've now heard from prominent Senate Republicans who sit on the Senate Banking Committee. The move to criminally investigate the chair for some renovations has really, I think, set off alarm bells that could lead to the chair staying in his seat as governor for longer than he might have done otherwise.
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Joe Matthew
Right. Isn't that something? We had Thom Tillis on the program last week under no uncertain terms. Says he will not consider a replacement until this is resolved. As we spend time with Lael Brainard, I want to go through some of the notes that I took during the President's address today before this crowd in Davos that I think we can agree knows a lot about the data. They probably have a couple Bloomberg terminals in that room. These are business leaders, These are world leaders who are listening to the president. Inflation has been defeated. Is that true?
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Bloomberg Host 2
Well, I think we know that inflation is still hovering close to 3%. We'll get the PC inflation later. But inflation has not been defeated. Inflation close to 3% is not close to the Fed's target. There's more work to be done there.
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Joe Matthew
The bold claim, virtually no inflation, he says, and extraordinarily high economic growth over the past three months. He says core inflation has been 1.6%. He's projecting economic growth in the fourth quarter of almost five and a half percent. Will that happen?
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Bloomberg Host 2
Seems very implausible. Don't forget, we had the shutdown in the fourth quarter, and that's likely to depress growth in the fourth quarter. Of course, we'll see a bounce back from that in the first quarter. He's right that we've had several quarters of very strong growth that has been entirely propelled by the private sector AI boom. But if you look at jobs, it's been entirely jobless growth. So the rate of job creation has really plummeted during this time. And of course, with inflation still high, that's why you see consumer sentiment that's still very glum.
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Joe Matthew
President said people are doing very well. They're very happy with me. We've lifted more than 1.2 million people off of food stamps. How do you interpret those lines?
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Bloomberg Host 2
So, look, I think the polling similar to the consumer sentiment data suggests that actually there has been a precipitous decline in sentiment about the economy. And what we've seen in some recent elections is that a lot of Americans want the President to deliver on his promise to bring down prices on day one. Instead, prices have gone up a lot and people are very concerned about affordability.
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Joe Matthew
Well, and you wonder as well, the 1.2 million people off of food stamps, is that because of the changes in eligibility or is it because people are lifting themselves up with new jobs or higher wages?
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Bloomberg Host 2
Well, we certainly know that the Big beautiful bill had restrictions on SNAP food benefits that have been calamitous for many American families. And of course The Medicaid cuts 11 to 13 million Americans that will potentially lose access. That won't kick in until after the midterms. But I think a lot of families are also already seeing the premium tax credits expiration means that they are paying double the premiums on their health insurance for another up to 20 million Americans.
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Joe Matthew
And this may not be changing anytime soon. As we watch the beat here, try to follow the beat on Capitol Hill. I want to ask you about housing. Really interesting. The president wants to ban institutional buyers from the single family home market. That's one initiative that's been fixed. I suspect that'll be part of the State of the Union address. But he's been recently talking about his concerns over rating people's nest eggs in their homes, that making changes to the market could lower their home values. Listen to the President talking about this earlier in Davos.
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President Donald Trump
Every time you make it more and more and more affordable for somebody to buy a house cheap, you're actually hurting the value of those houses. Now if I want to really crush the housing market, I could do that so fast that people could buy houses. But you would destroy a lot of people that already have houses.
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Joe Matthew
I'm really curious your thoughts on this. Number one, I don't know how fast he could start building tens of millions of homes that I guess would be needed to actually lower home values. But how destructive would this be to people's safety?
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Bloomberg Host 2
Look, I think it was interesting, as you say, to hear him just reflect aloud. It seems like he's got some real ambivalence. Most Americans don't have a lot of ambivalence. They really do. They're hurting. Rent is too high. They want to own homes. Young families, first time homeowners who are aspirational. They've been locked out of the market for too long. And we know that the answer is more housing to be built. We are short 3 to 4 million units of housing at a minimum. And so in order to do that, a very forceful and long term agenda needs to be put in place. The Senate actually had some good legislation, the road to affordability on housing. I think there's a lot of good ideas out there, but it really has to go beyond a few band aids and take seriously the need for more so supply.
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Joe Matthew
It would take a lot to lower housing values. I suspect that would dent people's retirements. Although we've been through a great recession before and we've seen the housing market go through some pretty wild swings. Lastly, we have a minute left. Interest rates. The president says in the old days he had big numbers, they lowered rates. He doesn't understand the dynamic here with the Fed. We don't have time to get into all of that. But do you see a Federal Reserve that's on the precipice of cutting rates again?
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Bloomberg Host 2
So I think it'll all depend on the data. I actually think this Federal Reserve is focused on the data. We have seen that the unemployment rate has held steady. Now, they were extremely concerned about a weakening labor market for a month or two. We've seen some reassuring data there, which means they can take a little longer and see how those inflation numbers really play out. But if the present continues to threaten the Fed's independence, interest rates will actually go up.
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Joe Matthew
Well, we've seen that a bit on the long end, haven't we? It's great to have you back with us, Lael Brainard. I didn't even ask you who should be the next Fed chair. You wouldn't tell me though, would you?
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Bloomberg Host 2
I would not.
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Joe Matthew
She's been in the building, Vice chair at the Federal Reserve and of course, former director of the National Economic Council. Lael Brainard with us in studio here at Bloomberg. We thank you for the insights and we'll assemble our panel next. Stay with us on Balance of Power. We'll have much more coming up after this. How do you shift AI from being a flashy feature to a trusted partner in consumers everyday lives on the ground at CES Bloomberg Media Studios, asked Michael McDermott, EVP of Samsung. Our 2026 vision is built around an AI companion. It understands you and responds intuitively. This intelligence works quietly in the background.
- [17:03]
Mike Regan
Across TVs, home appliances and mobile devices.
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Joe Matthew
By putting AI at the center of everything we do, we're simply improving everyday life for everyone everywhere.
- [17:14]
Bloomberg Host 1
You're listening to the Bloomberg Balance of Power podcast.
- [17:17]
Bloomberg Host 2
Catch us live weekdays at noon and.
- [17:20]
Joe Matthew
5Pm Eastern on Apple CarPlay and Android.
- [17:22]
Bloomberg Host 1
Auto with the Bloomberg Business app.
- [17:24]
Bloomberg Host 2
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- [17:29]
Bloomberg Host 1
Just say Alexa play Bloomberg 11:30.
- [17:33]
Joe Matthew
I'm Joe Matthew in Washington. We want to bring it back to Davos. As I just mentioned, Mark Ruta, the secretary general of NATO's sitting down for a bilateral meeting with President Trump, remembering that President Trump saying earlier today he did not believe NATO nations would back the United States if attacked. Let's listen live now on Bloomberg.
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President Donald Trump
It's been amazing. As you know, we're staying. And tomorrow we're doing something else having to do with the Board of Peace. We're getting tremendous acceptance of that. It's going to be great. So we'll see how that all works out. But we're doing that tomorrow. So thank you very much, media. Thank you very much. And Mark, would you.
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Joe Matthew
Yeah.
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President Donald Trump
Just briefly, what I just wanted to say again, as I did this morning when I was on a panel, I want to thank you again for what you did since coming In January, Trump 47, basically getting the Europeans and Canada to really step up, up. And that led to the enormous success.
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Joe Matthew
We had in the Hague with the.
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President Donald Trump
5%, which is crucial to defend ourselves and to also equalize this. What the US Is paying. This was a problem already there since Eisenhower.
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Joe Matthew
I always tell the Europeans, you are.
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President Donald Trump
Completely committed to NATO, but there is also that one irritant, and it is this factor that the Europeans were not paying the same as the US Was paying, and we solved it. And this is crucial also because we need the money to protect ourselves. There's one thing I heard you say yesterday. Today, you are not absolutely sure that the Europeans would come to the rescue of the US if you will be attacked. Let me tell you, they will. And it did in Afghanistan. As you know, for every American who paid the ultimate. For every two Americans who paid the ultimate price, there was one soldier from another NATO country who did not come back to his family from the Netherlands, from Denmark, particularly from other countries.
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Joe Matthew
So you can be assured.
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President Donald Trump
Absolutely, if ever the US will be under attack, your allies will be with you. Absolutely. There's absolute guarantee. I really want to tell you this because this is important. It pains me if you think it is not. And under your leadership, this alliance is stronger than ever. Thank you very much. It's a great compliment. Any questions?
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Joe Matthew
Mr. President, the Danish foreign Minister rejected your call to negotiate on Greenland.
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President Donald Trump
What?
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Joe Matthew
What?
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President Donald Trump
I didn't call him.
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Bloomberg Host 2
Sorry.
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Joe Matthew
The President, the Danish Foreign minister rejected.
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Bloomberg Host 2
What you said in your speech that you were hoping to negotiate to acquire Greenland, essentially saying that this is not something that they are willing to discuss. So what will those negotiations.
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President Donald Trump
Well, they didn't tell me that. So would they tell me? Because I don't like getting it secondhand. If he wants to tell me, he'll tell me that to my face.
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Bloomberg Host 2
And when will you be discussing this?
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President Donald Trump
I have no idea.
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Joe Matthew
When you said you.
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President Donald Trump
I'll be discussing it with this man right here, Mr. President. He's frankly, more important.
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Bloomberg Host 2
Mr. President, when you said you would.
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Joe Matthew
Remember if Denmark did Not agree to.
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President Donald Trump
A deal on Greenland.
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Joe Matthew
What did you mean? What are the consequences?
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President Donald Trump
You'll have to figure that out for yourself. You're a smart guy.
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Joe Matthew
Mr. President, do you see a price for Greenland that's reasonable?
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President Donald Trump
I could see that, yeah.
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Joe Matthew
How would you calculate that?
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President Donald Trump
I could see that, but there's a bigger price, and that's the price of. The price of safety and security and national security and international security having to do with many of your countries. That's really the price, and that's the big price. And as you know, we're doing the Golden Dome. It's going to be very expensive, and it's better if we have Greenland than it is without. It's going to be safer, it's going to be stronger. It's going to be better for Europe, and it's going to be better for us. And so we'll see what happens. Any other questions? Is it reassuring to hear the NATO Secretary General say NATO will defend the United States if it comes under attack? Well, I hope that that's true. I mean, he's. He's a good man. He's never lied to me before. You know, we've had a good relationship, and he made that statement. That's nice. I mean, I just, you know, when I see what's happening with Greenland, I wonder, because I want Greenland for security. I don't want it for anything else. We have so much rare earth, we don't know what to do with it. We don't need it for anything else. And in terms of Greenland, you know, you have to go 25ft down through ice to get it. It's not. It's not something that a lot of people are going to do or want to do. No, this is security we're talking about. And I can say one thing about Mark. He wants security. He wants security for all of us. I think it's, you know, we're a member of NATO. He wants security for NATO and beyond. So when he says that, Steve, I think it's, you know, it's very nice. Okay, thank you very much, everybody. Thank you. Thank you. Thank you.
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Bloomberg Host 2
Let's go. Start moving. Thank you.
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Joe Matthew
All right, a live conversation there with President Trump and the Secretary General of NATO, Mark Ruta, who said, you can be assured. Absolutely. This is Ruda speaking. If ever the US Was under attack, your allies will be with you. He added, it pains me if you think that's not so, following the President's remarks earlier at the World Economic Forum in which he said flat out he does not believe that our NATO allies would be there to help support the United States if attacked if there was in fact an Article 5 violation, knowing that the only time there ever has been one was on behalf of the United States following 9, 11. And of course, Denmark did send troops who died in Afghanistan. Let's assemble our political panel to get their take on the comments from the president so far today in Davos. And we're not done yet. Bloomberg Politics contributors Jeanne Shann Zaino and Rick Davis are with us. Jeanne is Democracy visiting fellow at Harvard Kennedy School's Ash Center. Rick, our Republican strategist and partner at Stone Court Capitol. Jeannie, the president, after the secretary general of NATO just made that pronouncement, seemed to think it was kind of a personal he said thank you for the compliment. He does not believe that other nations, based on the pushback over Greenland, would be there to protect us. Do you think he takes Ruta at his word?
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Bloomberg Host 1
I don't think he believes that. And you know, quite frankly, I think we're seeing a rupture in NATO. I mean, you look at the comments and that's what I think has been so remarkable at Davos. You look at people like Mark Carney, you look at people like the UK Finance minister, you look at others, they are, they are starting to say that they don't think they can trust the US to be there for them. So I'm not so sure that Donald Trump is wrong when he says they may not be there for us. But of course, what he's not saying is that this is of his own doing because to your point, they have been there for us for the last 80 years. And I think, you know, Mark Ruda is standing a little bit on his own. They're still harboring the idea that if he hugs close to Donald Trump, he will get something out of it. And I'm not so sure many of our NATO and European allies feel that way anymore.
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Joe Matthew
He did spend a lot of time thanking President Trump for preserving funding for Naito. Rick, what's going through your mind after you just heard this conversation? The US has never doubted NATO allies in responding to an Article 5, has it? No, and I don't think it will in the future. The debate isn't about the ability for NATO to continue to protect one another's interests. As you've pointed out, it rarely comes into effect. But when it does, there's not a question in the NATO countries responding kind. And certainly Donald Trump has not said anything that would actually give cause for the NATO countries to not think that. That. That the US Wouldn't be there, too. And I think you got to divorce some of this with just sort of the typical Trump grandstanding, trying to leverage Europe into a place where it hasn't wanted to be. Europe was not investing in their lethality. And now it's a much more lethal enterprise in NATO than it has ever been. And Trump spent a good part of his first term, you want to call it, lobbying Europe, more like lobbying bombs at Europe. And obviously, he's been committed to doing that again in this last year. So it's how he gains leverage over these leaders is to be able to throw these insults. I'm not saying it's the right thing to do, but it's definitely a tactic. And I don't think you want to look too far past that tactic to see that things are actually improved in NATO since 2016. Well, when we move past some of the insults that we heard this morning and some of the hot takes on data that Lael Brainard helped us understand were not always accurate. And of course, the president, Jeannie, is talking to a lot of people who are pretty smart in that room. These are world leaders and corporate leaders who know the data and they know the score. But it wasn't just about that. The president, when he got back on the script, started talking about the cultural implications of our economies. Jeanne, and I'm wondering your thoughts on this rhetoric. Listen to what he said.
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President Donald Trump
The explosion of prosperity and conclusion and progress that built the west did not come from our tax codes. It ultimately came from our very special culture. This is the precious inheritance that America and Europe have in common. We share it. We share it, but we have to keep it strong. We have to become stronger, more successful, and more prosperous than ever. We have to defend that culture and rediscover the spirit that lifted the west from the depths of the Dark Ages to the pinnacle of human achievement.
- [27:04]
Joe Matthew
This followed a pretty long rant insulting Somalia, which he said was not a real country, and talked about the impact of Somali migrants in the United States. When you consider that language, we have to defend that culture. Jeannie, what culture is he talking about?
- [27:20]
Bloomberg Host 1
You know, number one, I think he's talking about a culture that is scripted. And he is far less, in my mind, comfortable when he's forced to go back on script, which he was doing at that point. And what strikes me about that is if his real interest is in preserving the west and everything that has made the west what it is Since World War II, since the fall of the Berlin War, since The end of the Cold War. Why is he doing everything he can to blow those relationships up, if that's his interest? Why is he threatening to send American troops into Greenland? Obviously, before this script, before this speech, rather, he has backed off from that. Why is he consistently telling our NATO allies that they wouldn't even be countries if it wasn't for the United States, that they have done nothing, that NATO has done nothing for the United States? So, you know, to me, this seems like what his political strategists want him to say, what. What his speechwriters want him to say. And he'll say it. But you can hear what he really wants to say, is what he has said since 2016, that Naito is not serving the United States. We are serving it, and they owe us. That is Donald Trump's message to Naito. And I think for the first time, we are hearing European leaders wake up and say, you know what, we're going to take his rhetoric seriously. We aren't going to, and we aren't going to keep going and say he's just joking or he's just using this crazy rhetoric to move us in a different direction. You see a split there, and you see Carney and others who are saying, I'm going to take him at his word and we need to defend ourselves and look for allies in China and elsewhere.
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Joe Matthew
Rick Davis, how should we interpret the cultural references? Are these the fingerprints of Stephen Miller on the script? Yeah, I think that anytime the word culture comes out of Donald Trump's mouth, especially written in a speech, you can pretty much rest assured that that's coming from, you know, sort of the ideological center of the White House, which is Stephen Miller. And. And that is a reference to the Judeo Christian values that are similar between the US And Europe. It is not a modern conceit. It's an ancient conceit. And it's a bit of a dog whistle, you know, in today's domestic politics. So in so much as they're embedded into this speech, some of these kinds of symbolism and messaging for the domestic US Audience, at least the MAGA audience, then you can be rest assured that that's going to make its way through social media by the end of today. Always a great conversation with these two Rick Davis and Jeannie Shan Zaino. That's why they are Bloomberg Politics contributors. Stay with us on balance of power. We'll have much more coming up after this.
- [30:09]
Bloomberg Host 2
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Bloomberg Host 1
5Pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app.
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Bloomberg Host 2
You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg 11:30 Tentative.
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Joe Matthew
Calm what a perfect way to describe this market today. Monster rally this morning. We're not seeing it now, but we're holding positive with some hope here that we might find some stability in the days ahead after the President ruled out the idea of invading actually using military kinetic action to take over Greenland. He says we're not going to do that, but if they say no, we'll remember it's 26 degrees right now in Davos. By the way, it's going to get down to 8 degrees tonight at Bloomberg House. Amazing the news that we've been hearing from over there. Of course, none bigger than the President's speech this morning and he talked so much about Europe. That was the thrust. I know it was supposed to be about affordability and he did get into some of that. By the way, A half an hour from now, Lael Brainard is going to be with us in studio to get her reaction to the President's framing of the economy today, which ought to be interesting. Never mind the arguments before the Supreme Court this morning, but it wasn't only about Europe. He did mention Venezuela as well. But in the line of attack was our ally to the north. Yes, Canada. Having heard from Mark Carney yesterday, we talked about it just a moment The Prime Minister delivering a very blunt address in which he said we are in the midst of a rupture, not a transition, when referring to the new World Order. Listen to what he said. Every day we're reminded that we live in an era of great power rivalry, that the rules based order is fading, that the strong can do what they can and the weak must suffer what they must. Wow. President Trump was listening, watching and had a message back to Canada today. I don't know if he mentioned Carney by name. He referred to the Prime Minister. Listen to President Trump from his speech today in Davos.
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President Donald Trump
We're building a golden dome that's going to, just by its very nature going to be defending Canada. Canada gets a lot of freebies from us, by the way. They should be grateful also, but they're not. I watched your Prime Minister yesterday. He wasn't so grateful, but they should be grateful to us. Canada. Canada lives because of the United States. Remember that, Mark, the next time you make your statements.
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Joe Matthew
That's right. He called him Mark. Derek de Cluet covers this for us from our Toronto bureau. Bloomberg News executive editor for Canada is with us live right now. Derek, it's great to see you. Welcome back to Balance of Power. How's this all playing in Canada?
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Derek de Kluet
Well, Carney's speech is really reverberating around the country. I mean, some people are talking about it as, as the most significant foreign policy speech from a Canadian leader, maybe in decades. And it's all anybody can talk about because what Carney is saying, I mean, there are a bunch of signals in that speech that he gave. He didn't mention Trump. He really barely mentioned the US but you know, it's a signal to Washington, but it's also a signal to Europe, to the Nordic nations and to the Canadian population. The underlying message being don't expect the world to go back to what it was. We are truly in a new era. And that will require a whole bunch of different policies, especially from countries like Canada that have historically been very allied with the US on defense, trade and security matters.
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Joe Matthew
Yeah. Well, I'll tell you, you listen to what the President just said, right? The line was Canada lives because of the United States. Yet days ago we saw Mark Carney signing a trade agreement with Beijing. How do we rationalize these two?
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Derek de Kluet
Well, I mean, the trade agreement, let's be clear, is quite a limited thing. There were high tariffs that have existed for a while between Canada and China on a handful of things. Canada was tariffing Chinese cars, which it did to follow what the Biden administration wanted, I mean, basically that was a match of what Biden had done on Chinese EVs and the Chinese retaliated against Canadian food products and they've agreed to, you know, to lower those tariffs. If the question is how do Canadians react when Trump says things like Canada lives because of the United States? I mean, the answer really is not very well. I mean, Canada is been a partner with the US on NORAD and NATO and all sorts of things. But something that many Americans don't know is that after 911 when the US went into Afghanistan, Canadian soldiers went too. And there's a monument with more than 150 names of Canadian soldiers who died in Afghanistan, just sort of responding as part of, part of a broader NATO mission post 9 11. And people here do remember that sort of thing when they, when they hear the President or other US Policymakers talking, talking in this way about, about Canada.
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Joe Matthew
Yeah, you saw this headline out there that Canadians are modeling scenarios for a possible U.S. invasion. We've only got about a minute left here, Derek. Is that real?
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Derek de Kluet
I mean, yes, in the sense that we believe that it's real in the sense that they've discussed this as you would always do scenario planning for the worst case scenario. Everybody understands that Canadian military might is vastly superior to Canadian military might. And so that's the way it is. But the polls all show that there is huge Canadian resistance to the idea of ever joining the US 51st state. None of that really has any real traction here. And so, you know, that's the reality of how the Canadian public feels about and thinks about this when you get past the question of theoretical military invasions.
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Joe Matthew
Derek, it's great to have you as always from our Toronto bureau, Derek de Kluitt with the Canadian side of this whole story. And we've got our eyes on Wall street today following the President's address. We had a very severe sell off yesterday that we were told might be the beginning of another Sell America moment, bringing us back to Liberation Day. Everything was off. Stocks, bonds, the dollar. We are seeing a recovery now, but it's been tempered. What was it that Charlie said? Tentative calm, which I think does kind of illustrate where we're at right now. We wanted to take a minute with Mike Regan to see what he's looking at. Bloomberg managing editor for U.S. equities is with us live from New York. Mike, it's great to see you. Was that a one day event?
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Mike Regan
Well, you know, Joe, it's interesting. I mean, the market seems laser focused on this Greenland situation right now. And the rhetoric from Trump's social media over the weekend was very alarming in that regard. Then this morning we had his speech in Davos where he seemed to indicate that a military invasion, if you will, of Greenland is not in the cards. However, you know, that really shot the market back up about 1% in the S&P 500, recouped about half of yesterday's drop. But then right after his speech, you know, we started seeing headlines that Greenland does not want to negotiate with him at all. So really, you know, so really, I think is, is calling into question, well, what will Trump, Trump's response be again? So we've, you know, we've come back down, erased almost all that gain we saw early in the session, up about 0.3% in the S and P right now.
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Joe Matthew
Well, it certainly gives you a sense of what is driving markets right now. Was, was, was much technical damage done yesterday, Mike, because it was what, just a week and a half ago, the s and P500 was at an all time high?
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Mike Regan
Yeah, I think so. I mean, we erased the gains for the year, granted only three weeks into the year. So that's, you know, that's nothing to, to worry about. We are trading below that 50 day moving average in the S&P 500. I think the rhetoric is very damaging though. You know, we've, we've heard a lot about, to your point about Sell America. You know, we've seen these strategists at Deutsche bank and elsewhere sort of speculating on the possibility of the quote, unquote, weaponization of U.S. assets, both equities and Treasuries. You know, people in Europe, especially the countries that would be a target of these potential tariffs over the Greenland issue. They own a lot of stocks. You know, something like those 88 countries own about 5 trillion worth of stocks. They own a big slug of Treasuries. Most of the analysts and investors I've read or, you know, heard their comments seem to think, you know, it's kind of unlikely for this to happen, that investors would be shooting themselves in the foot if they were were to sell US Assets over this issue because it could have the potential to really drive down prices. That said, just the fact that it's in the conversation at all is, I think, you know, makes us a pretty, you know, pretty fragile market right now, if that's the type of thing we're talking about.
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Joe Matthew
It looks like the NASDAQ might actually turn negative while we're talking here. It's up only three points now and much of this also has to do with this new aversion that the market seems to have with all things Data Center. The Mag 7 has been having a real tough time here. Is this rotation into something I guess we're calling quality, real and sustainable. Is the RSP what we should be looking at? You know, I think that we'll get.
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Mike Regan
A lot of the answers to these questions in the coming weeks when we get the earnings reports and the conference calls from the mag 7 themselves selves to see what kind of pipeline they're talking about, what kind of demand they're talking about. I mean, this rotation certainly is real and it's not just this year. It sort of started late last year. That said, there are pockets of the trade that are still booming. Sandisk is up, you know, a ton.
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Joe Matthew
Oh my God.
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Mike Regan
Yeah, so it's not a wholesale rotation out of it, but you know, people are looking for the sort of more valued, undervalued stocks, stocks and there's, you know, the trade sort of spills over into construction stocks and you know, those raw materials. You know, you need copper, you need steel, you look at the metal prices going crazy. So, you know, there is a spillover beyond the MEG7 to the trade as well.
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Joe Matthew
Really fascinating as always to spend some time with Mike Reagan. Thank you, Mike. Great to see you from world headquarters in New York. And boy, isn't that the true. These storage companies are incredible. Sandisk just keeps on rising. We've got a new all time high today. Same from Micron. Thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already. Apple, Spotify or wherever you get your podcasts. And you can find us live every weekday from Washington D.C. at Noontime Eastern@Bloomberg.com at CVS.
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