Latest / Trend Watch / Episode 51: Political Chaos—U.S. Faces Shutdown, Trump & Vance Clash with Europe

Transcript

Episode 51: Political Chaos—U.S. Faces Shutdown, Trump & Vance Clash with Europe · Trend Watch

• 0:00
  SPEAKER_00: Today is February 19th, 2025, and this is Trend Watch.
• 0:04
  SPEAKER_00: Welcome back, everybody.
• 0:06
  SPEAKER_00: As usual, I have on my fellow analyst, Christian Ford.
• 0:10
  SPEAKER_00: So Christian, how was your week?
• 0:11
  SPEAKER_00: I understand it was rather eventful last week.
• 0:15
  SPEAKER_00: Leaving the country for the wilds of Canada.
• 0:18
  SPEAKER_01: That's right.
• 0:19
  SPEAKER_01: I went up to Quebec City for winter carnival.
• 0:22
  And I'll tell you,
• 0:23
  Neil,
• 0:23
  it was probably the most harrowing journey of my life.
• 0:26
  All our flights were canceled because they were hit by two
• 0:29
  massive snowstorms.
• 0:30
  SPEAKER_01: So we ended up driving.
• 0:32
  SPEAKER_01: And coldest weather I've ever been in.
• 0:34
  SPEAKER_01: The festival was amazing, but...
• 0:36
  The trip back,
• 0:37
  you know,
• 0:38
  the winds were howling and we were in whiteouts.
• 0:41
  SPEAKER_01: Took us probably about, I think, 18 hours to get back to D.C.
• 0:44
  SPEAKER_01: And it was a journey.
• 0:46
  SPEAKER_00: So it was you went through the Adirondacks, right?
• 0:49
  SPEAKER_00: That upstate New York area.
• 0:51
  SPEAKER_00: And then we went through Montreal to Quebec City.
• 0:54
  SPEAKER_00: Yeah, so that's kind of flat.
• 0:56
  SPEAKER_00: It's not in the mountains, so you didn't have that issue.
• 0:59
  SPEAKER_00: But that was bad, too.
• 1:01
  SPEAKER_00: Yeah,
• 1:01
  SPEAKER_01: the issue was they had these giant open fields,
• 1:04
  SPEAKER_01: and because of the wind,
• 1:05
  SPEAKER_01: it just pushes all the snow onto the highway.
• 1:09
  SPEAKER_00: Wow.
• 1:10
  SPEAKER_00: Yeah.
• 1:11
  SPEAKER_00: Wow.
• 1:12
  Well,
• 1:12
  I think this is – what the heck do you expect to happen to you
• 1:16
  going up to –
• 1:18
  SPEAKER_00: You know, the wilds of Quebec in the second week of February.
• 1:23
  SPEAKER_00: I say it's charming.
• 1:24
  SPEAKER_00: Quebec City is quite the city.
• 1:26
  SPEAKER_00: I think it's totally insane to take that trip at this time of year.
• 1:28
  SPEAKER_00: But that's just me.
• 1:30
  SPEAKER_00: I don't like being cold.
• 1:32
  SPEAKER_00: As always,
• 1:32
  SPEAKER_00: let me remind you,
• 1:33
  SPEAKER_00: if you like this podcast,
• 1:35
  SPEAKER_00: please go ahead and share it with your friends and family.
• 1:37
  SPEAKER_00: Repost it on social media.
• 1:40
  SPEAKER_00: So let's get into today's podcast.
• 1:42
  SPEAKER_00: You know, we joked a little bit ago about having Trump-isodes, right?
• 1:47
  SPEAKER_00: We don't have episodes.
• 1:48
  SPEAKER_00: They're Trump-isodes.
• 1:49
  SPEAKER_00: I don't think this week will be any different, right?
• 1:52
  As always,
• 1:53
  there's so much,
• 1:54
  and it revolves around this new force in global politics,
• 2:00
  right?
• 2:00
  SPEAKER_00: First, we've got market news.
• 2:02
  SPEAKER_00: Then, as usual, we'll be covering stories from around the world.
• 2:05
  SPEAKER_00: Let's just give a summary of what's coming up.
• 2:08
  The Trump administration effort to shut down various programs
• 2:12
  and agencies,
• 2:12
  SPEAKER_00: including USAID and the Consumer Financial Protection Bureau,
• 2:17
  is now getting blocked by federal district court judges
• 2:21
  responding to dozens of lawsuits.
• 2:23
  SPEAKER_00: We will sort through that a little bit.
• 2:26
  Senate and House Republicans are feverishly working on budget
• 2:29
  plans to implement at
• 2:31
  SPEAKER_00: least part of Trump's fiscal agenda before March 15th,
• 2:34
  when the current continuing resolution runs out and the federal
• 2:38
  government shuts down.
• 2:40
  SPEAKER_00: Interesting.
• 2:40
  Eight federal prosecutors in New York resigned after Trump's
• 2:44
  acting deputy attorney general,
• 2:46
  SPEAKER_00: Emile Bove,
• 2:48
  ordered them to withdraw the bribery indictment against New
• 2:51
  York Mayor Eric Adams.
• 2:53
  SPEAKER_00: Those are our domestic stories.
• 2:55
  SPEAKER_00: And as you can imagine, that kind of gets into a lot of issues.
• 2:58
  SPEAKER_00: But then we go abroad, no less eventful.
• 3:01
  SPEAKER_00: High-level US and Russian officials met in Saudi Arabia.
• 3:06
  without any Ukrainian or European participation to begin
• 3:10
  negotiations for an end to
• 3:12
  SPEAKER_00: the Ukraine war.
• 3:14
  SPEAKER_00: That is unleashing a firestorm around the world,
• 3:16
  SPEAKER_00: particularly in Europe,
• 3:18
  SPEAKER_00: which we will talk about.
• 3:19
  SPEAKER_00: And relatedly,
• 3:20
  SPEAKER_00: at the annual Munich Security Conference,
• 3:22
  SPEAKER_00: and I might just mention as well,
• 3:24
  SPEAKER_00: on the eve of
• 3:25
  SPEAKER_00: of the next national election in Germany, Vice President J.D.
• 3:29
  Vance shocked his European audience by claiming their biggest
• 3:33
  threat was not Russia,
• 3:35
  SPEAKER_00: but their own retreat from democracy.
• 3:38
  SPEAKER_00: Going all the way across the world at the Honolulu Defense Forum,
• 3:42
  SPEAKER_00: Admiral Samuel Paparo,
• 3:46
  SPEAKER_00: head of the U.S.
• 3:46
  SPEAKER_00: Indo-Pacific Command,
• 3:48
  warned that China's naval and air exercises around Taiwan were
• 3:52
  becoming so massive
• 3:53
  SPEAKER_00: And finally,
• 3:54
  SPEAKER_00: moving on to the Middle East,
• 3:55
  SPEAKER_00: alarmed by Trump's plan to evict Palestinians from Gaza,
• 4:07
  The leaders of major Arab nations are meeting to devise an
• 4:11
  alternative plan of their own.
• 4:13
  SPEAKER_00: So with that, we have a lot on our plate.
• 4:17
  SPEAKER_00: Why don't you take us through, as you always do, market news?
• 4:20
  S&P,
• 4:20
  that closed up today 0.24%,
• 4:21
  and over the last five trading days is up 1.52%.
• 4:27
  SPEAKER_01: As for the global Dow, that actually closed down today at 0.45%.
• 4:31
  SPEAKER_01: But over the last five days, it's up 1.94%.
• 4:35
  SPEAKER_01: As for the VIX, that closed today at 15.27%.
• 4:38
  SPEAKER_01: That's actually below what we were seeing last week.
• 4:41
  SPEAKER_01: NIO was up around 18 then.
• 4:43
  SPEAKER_01: And as for the 10-year Treasury,
• 4:44
  SPEAKER_01: that is at 4.538%,
• 4:45
  SPEAKER_01: down 9.1 basis points over the last five days.
• 4:52
  SPEAKER_01: Got it.
• 4:53
  SPEAKER_00: Yeah, it's still a little bit higher than it used to be.
• 4:58
  SPEAKER_00: And it was kind of interesting that the world and the U.S.
• 5:03
  SPEAKER_00: moved in different directions today.
• 5:05
  SPEAKER_00: No real news.
• 5:08
  I mean,
• 5:09
  the VIX is down a little bit,
• 5:10
  but it's not down to its tranquil level.
• 5:15
  SPEAKER_00: It's a little lower than average, you might say.
• 5:18
  SPEAKER_00: Actually,
• 5:20
  A little higher than you might think,
• 5:22
  considering that we're reaching record highs in the SPX.
• 5:28
  SPEAKER_00: So what about indicators?
• 5:30
  SPEAKER_00: U.S.
• 5:30
  SPEAKER_00: first.
• 5:31
  SPEAKER_01: All right.
• 5:32
  SPEAKER_01: Well, we have some January final PMIs, both from the S&P and ISM.
• 5:37
  SPEAKER_01: We'll start with manufacturing.
• 5:39
  SPEAKER_01: The S&P, it rose from 49.5 to 51.2, so we're now in growth.
• 5:44
  And as for the ISM,
• 5:45
  that manufacturing PMI rose from 49.2 to 50.9,
• 5:50
  also in growth.
• 5:51
  SPEAKER_01: If we look at services, S&P, that actually fell from 56.8 to 52.9.
• 5:56
  SPEAKER_01: That still is growth, but just not as much.
• 5:58
  SPEAKER_01: And ISM was similar, fell from 54.0 to 52.8.
• 6:04
  Then if we go to non-farm payrolls,
• 6:07
  that fell from $307,000 in December to $143,000 in January.
• 6:09
  SPEAKER_01: Then we had the CBI numbers for January.
• 6:11
  SPEAKER_01: The inflation rate rose 0.5% month over month and 3.0% year over year.
• 6:13
  SPEAKER_01: Both were above expectations.
• 6:26
  SPEAKER_00: Right.
• 6:27
  SPEAKER_00: Well, that's the CPI.
• 6:28
  SPEAKER_00: Inflation expectations are up.
• 6:30
  SPEAKER_00: The long-term interest rate premium is definitely up.
• 6:33
  SPEAKER_00: A lot more uncertainty about inflation.
• 6:35
  SPEAKER_00: That's why the 10-year is still as high as it is.
• 6:38
  SPEAKER_00: But it's not really undermining equities, is it?
• 6:41
  SPEAKER_00: Which remains strong.
• 6:42
  And particularly the willingness of the rest of the world to
• 6:45
  invest in the U.S.
• 6:46
  SPEAKER_00: You don't have any European PMIs this week, do you?
• 6:51
  SPEAKER_00: No, but we did.
• 6:52
  SPEAKER_00: Maybe you have a couple of numbers from China.
• 6:54
  SPEAKER_00: Yeah, I thought they were coming in today.
• 6:56
  SPEAKER_01: Yeah, we had the Saishin.
• 6:58
  SPEAKER_01: And so manufacturing slightly fell from 50.5 to 50.1.
• 7:04
  SPEAKER_01: So just squeaking out growth.
• 7:07
  SPEAKER_01: And then services that also fell from 52.2 to 51.0.
• 7:10
  SPEAKER_01: So they're both positive, but they're right on the edge.
• 7:16
  Well,
• 7:17
  as China's been,
• 7:18
  actually,
• 7:19
  China should be happy that they're positive at all.
• 7:22
  SPEAKER_00: They certainly don't have an inflation problem.
• 7:24
  SPEAKER_00: So, yeah, we're going to get into that.
• 7:28
  SPEAKER_00: I should tell you, speaking of China, I truly enjoyed DeepSeek.
• 7:33
  SPEAKER_00: I'm a believer.
• 7:34
  SPEAKER_00: You know, I had Chad, GP, whatever it was, whatever the last version was.
• 7:40
  SPEAKER_00: Right.
• 7:40
  SPEAKER_00: I was playing for it.
• 7:41
  SPEAKER_00: It wasn't a hugely expensive $200 a month one, but it was paying for it.
• 7:46
  SPEAKER_00: But I thought I would compare with DeepSeek and DeepSeek was better.
• 7:50
  SPEAKER_00: I mean, just flat out better.
• 7:52
  SPEAKER_00: You know what I think about these large language models, right?
• 7:57
  SPEAKER_00: They're kind of a glorified Wikipedia for me.
• 7:59
  SPEAKER_00: Right.
• 8:00
  You ask it a question and it gives you this nicely structured
• 8:03
  answer with all the
• 8:04
  SPEAKER_00: stuff scraped from everywhere.
• 8:05
  SPEAKER_00: Right.
• 8:06
  SPEAKER_00: in a very ordered way.
• 8:08
  And it allows you then to kind of put it all in your head at
• 8:12
  one glance and then
• 8:13
  SPEAKER_00: know where you need to look from there on.
• 8:14
  SPEAKER_00: So I find it very useful.
• 8:16
  SPEAKER_00: But it is amazing,
• 8:18
  SPEAKER_00: right,
• 8:18
  SPEAKER_00: that this open source free piece of software,
• 8:23
  SPEAKER_00: yeah,
• 8:24
  SPEAKER_00: they may have,
• 8:24
  SPEAKER_00: they probably did
• 8:26
  SPEAKER_00: A pirate from OpenAI, right?
• 8:29
  SPEAKER_00: Right.
• 8:30
  SPEAKER_00: But they did a good job.
• 8:33
  SPEAKER_00: That's all I got to say.
• 8:34
  SPEAKER_00: I'll give it a try.
• 8:35
  SPEAKER_00: You do.
• 8:36
  SPEAKER_00: You should give it a try.
• 8:37
  SPEAKER_00: Yes, exactly.
• 8:38
  SPEAKER_00: So where are we going to go?
• 8:39
  SPEAKER_00: I think we,
• 8:40
  SPEAKER_00: as I said,
• 8:41
  SPEAKER_00: when we were talking about domestic in the United States,
• 8:43
  SPEAKER_00: it's about Trump all the time,
• 8:45
  SPEAKER_00: isn't it?
• 8:46
  SPEAKER_01: Yes.
• 8:46
  SPEAKER_01: Let's start with USAID.
• 8:49
  SPEAKER_01: Absolutely.
• 8:49
  SPEAKER_01: All right.
• 8:50
  Well,
• 8:50
  there has been significant press about Trump's attempts to
• 8:53
  dismantle USAID or the U.S.
• 8:56
  SPEAKER_01: Agency for International Development.
• 8:59
  SPEAKER_01: Trump has taken down the agency's website,
• 9:01
  SPEAKER_01: fired hundreds of employees and closed the actual USAID building,
• 9:06
  SPEAKER_01: which prevents workers from entering.
• 9:08
  SPEAKER_01: Marco Rubio has been appointing as acting administrator of the agency.
• 9:13
  Trump ultimately wants to integrate some of its functions into
• 9:16
  the State Department.
• 9:18
  This has coincided with an executive order that has paused
• 9:21
  almost all foreign aid
• 9:23
  SPEAKER_01: for a 90-day period while the programs are reviewed.
• 9:26
  SPEAKER_01: Now,
• 9:27
  SPEAKER_01: I will say,
• 9:27
  SPEAKER_01: Neil,
• 9:28
  SPEAKER_01: on Thursday,
• 9:28
  a federal judge ordered the White House to temporarily lift
• 9:31
  this freeze on funding,
• 9:33
  arguing that a blanket suspension of congressionally appointed
• 9:37
  foreign aid is not a
• 9:38
  SPEAKER_01: rational precursor to reviewing programs.
• 9:41
  SPEAKER_01: Ultimately, Trump argues that...
• 9:44
  SPEAKER_01: U.S.
• 9:45
  foreign aid does not align with American interests and promotes
• 9:48
  liberal ideology.
• 9:50
  SPEAKER_01: Of course,
• 9:50
  critics have also been saying that this blanket freeze has
• 9:54
  allowed China to start
• 9:55
  SPEAKER_01: making inroads in some of these countries.
• 9:59
  SPEAKER_00: Right.
• 9:59
  SPEAKER_00: Well, look, as always here, there's just a lot of dust in the air, right?
• 10:05
  SPEAKER_00: It's hard to know what's going on because Marco Rubio,
• 10:08
  SPEAKER_00: you know,
• 10:08
  SPEAKER_00: the Secretary of State,
• 10:09
  SPEAKER_00: has basically announced that he has walled off,
• 10:13
  SPEAKER_00: right,
• 10:13
  SPEAKER_00: humanitarian programs and things that are doing good,
• 10:16
  SPEAKER_00: you know,
• 10:16
  SPEAKER_00: either famine relief and,
• 10:18
  SPEAKER_00: you know,
• 10:18
  SPEAKER_00: Ebola control and,
• 10:20
  SPEAKER_00: right,
• 10:20
  SPEAKER_00: the kinds of things that
• 10:23
  probably are pretty cost-effective and help us in pretty
• 10:29
  unstable areas of the world,
• 10:30
  right?
• 10:31
  SPEAKER_00: Well, I don't know who's, you know what I mean?
• 10:34
  SPEAKER_00: No one knows.
• 10:35
  SPEAKER_00: And what gets me is when I talk to people who are close to USAID,
• 10:40
  SPEAKER_00: and you can tell me your experiences about it,
• 10:42
  SPEAKER_00: Christian,
• 10:43
  SPEAKER_00: but it's as though there's confusion.
• 10:46
  SPEAKER_00: No one really knows who's still hired, who's still working.
• 10:49
  SPEAKER_00: We do know that there are teams which have just suddenly been forced to
• 10:53
  SPEAKER_00: shut up whatever they've been doing,
• 10:55
  SPEAKER_00: vital or not,
• 10:55
  SPEAKER_00: doesn't matter what it is,
• 10:57
  SPEAKER_00: and forced to shut everything down.
• 10:59
  SPEAKER_00: One of the problems is that,
• 11:00
  SPEAKER_00: as with the comment of this judge,
• 11:02
  SPEAKER_00: yeah,
• 11:02
  SPEAKER_00: shutting everything down to review it may not be very rational.
• 11:05
  One thing,
• 11:06
  it is true that when you have a mission going where you're actually...
• 11:10
  SPEAKER_00: You know,
• 11:10
  you have vaccines and antibiotics and stuff and you have
• 11:14
  everything inventoried and
• 11:15
  SPEAKER_00: warehoused and you have refrigerators and so on.
• 11:18
  If you suddenly fire everyone and junk it all and force
• 11:21
  everyone to go home,
• 11:23
  SPEAKER_00: it may be enormously costly,
• 11:25
  SPEAKER_00: if possible at all,
• 11:26
  SPEAKER_00: to set it all up again.
• 11:28
  SPEAKER_00: Right.
• 11:28
  SPEAKER_00: Right.
• 11:29
  And I think that's and again,
• 11:31
  we don't even know how often that's happening.
• 11:33
  SPEAKER_00: Right.
• 11:34
  SPEAKER_00: because we do have people complaining about being forced to go home,
• 11:37
  SPEAKER_00: and we do have a lot of people being laid off.
• 11:39
  SPEAKER_00: But on the other hand, some of these programs are still going.
• 11:42
  SPEAKER_00: So to me, it's very confusing.
• 11:47
  SPEAKER_01: I know a lot of people working in the federal government,
• 11:49
  SPEAKER_01: not specifically USAID,
• 11:51
  SPEAKER_01: but they all have the same – they say the same thing,
• 11:54
  SPEAKER_01: that Trump makes these orders,
• 11:56
  SPEAKER_01: and there's just mass confusion about what's actually happening,
• 12:00
  SPEAKER_01: especially with –
• 12:01
  SPEAKER_01: I think he fired the other day,
• 12:02
  he said he fired these 200,000 employees that are on probation
• 12:08
  when you first start.
• 12:09
  SPEAKER_01: But then, so they all went to work wondering, are we fired?
• 12:12
  SPEAKER_01: But they never got an email.
• 12:13
  SPEAKER_01: And it's just this question of throughout all of these executive orders,
• 12:17
  SPEAKER_01: How does it actually play out?
• 12:19
  SPEAKER_01: And no one seems to know the answers.
• 12:20
  That leads to some of these other areas,
• 12:23
  Doge and the interference with federal spending.
• 12:25
  SPEAKER_00: That was a big issue this last week, right?
• 12:27
  SPEAKER_00: Right.
• 12:28
  This had to do with the Bureau of the Fiscal Service and the
• 12:31
  Department of Treasury.
• 12:33
  which processes billions of payments each year with trillions
• 12:36
  of dollars.
• 12:37
  Nearly 250 federal agencies all link up to the Bureau of the
• 12:42
  Fiscal Service.
• 12:43
  Sometimes it's consolidated into these massive agencies like
• 12:47
  OPM with payroll or GSA,
• 12:50
  SPEAKER_00: which manages real estate.
• 12:51
  SPEAKER_00: You know what I mean?
• 12:53
  SPEAKER_00: It's an enormous system, right?
• 12:55
  SPEAKER_00: Right.
• 12:56
  SPEAKER_00: It is the one...
• 12:58
  SPEAKER_00: and only one real-time portal for U.S.
• 13:01
  SPEAKER_00: spending.
• 13:01
  So there's been a huge amount of press about Doge efforts to
• 13:04
  read and gain control
• 13:06
  SPEAKER_00: of this portal and trying to identify payments that may be improper,
• 13:10
  SPEAKER_00: that may be waste,
• 13:11
  SPEAKER_00: fraud,
• 13:12
  SPEAKER_00: mismanagement,
• 13:13
  SPEAKER_00: whatever.
• 13:13
  A federal judge has restricted access to BFS to only career
• 13:18
  civil servants with expertise.
• 13:20
  And I will say Treasury Secretary Scott Besant has reassured
• 13:24
  the public actually several times
• 13:26
  SPEAKER_00: that Treasury has not tried to block any federal payment.
• 13:29
  SPEAKER_00: And there was a big furor when the highest ranking Treasury official,
• 13:34
  SPEAKER_00: David Lebrick,
• 13:36
  SPEAKER_00: stepped down after clashing with Musk's task force.
• 13:40
  What's really interesting about Musk and Doge is that he's
• 13:44
  trying to find waste and
• 13:47
  SPEAKER_00: fraud and mismanagement.
• 13:48
  SPEAKER_00: And he can look at all these payments and
• 13:51
  But he's not going to find a payment called waste,
• 13:53
  fraud,
• 13:53
  and mismanagement.
• 13:54
  SPEAKER_00: You know what I mean?
• 13:56
  SPEAKER_00: Right.
• 13:56
  SPEAKER_00: That's not how you find it.
• 13:58
  SPEAKER_00: To find it, you actually have to know something about the programs.
• 14:03
  SPEAKER_00: You have to actually have familiarity with it.
• 14:05
  You have to go out and find out who are these people and who
• 14:09
  has access to these
• 14:11
  SPEAKER_00: payments and who's making the decisions.
• 14:13
  SPEAKER_00: It's an enormous ecosystem that you have to figure out.
• 14:18
  SPEAKER_00: And I do think that that's
• 14:20
  SPEAKER_00: One of the problems with Doge,
• 14:23
  SPEAKER_00: right,
• 14:23
  SPEAKER_00: they keep trying to figure out what's at the center of this whole thing.
• 14:28
  SPEAKER_00: And when you look at the very center, you don't really find your answer.
• 14:31
  SPEAKER_00: I mean,
• 14:31
  SPEAKER_00: for example,
• 14:33
  SPEAKER_00: one of the biggest areas of waste and fraud that if you look at,
• 14:39
  SPEAKER_00: you know,
• 14:39
  SPEAKER_00: the GAO,
• 14:40
  SPEAKER_00: they've done a lot of reports on this and came up with estimates,
• 14:44
  SPEAKER_00: is federal money that goes to the states,
• 14:47
  SPEAKER_00: right,
• 14:48
  SPEAKER_00: for,
• 14:49
  SPEAKER_00: you know,
• 14:50
  SPEAKER_00: food stamps,
• 14:50
  SPEAKER_00: Medicaid,
• 14:51
  SPEAKER_00: a lot of other stuff,
• 14:52
  SPEAKER_00: a lot of state agencies that are distributing federal money.
• 14:56
  SPEAKER_00: And a lot of these states don't have a lot of incentive,
• 14:58
  SPEAKER_00: you know,
• 14:59
  to police fraud or waste or mismanagement because they're not
• 15:02
  actually paying for it,
• 15:03
  SPEAKER_00: right?
• 15:03
  SPEAKER_00: Just an example, right?
• 15:05
  SPEAKER_00: But you'd have to know that.
• 15:07
  You'd have to actually figure that out by talking to people
• 15:11
  with a huge amount of experience.