1 00:00:00,240 --> 00:00:05,000 Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes. 2 00:00:05,040 --> 00:00:07,400 Speaker 1: The economy is in the process of rebounding. Will the 3 00:00:07,480 --> 00:00:10,479 Speaker 1: Utter Reserve have its own digital currency? The financial stories 4 00:00:10,520 --> 00:00:12,879 Speaker 1: that cheap hard work. Many people think the eels are 5 00:00:12,880 --> 00:00:15,080 Speaker 1: just going to keep marching out. We have more spending 6 00:00:15,120 --> 00:00:17,160 Speaker 1: coming out of Congress. One of the big questions I 7 00:00:17,200 --> 00:00:19,880 Speaker 1: think on investor's mind inflation. Through the eyes of the 8 00:00:19,920 --> 00:00:23,560 Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary, 9 00:00:23,640 --> 00:00:26,880 Speaker 1: Bryan Wynihan Bank of America, Will Smart, CEO of Charlie 10 00:00:26,920 --> 00:00:31,560 Speaker 1: Sharp Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 11 00:00:31,800 --> 00:00:35,159 Speaker 1: It's a whole new world of diplomacy and maybe of 12 00:00:35,200 --> 00:00:38,800 Speaker 1: monetary policy. So what difference will it make? This is 13 00:00:38,840 --> 00:00:42,080 Speaker 1: Bloomberg Wall Street Week. I'm David Weston. Bank of America 14 00:00:42,159 --> 00:00:44,879 Speaker 1: Chairman and CEO. Brian moynihan has been a leader in 15 00:00:44,920 --> 00:00:48,480 Speaker 1: bringing private industry together to establish standards for the environmental, 16 00:00:48,520 --> 00:00:51,520 Speaker 1: social and governments, working with both the World Economic Forum 17 00:00:51,560 --> 00:00:54,000 Speaker 1: and with His Royal Highness Prince Charles. It was in 18 00:00:54,000 --> 00:00:56,440 Speaker 1: that capacity that he was invited to participate in the 19 00:00:56,480 --> 00:00:58,960 Speaker 1: G seven Summit in Cornwall last weekend and we asked 20 00:00:59,160 --> 00:01:02,760 Speaker 1: what happened. His Royal Highness, Prince Charles for years, for 21 00:01:02,800 --> 00:01:05,640 Speaker 1: four decades plus, has been focused on the environment a 22 00:01:05,640 --> 00:01:08,480 Speaker 1: few years and he's had various initiatives with business people 23 00:01:08,640 --> 00:01:11,440 Speaker 1: and other groups over the years. A couple of years ago, 24 00:01:11,840 --> 00:01:14,160 Speaker 1: UM a group of us sat with him and talked 25 00:01:14,160 --> 00:01:16,479 Speaker 1: about how we could get the private sector really who 26 00:01:16,520 --> 00:01:19,600 Speaker 1: has to drive this change aligned and so he announced 27 00:01:19,600 --> 00:01:23,400 Speaker 1: in early two thousand twenties Sustainable Markets Initiative. Yes m I, 28 00:01:23,560 --> 00:01:26,960 Speaker 1: that is three CEO is working as a coalition the 29 00:01:27,040 --> 00:01:31,759 Speaker 1: willing to help along industry groups to help share best practices, 30 00:01:31,800 --> 00:01:33,520 Speaker 1: to help figure out how we can move things faster, 31 00:01:34,080 --> 00:01:37,280 Speaker 1: to help promote public policy ideas that would be helpful. 32 00:01:37,600 --> 00:01:40,360 Speaker 1: And that SMI group, through the leadership as Royal Highness, 33 00:01:40,520 --> 00:01:44,120 Speaker 1: was able to meet with the G seven leaders for 34 00:01:44,480 --> 00:01:47,400 Speaker 1: an engagement around you know, the private sectors here. We 35 00:01:47,480 --> 00:01:50,440 Speaker 1: don't need money. We were ready to move or moving fast, 36 00:01:50,600 --> 00:01:53,440 Speaker 1: but if he did these types of policy implementations, we 37 00:01:53,480 --> 00:01:55,760 Speaker 1: could move even faster. So I'm a leader of the 38 00:01:55,760 --> 00:01:57,840 Speaker 1: group like co chair was. Royal Highness had a chance 39 00:01:57,880 --> 00:02:00,400 Speaker 1: to speak a bit and then we had a interaction 40 00:02:00,440 --> 00:02:01,800 Speaker 1: with the eight or nine c e o s were 41 00:02:01,800 --> 00:02:03,760 Speaker 1: there with the G seven leaders to kind of make 42 00:02:03,800 --> 00:02:05,960 Speaker 1: sure they understood that we're there to help them, support 43 00:02:06,000 --> 00:02:09,119 Speaker 1: to make this transition be a just transition and help 44 00:02:09,320 --> 00:02:11,560 Speaker 1: have it help but happen. So I know that you've 45 00:02:11,560 --> 00:02:13,800 Speaker 1: been heading up the initial Business Council for the World 46 00:02:13,840 --> 00:02:16,120 Speaker 1: Economic Forum. How does this fit with that? Because I 47 00:02:16,120 --> 00:02:18,160 Speaker 1: know you're coming up with uniform standards. You've got quite 48 00:02:18,160 --> 00:02:20,200 Speaker 1: a few companies to sign onto that so far. What 49 00:02:20,280 --> 00:02:22,959 Speaker 1: kind of progress are you making? So the World Economic Forum, 50 00:02:23,240 --> 00:02:26,799 Speaker 1: UH International Business Council, which I've been chairing for the 51 00:02:26,880 --> 00:02:29,519 Speaker 1: last couple of years UH with a group of hundred 52 00:02:29,560 --> 00:02:32,600 Speaker 1: thirty CEOs or so, they adopted a set of metrics 53 00:02:32,600 --> 00:02:34,600 Speaker 1: in ninety years. So companies have signed up and we're 54 00:02:34,600 --> 00:02:38,359 Speaker 1: pushing that through the system that basically aligned against the 55 00:02:38,360 --> 00:02:41,240 Speaker 1: sustainable development goals are you unadopted in two thousand fifteen 56 00:02:41,280 --> 00:02:45,320 Speaker 1: and frankly defined stakeholder capitalism and those you know, people place, 57 00:02:45,880 --> 00:02:49,920 Speaker 1: planet and prosperity and so on the environment which links 58 00:02:49,960 --> 00:02:53,560 Speaker 1: to this obviously it's disclosure scope one two three and 59 00:02:53,800 --> 00:02:56,680 Speaker 1: what are you doing about things like that? So one 60 00:02:56,680 --> 00:02:58,560 Speaker 1: of the things we told the G seven leaders is 61 00:02:58,600 --> 00:03:01,400 Speaker 1: you need convergence and met trics and the IBC work 62 00:03:01,720 --> 00:03:04,520 Speaker 1: led by the Big four accounting forms bringing together the 63 00:03:04,560 --> 00:03:07,720 Speaker 1: work and pushing for a convergence with even the groups 64 00:03:07,720 --> 00:03:11,560 Speaker 1: that support metrics sas by g R, I, etcetera. The 65 00:03:11,560 --> 00:03:13,520 Speaker 1: idea is to push to one set of metrics. So 66 00:03:13,560 --> 00:03:15,520 Speaker 1: we don't have all the work as I said that 67 00:03:15,560 --> 00:03:18,320 Speaker 1: she said was going into calculating things. We have the 68 00:03:18,320 --> 00:03:20,880 Speaker 1: work going and actually making the metrics better. And so 69 00:03:21,400 --> 00:03:23,440 Speaker 1: you know, you have the SEC looking at these metrics, 70 00:03:23,480 --> 00:03:25,360 Speaker 1: you have the I, f R S looking at these metrics, 71 00:03:25,360 --> 00:03:27,200 Speaker 1: that e. Looking through metrics, and then you have all 72 00:03:27,200 --> 00:03:30,120 Speaker 1: the unofficial sectors. The idea is to push the metrics together, 73 00:03:30,520 --> 00:03:32,799 Speaker 1: get to standard set of metrics. That's what the IBC 74 00:03:33,000 --> 00:03:36,240 Speaker 1: did and that feeds directly into the SMI because those 75 00:03:36,280 --> 00:03:38,320 Speaker 1: are the metrics the s m I believes should be 76 00:03:38,320 --> 00:03:40,480 Speaker 1: adopted by companies around the world to show them making 77 00:03:40,520 --> 00:03:44,000 Speaker 1: progress on the SDGs. Brian, you studied this so careful 78 00:03:44,040 --> 00:03:46,520 Speaker 1: and you understand it well as a practical matter. Will 79 00:03:46,560 --> 00:03:48,880 Speaker 1: we get where we need to go without the government's 80 00:03:48,880 --> 00:03:51,040 Speaker 1: adopting those metrics? Can the private sector do it on 81 00:03:51,080 --> 00:03:53,960 Speaker 1: its own Well. I think the important thing is the 82 00:03:54,000 --> 00:03:56,280 Speaker 1: private sector has the money. So if you think about 83 00:03:57,120 --> 00:04:01,280 Speaker 1: the calculation of what the sustainable development goals cost per 84 00:04:01,360 --> 00:04:05,440 Speaker 1: annum is about six trillion, So charity, you know, is 85 00:04:05,560 --> 00:04:08,120 Speaker 1: a trillion plus a year. It's wonderful think about all 86 00:04:08,120 --> 00:04:09,720 Speaker 1: that money people are giving a way to help things. 87 00:04:09,960 --> 00:04:12,559 Speaker 1: But it's a trillion if you look at all the foundations, 88 00:04:12,600 --> 00:04:14,280 Speaker 1: and one of debates in the world is why all 89 00:04:14,320 --> 00:04:16,400 Speaker 1: these foundations just don't give away all their money tomorrow? 90 00:04:16,480 --> 00:04:18,520 Speaker 1: What that gets you through about a third of a 91 00:04:18,600 --> 00:04:21,200 Speaker 1: year to Also, if you look at governments arounding huge deficits, 92 00:04:21,279 --> 00:04:23,640 Speaker 1: is because the pandemic, they can only do so much. 93 00:04:24,000 --> 00:04:26,600 Speaker 1: The private sector has trillions of dollars in market, capt 94 00:04:26,680 --> 00:04:29,360 Speaker 1: trillions of dollars, many trillions of dollars of market, many 95 00:04:29,400 --> 00:04:33,000 Speaker 1: trillions dollars of bounty. But importantly, many trillions dollars are 96 00:04:33,000 --> 00:04:35,599 Speaker 1: operating expenses. So how they operate in their company and 97 00:04:35,640 --> 00:04:39,720 Speaker 1: how they buy services including electricity and power and things 98 00:04:39,720 --> 00:04:42,000 Speaker 1: like that can move markets. And that's why the private 99 00:04:42,040 --> 00:04:45,159 Speaker 1: sector has to lead it. Innovation, inovation, uh, and when 100 00:04:45,160 --> 00:04:47,800 Speaker 1: your private sector leads it, it becomes capitalism. When capitalism 101 00:04:47,880 --> 00:04:51,040 Speaker 1: has it will keep sustaining itself. And so that's that's 102 00:04:51,080 --> 00:04:53,960 Speaker 1: the sort of intellectual thought process. Can the private sector 103 00:04:54,000 --> 00:04:55,839 Speaker 1: do it on its own? Absolutely not. This is going 104 00:04:55,880 --> 00:04:59,080 Speaker 1: to take everybody. But I will use a specific example, 105 00:04:59,520 --> 00:05:02,480 Speaker 1: David sustainable aviation fuels. If there's a mandate for ten 106 00:05:02,560 --> 00:05:06,560 Speaker 1: percent in in in in the world, you will then 107 00:05:06,600 --> 00:05:08,960 Speaker 1: get an instant market that people can build the plans 108 00:05:09,000 --> 00:05:11,880 Speaker 1: to produce it. It works today, it's going in planes today, 109 00:05:11,920 --> 00:05:15,080 Speaker 1: but until there's a more of a requirement, it becomes 110 00:05:15,240 --> 00:05:19,400 Speaker 1: you know, uh, country by country, region by region very hard. 111 00:05:19,440 --> 00:05:21,599 Speaker 1: The airlines are in there doing it already, and the 112 00:05:21,680 --> 00:05:23,839 Speaker 1: question is we could create much more stable markets and 113 00:05:23,839 --> 00:05:26,280 Speaker 1: then the private set you provide all the financing, all 114 00:05:26,279 --> 00:05:28,080 Speaker 1: the stuff because they know the market's going to be there. 115 00:05:28,120 --> 00:05:31,120 Speaker 1: That's how the policy and a private market can work 116 00:05:31,120 --> 00:05:33,000 Speaker 1: in tandon to make something happen right. One of the 117 00:05:33,000 --> 00:05:34,720 Speaker 1: things that the G seven took up over there was 118 00:05:34,760 --> 00:05:37,680 Speaker 1: that to propose global minimum tax that would have to 119 00:05:37,720 --> 00:05:39,320 Speaker 1: go to the G twenty and then O E C 120 00:05:39,400 --> 00:05:41,760 Speaker 1: D have to go through Congress. Have you taken a 121 00:05:41,760 --> 00:05:43,840 Speaker 1: hard look, I'm sure you have what effect they would 122 00:05:43,839 --> 00:05:45,919 Speaker 1: have on Bank of America and perhaps as important, more 123 00:05:45,960 --> 00:05:48,800 Speaker 1: important to your customers if it went through well. Banks, 124 00:05:48,839 --> 00:05:51,440 Speaker 1: as you know, David, are pay a lot, a lot 125 00:05:51,480 --> 00:05:53,680 Speaker 1: of taxes, so we have very little shelter. So the 126 00:05:53,720 --> 00:05:56,120 Speaker 1: only reason why our tax rates not the exact tax 127 00:05:56,240 --> 00:05:58,080 Speaker 1: rate in place like the United States, has more to 128 00:05:58,120 --> 00:06:01,480 Speaker 1: do with the uh investments we make in lower modern 129 00:06:01,480 --> 00:06:06,400 Speaker 1: income housing and sustainable energy. When when solar et cetera, 130 00:06:06,480 --> 00:06:08,680 Speaker 1: that allows to the tax and centers to bring it down. 131 00:06:08,680 --> 00:06:11,680 Speaker 1: But that's it. We don't have big depreciation things other 132 00:06:12,200 --> 00:06:15,080 Speaker 1: other companies do. So the banking system is always affected 133 00:06:15,080 --> 00:06:17,200 Speaker 1: by taxes. They pay a lot of taxes, frankly, and 134 00:06:17,240 --> 00:06:20,960 Speaker 1: that's that's the reality. Highest percentage of taxes paid and 135 00:06:21,040 --> 00:06:24,960 Speaker 1: highest dollar mount in the US. The globalization of it's 136 00:06:24,960 --> 00:06:27,600 Speaker 1: really to try to get out of the What goes 137 00:06:27,640 --> 00:06:29,719 Speaker 1: on in the US and other countries, even within regions 138 00:06:29,839 --> 00:06:32,000 Speaker 1: is people bidding using attacks, right, and they're trying to 139 00:06:32,080 --> 00:06:34,400 Speaker 1: put a floor in. That was Bank of American CEO 140 00:06:34,520 --> 00:06:38,560 Speaker 1: Brian William coming up. Bubbles, bubbles everywhere, but are they 141 00:06:38,640 --> 00:06:41,880 Speaker 1: really bubbles? And what does it look like if they pop? 142 00:06:42,240 --> 00:06:45,320 Speaker 1: From sure? Sharma of Morgan Stanley puts some of what 143 00:06:45,360 --> 00:06:49,000 Speaker 1: we're seeing now into an historical context and has some 144 00:06:49,040 --> 00:06:52,600 Speaker 1: answers for us. That's next on Wall Street Week on Bloomberg. 145 00:06:57,839 --> 00:07:02,880 Speaker 1: This is Bloomberg Wall Street with David Weston from Bloomberg Radio. 146 00:07:03,040 --> 00:07:06,159 Speaker 1: It's hard to talk about investments these days without hearing 147 00:07:06,200 --> 00:07:08,760 Speaker 1: the word bubble. We're getting towards the end of an 148 00:07:08,800 --> 00:07:12,280 Speaker 1: asset bubble, housing bubble, warnings, trouble, bubble. Since we're talking 149 00:07:12,320 --> 00:07:14,280 Speaker 1: about it, is it a bubble or not? The bubble 150 00:07:14,600 --> 00:07:17,320 Speaker 1: I think in the bottom market creating these bubbles. But 151 00:07:17,440 --> 00:07:19,920 Speaker 1: for all the talk, how can we tell what's a 152 00:07:19,960 --> 00:07:22,920 Speaker 1: bubble and what's not and what happens if it is 153 00:07:22,960 --> 00:07:26,840 Speaker 1: a bubble and it bursts. Morgan Stanley's Rusher Charma decided 154 00:07:26,920 --> 00:07:30,280 Speaker 1: to go back in history, analyzing the ten biggest bubbles 155 00:07:30,280 --> 00:07:33,239 Speaker 1: over the last century, everything from the U S Stock 156 00:07:33,280 --> 00:07:37,200 Speaker 1: market in nine to Chinese shares in two thousand fifteen. 157 00:07:37,480 --> 00:07:39,640 Speaker 1: And what they had in common was a price that 158 00:07:39,760 --> 00:07:43,080 Speaker 1: rose one in the year before they peaked, with much 159 00:07:43,080 --> 00:07:45,960 Speaker 1: of the gain packed into frenzied trading in the last 160 00:07:46,000 --> 00:07:49,760 Speaker 1: few months as day traders and other latecomers came rushing in. 161 00:07:50,400 --> 00:07:53,000 Speaker 1: So if history is a guide, where do we see 162 00:07:53,040 --> 00:07:56,600 Speaker 1: those traits. Today, We're welcome back now to Wall Street Week. 163 00:07:56,600 --> 00:07:58,680 Speaker 1: We're sure. Charma, the man who has done this work 164 00:07:58,680 --> 00:08:01,680 Speaker 1: on the history of bubbles, is the chief Global strategist 165 00:08:01,880 --> 00:08:04,520 Speaker 1: for Morgan Stanley Investment Management and author of the book 166 00:08:04,720 --> 00:08:08,400 Speaker 1: The Ten Roles of Successful Nations. Fascinating study you did, 167 00:08:08,720 --> 00:08:10,320 Speaker 1: but take a suit of it. You went back over 168 00:08:10,360 --> 00:08:12,840 Speaker 1: a hundred years, the ten biggest bubbles. One are the 169 00:08:12,840 --> 00:08:15,920 Speaker 1: things that you found in common about these bubbles? That David, 170 00:08:15,960 --> 00:08:18,880 Speaker 1: there's so much chattering the market about bubbles, but yet 171 00:08:18,920 --> 00:08:21,480 Speaker 1: what exactly is a bubble? How do you define a bubble? 172 00:08:21,960 --> 00:08:26,000 Speaker 1: Is subject to much speculation itself and subjectivity. So what 173 00:08:26,040 --> 00:08:30,760 Speaker 1: I did was to look at the ten biggest bubbles 174 00:08:30,760 --> 00:08:33,840 Speaker 1: of the past century and see what were the common 175 00:08:33,920 --> 00:08:39,360 Speaker 1: features here? And some uh objective characteristics were present in 176 00:08:39,440 --> 00:08:42,040 Speaker 1: all the bubbles, and some of it was obviously subjective, 177 00:08:42,520 --> 00:08:45,959 Speaker 1: but the one common factor was this that typically a 178 00:08:46,080 --> 00:08:49,040 Speaker 1: bubble is a trend that has been going on for 179 00:08:49,080 --> 00:08:53,160 Speaker 1: a while, and in the final year, the final twelve months, 180 00:08:53,280 --> 00:08:56,880 Speaker 1: you see a massive acceleration in that trend, with prices 181 00:08:56,960 --> 00:09:01,360 Speaker 1: increasing by typically hundred percent over a twelve month period, 182 00:09:01,679 --> 00:09:04,040 Speaker 1: and a lot of the gains packed into the last 183 00:09:04,360 --> 00:09:07,040 Speaker 1: few months of that twelve month period. So that is 184 00:09:07,080 --> 00:09:10,720 Speaker 1: the most objective criteria of looking at any bubble. The 185 00:09:10,760 --> 00:09:14,280 Speaker 1: most subjective one is that it's also accompanied by a 186 00:09:14,280 --> 00:09:19,960 Speaker 1: lot of speculative activity, frenzy trading, uh, mass, detailed participation. 187 00:09:20,480 --> 00:09:22,840 Speaker 1: Those are some of the other subjective criteria that go 188 00:09:22,920 --> 00:09:26,360 Speaker 1: hand in hand. But a hundred percent increase in the 189 00:09:26,400 --> 00:09:29,520 Speaker 1: price of any acid that has already been rising for 190 00:09:29,559 --> 00:09:34,160 Speaker 1: a while but concentrated towards the game is one objective 191 00:09:34,160 --> 00:09:37,600 Speaker 1: criteria that you can see in every single big bubble 192 00:09:37,880 --> 00:09:40,360 Speaker 1: of the past century. Sure, I think it's fair to 193 00:09:40,400 --> 00:09:43,040 Speaker 1: say just about every week we're seeing some frenzy speculations 194 00:09:43,040 --> 00:09:46,280 Speaker 1: someplace or the other. But applying your objective criteria that 195 00:09:47,040 --> 00:09:50,320 Speaker 1: run up up to the peak, what do you see 196 00:09:50,400 --> 00:09:51,839 Speaker 1: right now in the market place? Where do you see 197 00:09:51,880 --> 00:09:54,880 Speaker 1: things that fit that those criteria? So I think if 198 00:09:54,920 --> 00:09:57,480 Speaker 1: you look at both the objective and the subjective triteria, 199 00:09:57,559 --> 00:10:01,400 Speaker 1: remember about a but it's not just something about one 200 00:10:01,440 --> 00:10:04,280 Speaker 1: stock rising. It's a concept. It's about the fact that 201 00:10:04,320 --> 00:10:07,800 Speaker 1: everyone believes in some new new thing, that this concept 202 00:10:07,960 --> 00:10:10,520 Speaker 1: is here to stay and about to change the world. 203 00:10:10,640 --> 00:10:13,640 Speaker 1: So it is um as I say, a good idea 204 00:10:13,880 --> 00:10:16,840 Speaker 1: going too far. So what is it in the marketplace 205 00:10:16,880 --> 00:10:21,000 Speaker 1: today that we see which looks like about a bubble? 206 00:10:21,480 --> 00:10:23,760 Speaker 1: So I think that you see this ince and obviously 207 00:10:23,840 --> 00:10:27,880 Speaker 1: some of the cryptocurrency space. We see this in, uh, 208 00:10:28,120 --> 00:10:31,080 Speaker 1: some of the clean energy stocks. We see this in 209 00:10:31,200 --> 00:10:34,800 Speaker 1: some of the stacks. We see this in some of 210 00:10:34,800 --> 00:10:38,600 Speaker 1: those pandemic stocks, the small cap stocks which have benefited 211 00:10:38,600 --> 00:10:42,400 Speaker 1: a lot because of the pandemic. And we also see 212 00:10:42,400 --> 00:10:45,960 Speaker 1: this in some of these tech companies that really have 213 00:10:46,080 --> 00:10:50,479 Speaker 1: no earnings. Uh. You know. So there are various indcas 214 00:10:50,520 --> 00:10:55,480 Speaker 1: on Wall Street that define these uh trends um. And 215 00:10:56,360 --> 00:10:58,840 Speaker 1: these are what I call bubblets. And I think that 216 00:10:58,920 --> 00:11:02,960 Speaker 1: this is a slight a new concept. Bubbles are industrial uh, 217 00:11:03,400 --> 00:11:05,680 Speaker 1: the entire market white. Right that you had the big 218 00:11:05,720 --> 00:11:08,920 Speaker 1: bubble of nine, you had the Chinese they share bubble 219 00:11:09,000 --> 00:11:12,520 Speaker 1: of two fifteen, You had the gold bubble of the nineties, 220 00:11:12,520 --> 00:11:18,960 Speaker 1: seventies oil. Uh, those are the really big market bubbles. 221 00:11:19,000 --> 00:11:21,440 Speaker 1: But I think that one step below that is what 222 00:11:21,480 --> 00:11:26,240 Speaker 1: I call bubblets. These are not market white bubbles, but 223 00:11:26,880 --> 00:11:31,360 Speaker 1: sector specific bubbles. And what we have today is I 224 00:11:31,360 --> 00:11:33,400 Speaker 1: don't think we have a market white bubble because the 225 00:11:33,440 --> 00:11:35,880 Speaker 1: earnings have been very strong. But I think we do 226 00:11:36,000 --> 00:11:38,920 Speaker 1: have sector white bubbles where you do not really have 227 00:11:39,000 --> 00:11:43,840 Speaker 1: any earnings or any great fundamental free cash flow for 228 00:11:43,880 --> 00:11:48,080 Speaker 1: these companies, and yet you have massive run ups on 229 00:11:48,120 --> 00:11:50,480 Speaker 1: the back of the concept. So that I think is 230 00:11:50,520 --> 00:11:54,960 Speaker 1: the important defining feature today and also differentiating feature today 231 00:11:55,000 --> 00:11:58,320 Speaker 1: of the bubblets we have in the marketplace. As you 232 00:11:58,360 --> 00:12:02,200 Speaker 1: look at past bubbles or bubbles, Uh, do you see 233 00:12:02,240 --> 00:12:05,400 Speaker 1: situations where there's a correction then it resumes its rise 234 00:12:05,520 --> 00:12:08,280 Speaker 1: up or is there a correction it resumes it's right, 235 00:12:08,320 --> 00:12:11,640 Speaker 1: it's fall down. That's a great point, David, And we 236 00:12:11,679 --> 00:12:15,080 Speaker 1: looked at that specifically, and here's what I came up with, 237 00:12:15,280 --> 00:12:18,240 Speaker 1: which is that if you look at most trends, nothing 238 00:12:18,280 --> 00:12:21,440 Speaker 1: goes up in a straight line. Uh. It only seems 239 00:12:21,440 --> 00:12:26,360 Speaker 1: so in retrospect, But typically what we found was that 240 00:12:26,640 --> 00:12:31,959 Speaker 1: you have draw downs of around those do not classify 241 00:12:32,000 --> 00:12:35,480 Speaker 1: as a break in trend. But once any of these 242 00:12:35,800 --> 00:12:40,600 Speaker 1: trends decline by more than thirty five percent, that usually 243 00:12:40,640 --> 00:12:42,880 Speaker 1: marks the end of the bubble. That means the trend 244 00:12:42,960 --> 00:12:46,079 Speaker 1: is broken, and they often want to decline as much 245 00:12:46,120 --> 00:12:50,600 Speaker 1: as seventy from the peak over two year time horizon, 246 00:12:51,000 --> 00:12:54,839 Speaker 1: so that is the broad template, and what we see 247 00:12:54,840 --> 00:12:57,319 Speaker 1: in the bubble it's today is that most of them 248 00:12:57,600 --> 00:13:01,920 Speaker 1: have declined by more than thirty five set. So that's 249 00:13:01,920 --> 00:13:04,520 Speaker 1: what makes me feel that the trend is broken in 250 00:13:04,600 --> 00:13:07,800 Speaker 1: many of these bubblets, and we may have further downside 251 00:13:08,160 --> 00:13:11,240 Speaker 1: in the months, if not quarters ahead. One of the 252 00:13:11,280 --> 00:13:13,600 Speaker 1: big debates going on in all sorts of ways, including 253 00:13:13,600 --> 00:13:15,360 Speaker 1: with the inflation and other things right now, is is 254 00:13:15,360 --> 00:13:18,560 Speaker 1: it different this time? And certainly it is different, at 255 00:13:18,600 --> 00:13:21,440 Speaker 1: least in the fact of a very rapid fall in 256 00:13:21,480 --> 00:13:23,040 Speaker 1: the economy as we shut it down, and then a 257 00:13:23,160 --> 00:13:25,679 Speaker 1: very rapid rise. But it's also different in the degree 258 00:13:25,760 --> 00:13:29,720 Speaker 1: of monetary and fiscal support for the economy. Could that 259 00:13:29,760 --> 00:13:31,800 Speaker 1: make us have a different result when it comes to 260 00:13:31,800 --> 00:13:35,360 Speaker 1: your bubblets? Yes, entirely possible. You know, we have never 261 00:13:35,400 --> 00:13:41,600 Speaker 1: had such an extraordinary um uh accommodation in monetary policy 262 00:13:41,720 --> 00:13:45,120 Speaker 1: and fiscal policy to go with it. There's one statistic 263 00:13:45,160 --> 00:13:48,400 Speaker 1: I keep repeating, which are the twenty percent of all 264 00:13:48,440 --> 00:13:51,960 Speaker 1: the dollars in circulation in the world were printed just 265 00:13:52,160 --> 00:13:56,160 Speaker 1: last year, So that's an extraordinary amount of monetary accommodation. 266 00:13:56,200 --> 00:13:58,679 Speaker 1: And even if you end up getting some hawkish not 267 00:13:59,240 --> 00:14:02,280 Speaker 1: noises from FED in other central banks to reverse their 268 00:14:02,280 --> 00:14:05,760 Speaker 1: accommodation will mean a lot. So it's entirely possible that 269 00:14:05,800 --> 00:14:10,680 Speaker 1: this trend lasts longer, and maybe the historical template doesn't 270 00:14:11,120 --> 00:14:14,079 Speaker 1: follow this time, but I still feel the probability is 271 00:14:14,160 --> 00:14:20,200 Speaker 1: kewed on the downside because uh, these trends are very extended. 272 00:14:20,680 --> 00:14:24,640 Speaker 1: We are getting some amount of less monetary accommodation, and 273 00:14:24,680 --> 00:14:27,360 Speaker 1: so even though it could be different this time, and 274 00:14:27,440 --> 00:14:31,640 Speaker 1: maybe some of these UH patterns don't apply to things 275 00:14:31,640 --> 00:14:34,280 Speaker 1: like cryptocurrency on which I had been very polish last 276 00:14:34,360 --> 00:14:37,720 Speaker 1: year because this is a new news thing and this 277 00:14:37,800 --> 00:14:40,800 Speaker 1: is still not something which people are used to, but 278 00:14:40,880 --> 00:14:44,640 Speaker 1: I still feel broadly, for these buglets, the trend is 279 00:14:45,120 --> 00:14:49,200 Speaker 1: down and the risks are skewed to the downside. Okay, sure, 280 00:14:49,200 --> 00:14:51,120 Speaker 1: thank you so much for your time today, that's for sure, 281 00:14:51,120 --> 00:14:54,400 Speaker 1: Sharma of Morgan Stanley. Coming up, we take a look 282 00:14:54,400 --> 00:14:57,200 Speaker 1: at the week ahead on Global Wall Street. That's next 283 00:14:57,240 --> 00:15:05,880 Speaker 1: on Wall Street Week on Bloomberg. This is Bloomberg Wall 284 00:15:05,920 --> 00:15:10,120 Speaker 1: Street Week with David Weston from Bloomberg Radio, p WC 285 00:15:10,320 --> 00:15:12,480 Speaker 1: Privorice water as Cooper's Where where we used to know. 286 00:15:12,520 --> 00:15:15,480 Speaker 1: It is investing twelve billion dollars across its global business 287 00:15:15,480 --> 00:15:17,960 Speaker 1: in an overhaul, and important part of it has to 288 00:15:18,000 --> 00:15:21,160 Speaker 1: do with PwC US as it's really reorganizing the way 289 00:15:21,280 --> 00:15:24,160 Speaker 1: it does business in a very different way. We welcome 290 00:15:24,200 --> 00:15:27,040 Speaker 1: now Tim Ryan. He's p w c US chairman and 291 00:15:27,120 --> 00:15:29,520 Speaker 1: senior partners. So Tim, thank you for being here. Take 292 00:15:29,600 --> 00:15:31,720 Speaker 1: us through what you're doing here, because it's it's fascinating, 293 00:15:31,760 --> 00:15:35,880 Speaker 1: it really reflects a fundamental redo of your professional services organization. 294 00:15:36,200 --> 00:15:37,760 Speaker 1: What we did the last couple of years is we 295 00:15:38,000 --> 00:15:39,680 Speaker 1: try to look around the corner. A big thing our 296 00:15:39,720 --> 00:15:41,640 Speaker 1: clients look for us is not just to tell them 297 00:15:41,680 --> 00:15:44,400 Speaker 1: what's happening today, but to help them peak around the 298 00:15:44,480 --> 00:15:46,920 Speaker 1: corner and see what's going to define the big issues 299 00:15:47,120 --> 00:15:49,600 Speaker 1: over the next ten years. And as we did that, 300 00:15:49,880 --> 00:15:54,120 Speaker 1: it became very clear that the single biggest element of 301 00:15:54,320 --> 00:15:57,320 Speaker 1: in terms of opportunity and challenges our clients will have 302 00:15:58,080 --> 00:16:02,120 Speaker 1: is gaining trust and maintain aiming trust. Where expectations are 303 00:16:02,160 --> 00:16:05,080 Speaker 1: going up and the topics are becoming broader over the 304 00:16:05,160 --> 00:16:08,840 Speaker 1: next ten years, and how companies balance profits and purpose 305 00:16:09,320 --> 00:16:13,200 Speaker 1: gain competitive advantage all across the globe. It's the issue 306 00:16:13,320 --> 00:16:15,880 Speaker 1: that has led us to launching this new strategy, which 307 00:16:15,880 --> 00:16:18,320 Speaker 1: is we call the New Equation until I dare say, 308 00:16:18,360 --> 00:16:19,880 Speaker 1: I think we saw some glimmers of that in the 309 00:16:19,960 --> 00:16:22,960 Speaker 1: G seven meetings, actually in the in the Cornwall Consensus, 310 00:16:23,280 --> 00:16:25,640 Speaker 1: where the nations now are reaching out. They're not just 311 00:16:25,800 --> 00:16:28,720 Speaker 1: dealing with geopolitical issues, they're dealing with health issues. They're 312 00:16:28,760 --> 00:16:32,720 Speaker 1: dealing with with equality and inclusion. Uh So when you're 313 00:16:32,760 --> 00:16:34,840 Speaker 1: talking about trust, because as I'm saying, one of your 314 00:16:34,880 --> 00:16:38,800 Speaker 1: divisions with the Trust Right consultancy, what does that include? Yeah, So, 315 00:16:38,960 --> 00:16:42,280 Speaker 1: David great point. What we saw very clearly there's good 316 00:16:42,320 --> 00:16:44,680 Speaker 1: news for business. The good news today is businesses amongst 317 00:16:44,680 --> 00:16:47,160 Speaker 1: the most trusted institutions in the world. But when we 318 00:16:47,200 --> 00:16:50,000 Speaker 1: peek around the corner, what's clear is the bar is 319 00:16:50,080 --> 00:16:53,720 Speaker 1: going up and the number of topics that businesses will 320 00:16:53,760 --> 00:16:57,320 Speaker 1: be expected to be trustworthyond is widening. So, for example, 321 00:16:57,480 --> 00:17:01,640 Speaker 1: we see financial reporting hugely important, supporting hugely important. But 322 00:17:01,760 --> 00:17:03,760 Speaker 1: what's going to happen over the next several years. It 323 00:17:03,800 --> 00:17:06,680 Speaker 1: will go to issues like E. S G. Likes, tax like, tax, 324 00:17:06,760 --> 00:17:11,480 Speaker 1: morality like tax fairness, data protection, data security, how you 325 00:17:11,560 --> 00:17:14,400 Speaker 1: treat your workers, worker pay, and we see the number 326 00:17:14,480 --> 00:17:17,680 Speaker 1: of topics going broader where businesses that need to be 327 00:17:17,800 --> 00:17:20,399 Speaker 1: trusted on. We did see a glimpse at the G 328 00:17:20,600 --> 00:17:23,080 Speaker 1: seven and we'll continue to see that more and more. 329 00:17:23,520 --> 00:17:24,879 Speaker 1: And a big part of what we're trying to do 330 00:17:25,040 --> 00:17:27,440 Speaker 1: is make sure we're ready to meet our clients needs 331 00:17:27,800 --> 00:17:30,440 Speaker 1: as we lead them into the future. So one of 332 00:17:30,440 --> 00:17:32,200 Speaker 1: the things that we're doing is we're in the US 333 00:17:32,320 --> 00:17:35,400 Speaker 1: reorganizing our business and we will have the largest trust 334 00:17:35,480 --> 00:17:38,520 Speaker 1: solutions business in the world as one of our two 335 00:17:38,600 --> 00:17:41,320 Speaker 1: major segments to help our clients meet these needs. It 336 00:17:41,320 --> 00:17:44,040 Speaker 1: will drive investment and where we drive our clients and 337 00:17:44,080 --> 00:17:46,359 Speaker 1: work with them to help them succeed. Break that down 338 00:17:46,480 --> 00:17:50,000 Speaker 1: and trust solutions as opposed to consulting solutions. What goes 339 00:17:50,040 --> 00:17:52,320 Speaker 1: in each of those buckets great questions. So what goes 340 00:17:52,320 --> 00:17:55,560 Speaker 1: into trust solutions is first our legacy assurance business, which 341 00:17:55,640 --> 00:17:58,159 Speaker 1: is hugely important, and we'll continue to drive out of 342 00:17:58,200 --> 00:18:01,879 Speaker 1: quality up our legacy tax reporting businesses, but also are 343 00:18:02,040 --> 00:18:06,679 Speaker 1: very fast growing businesses such as E s G, Diversity inclusion, governance. 344 00:18:06,960 --> 00:18:09,600 Speaker 1: All goes in that business cybersecurity, where we look to 345 00:18:09,720 --> 00:18:13,240 Speaker 1: drive more capabilities up again because they will define trust 346 00:18:13,800 --> 00:18:17,480 Speaker 1: and our consulting solutions business. It's our legacy advisory deals 347 00:18:17,600 --> 00:18:21,720 Speaker 1: consulting and tax consulting businesses because in order to give 348 00:18:21,800 --> 00:18:25,200 Speaker 1: strategy or execution consulting, we need to make sure taxes 349 00:18:25,320 --> 00:18:28,280 Speaker 1: at the table because it's so important to company's future 350 00:18:28,320 --> 00:18:30,880 Speaker 1: strategies as well. So that's what's in the two segments. 351 00:18:31,160 --> 00:18:34,159 Speaker 1: Both will see significant investment in as we look to 352 00:18:34,200 --> 00:18:36,359 Speaker 1: meet those needs of our clients. Tim, you run up 353 00:18:36,440 --> 00:18:38,080 Speaker 1: tax a couple of times. Now, that was one of 354 00:18:38,119 --> 00:18:40,000 Speaker 1: the things addressed to the G seven with the proposal 355 00:18:40,080 --> 00:18:42,119 Speaker 1: for a global minimum tax. I mean, you know this 356 00:18:42,240 --> 00:18:45,040 Speaker 1: area terribly well. Give us a sense of where that's going, 357 00:18:45,200 --> 00:18:47,520 Speaker 1: and particularly talked about tax fairness. I guess that's one 358 00:18:47,520 --> 00:18:49,320 Speaker 1: of the arguments for it. Yeah, without a doubt, David. 359 00:18:49,400 --> 00:18:51,520 Speaker 1: So when we look at what's happened all across the globe, 360 00:18:51,600 --> 00:18:55,280 Speaker 1: virtually every major country has done a major stimulus package. 361 00:18:55,320 --> 00:18:58,480 Speaker 1: They've used their balance sheets to guide their countries their 362 00:18:58,560 --> 00:19:02,000 Speaker 1: citizens through this incredible, big crisis that we've seen. Ultimately, 363 00:19:02,080 --> 00:19:04,639 Speaker 1: somebody has to pay for that. As we studied the trends, 364 00:19:04,720 --> 00:19:06,520 Speaker 1: what's clearly going to be important as tax will be 365 00:19:06,960 --> 00:19:10,000 Speaker 1: critical oment of that. It's critical the individual countries, it's 366 00:19:10,040 --> 00:19:13,520 Speaker 1: also critical to the overall global tax system. So it's 367 00:19:13,560 --> 00:19:16,400 Speaker 1: not it's not unreasonable. It's not a surprise that we're 368 00:19:16,440 --> 00:19:19,920 Speaker 1: seeing things like a global minimum tax discussed. But what's 369 00:19:19,920 --> 00:19:22,199 Speaker 1: equally important is each country will need their share as 370 00:19:22,240 --> 00:19:24,200 Speaker 1: well to pay down their debt as they look to 371 00:19:24,280 --> 00:19:27,960 Speaker 1: deal with those balance sheets. So we expect ongoing dialogue. 372 00:19:28,200 --> 00:19:31,080 Speaker 1: And when I talk to CEOs, people understand that taxes 373 00:19:31,119 --> 00:19:33,560 Speaker 1: will likely go up. They want to read sure it's fair, 374 00:19:33,960 --> 00:19:36,960 Speaker 1: predictable so they can plan for the long term. We'll 375 00:19:37,000 --> 00:19:38,680 Speaker 1: see more and more. This is this places out. I 376 00:19:38,720 --> 00:19:41,600 Speaker 1: think the G seven is just the beginning Artimilarly, try 377 00:19:41,640 --> 00:19:43,760 Speaker 1: to put together two subjects that I think would go 378 00:19:43,840 --> 00:19:47,600 Speaker 1: into your trust category. On the one hand, diversity and 379 00:19:47,720 --> 00:19:50,560 Speaker 1: equity and inclusion very much an issue on everyone's mind 380 00:19:50,600 --> 00:19:53,840 Speaker 1: and particularly us business right now, and audits because one 381 00:19:53,840 --> 00:19:57,040 Speaker 1: of those issues is the racial audits. Where do you 382 00:19:57,119 --> 00:19:58,840 Speaker 1: come out on that. Do you have clients who are 383 00:19:58,960 --> 00:20:01,960 Speaker 1: engaging that or thinking about it deciding not to do it? David, 384 00:20:02,000 --> 00:20:03,920 Speaker 1: one of the things that gives me great optimism is 385 00:20:03,960 --> 00:20:06,800 Speaker 1: I trouble around not now physically again, which is great 386 00:20:06,880 --> 00:20:09,320 Speaker 1: and virtually over the last year. As I speak with 387 00:20:09,400 --> 00:20:12,200 Speaker 1: CEO is what we're constantly hearing is a number of 388 00:20:12,240 --> 00:20:14,800 Speaker 1: topics right to the top of the list. I'm inspired 389 00:20:14,840 --> 00:20:18,440 Speaker 1: by the fact that diversity inclusion is on every CEO's minds. 390 00:20:18,720 --> 00:20:20,600 Speaker 1: I'm inspired that I see E. S. G In the 391 00:20:20,680 --> 00:20:23,119 Speaker 1: topic for his minds in addition to the digital cyber 392 00:20:23,440 --> 00:20:26,680 Speaker 1: In those topics, what I see is that businesses trying 393 00:20:26,720 --> 00:20:29,159 Speaker 1: to think think about how they look forward. One of 394 00:20:29,200 --> 00:20:30,800 Speaker 1: the big things we're doing is part of the New 395 00:20:30,880 --> 00:20:35,040 Speaker 1: Equation is we're launching a three hundred billion dollar three 396 00:20:35,119 --> 00:20:38,680 Speaker 1: year commitment that we call Tomorrow takes trust a big 397 00:20:38,840 --> 00:20:42,240 Speaker 1: element that is a trust institute where we will take 398 00:20:42,359 --> 00:20:46,120 Speaker 1: ten thousand current in future, seek speed executives to get 399 00:20:46,200 --> 00:20:49,000 Speaker 1: them ready in the future as they need to deal 400 00:20:49,080 --> 00:20:52,160 Speaker 1: with these complicated questions where we need to make progress 401 00:20:52,200 --> 00:20:55,600 Speaker 1: as a business community. Really fascinating reposition to your company. 402 00:20:55,600 --> 00:20:57,560 Speaker 1: Really appreciate your bringing it to us. That's Tim Ryan, 403 00:20:57,680 --> 00:21:01,879 Speaker 1: he's PwC US chairman and senior partner. Coming up, we 404 00:21:02,040 --> 00:21:04,960 Speaker 1: wrap up the week with our special contributor Larry Summers 405 00:21:05,000 --> 00:21:08,040 Speaker 1: at Harvard. That's next on Wall Street Week on Bloomberg. 406 00:21:11,720 --> 00:21:15,640 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 407 00:21:15,800 --> 00:21:18,840 Speaker 1: Bloomberg Radio. We're going to conclude our week with Larry Summers, 408 00:21:18,880 --> 00:21:21,480 Speaker 1: our special contributor from Harvard, as we do every week, 409 00:21:21,520 --> 00:21:23,600 Speaker 1: So Larry, welcome. Good to have you here. I have 410 00:21:23,720 --> 00:21:27,320 Speaker 1: to ask you, do feel vindicated the Fed actually at 411 00:21:27,400 --> 00:21:29,560 Speaker 1: least somewhat caught up with you, I think this week 412 00:21:29,760 --> 00:21:31,959 Speaker 1: and saying we do, after all, have to be concerned 413 00:21:31,960 --> 00:21:37,080 Speaker 1: about inflation, transitory or otherwise. So are you feeling good today? David? Look, 414 00:21:37,160 --> 00:21:43,160 Speaker 1: I think the Fed UH signaled uh that it recognized 415 00:21:43,280 --> 00:21:45,359 Speaker 1: that we were in a different place than it had 416 00:21:45,480 --> 00:21:51,800 Speaker 1: expected on inflation. UH. The best measure of that is 417 00:21:51,920 --> 00:21:54,520 Speaker 1: if you look at what the market is now saying 418 00:21:55,160 --> 00:21:59,200 Speaker 1: about real interest rates over the next few years, you 419 00:21:59,359 --> 00:22:04,520 Speaker 1: saw and unprecedented or nearly not unprecedented, but but very 420 00:22:04,720 --> 00:22:10,960 Speaker 1: large five standard deviation UH move UH in the market's 421 00:22:11,040 --> 00:22:15,840 Speaker 1: expectation around real interest rates because of what the Fed signals. 422 00:22:16,280 --> 00:22:20,680 Speaker 1: Principally with the dot plot. You saw that happening without 423 00:22:20,800 --> 00:22:25,119 Speaker 1: the Fed changing in a major way it's forecast of 424 00:22:25,240 --> 00:22:30,479 Speaker 1: economic growth or its forecasts of medium term inflation, simply 425 00:22:30,600 --> 00:22:34,840 Speaker 1: marking to reality it's near term inflation forecast. So I 426 00:22:34,880 --> 00:22:38,840 Speaker 1: think you did see yesterday. I see on Wednesday a 427 00:22:39,000 --> 00:22:43,399 Speaker 1: signal that the FED had changed its reaction function uh 428 00:22:43,840 --> 00:22:48,879 Speaker 1: in a significant uh way. I think that was an 429 00:22:48,960 --> 00:22:55,720 Speaker 1: appropriate change, uh given the inflation uh reality there was 430 00:22:55,800 --> 00:23:02,320 Speaker 1: a lot of uh volatility under the surface uh in markets. 431 00:23:02,400 --> 00:23:05,639 Speaker 1: So I think they're still processing what happened, and you 432 00:23:05,640 --> 00:23:11,879 Speaker 1: shouldn't try to read every uh every detail as fitting 433 00:23:11,960 --> 00:23:17,960 Speaker 1: together uh in uh in a pattern. But I think 434 00:23:18,200 --> 00:23:22,520 Speaker 1: much much more than most f o MC meetings, as 435 00:23:22,720 --> 00:23:29,480 Speaker 1: the beginning of the FEDS recognition UM that overheating is 436 00:23:29,600 --> 00:23:33,800 Speaker 1: the issue uh that it has to uh it has 437 00:23:33,880 --> 00:23:37,800 Speaker 1: to deal with going forward. And given that overheating has 438 00:23:37,880 --> 00:23:43,440 Speaker 1: been a major concern of mine, I'm glad to see 439 00:23:43,600 --> 00:23:49,359 Speaker 1: that they have uh that recognition. But look at a 440 00:23:49,440 --> 00:23:54,080 Speaker 1: certain point, Churchill talked about it not being the end, 441 00:23:54,440 --> 00:23:57,560 Speaker 1: not being the beginning of the end, but maybe it 442 00:23:57,720 --> 00:24:02,000 Speaker 1: begin maybe it being the end of the beginning. And 443 00:24:02,320 --> 00:24:06,440 Speaker 1: I think with respect to recognizing that the economy is 444 00:24:06,560 --> 00:24:10,800 Speaker 1: now in a very very different kind of place where 445 00:24:11,320 --> 00:24:17,160 Speaker 1: demand pressures are a crucial issue, I think that's exactly 446 00:24:17,280 --> 00:24:22,159 Speaker 1: what we have uh seen uh seen here, And I 447 00:24:22,600 --> 00:24:27,960 Speaker 1: was glad to see in particular the change in the 448 00:24:28,119 --> 00:24:37,080 Speaker 1: dot plot, which showed that the basic implausibility in a 449 00:24:37,320 --> 00:24:42,480 Speaker 1: labor short economy of rates being at zero out to 450 00:24:44,520 --> 00:24:47,440 Speaker 1: is something that now a majority of the members of 451 00:24:47,520 --> 00:24:52,520 Speaker 1: the f O, m c H recognize, Hilary. They get 452 00:24:52,560 --> 00:24:54,280 Speaker 1: the issue now. I think it's fair to say they've 453 00:24:54,280 --> 00:24:56,320 Speaker 1: said the thirteen of the eight team members think the 454 00:24:56,440 --> 00:24:58,640 Speaker 1: risk in inflation is the up side. So they get 455 00:24:58,680 --> 00:25:00,960 Speaker 1: the issue. But are they doing anything about that issue? 456 00:25:01,000 --> 00:25:03,400 Speaker 1: Because they moved some dots on their plot, to be sure, 457 00:25:04,080 --> 00:25:06,440 Speaker 1: but they didn't actually cut back on their bond purchase 458 00:25:07,240 --> 00:25:10,119 Speaker 1: billion dollars a month. As you've pointed out, that's increasing 459 00:25:10,400 --> 00:25:13,680 Speaker 1: the accommodation much less touched the rates. And by the way, 460 00:25:13,960 --> 00:25:16,080 Speaker 1: if anything, it's a little surprising the rate in the 461 00:25:16,280 --> 00:25:18,600 Speaker 1: on the tenure remained in the one point five range, 462 00:25:18,720 --> 00:25:20,720 Speaker 1: and the equity markets they sold off some, but it 463 00:25:20,800 --> 00:25:22,879 Speaker 1: wasn't that dramatic. So are they doing anything about the 464 00:25:22,920 --> 00:25:26,800 Speaker 1: fundamental underlying causes of this overheating as you describe it. 465 00:25:26,960 --> 00:25:31,440 Speaker 1: I think we're gonna have to uh weight weight and 466 00:25:31,720 --> 00:25:37,040 Speaker 1: judge that an optimistic view would be that because they 467 00:25:37,240 --> 00:25:41,480 Speaker 1: signaled that they were on the case that was reassuring 468 00:25:41,600 --> 00:25:46,400 Speaker 1: to everybody that the accident that people feared was less 469 00:25:46,480 --> 00:25:50,600 Speaker 1: likely to happen, and that's why equities were relatively tranquil. 470 00:25:51,080 --> 00:25:54,160 Speaker 1: That's why the ten year came down. After all. Part 471 00:25:54,200 --> 00:25:58,560 Speaker 1: of what the tenure was pricing in was the risks 472 00:25:58,680 --> 00:26:03,320 Speaker 1: I had been fearing uh significant increase in inflation or 473 00:26:03,920 --> 00:26:07,480 Speaker 1: the need for a major tightening at some point. So 474 00:26:07,520 --> 00:26:11,520 Speaker 1: I think an optimistic view of those developments would be that, 475 00:26:12,200 --> 00:26:17,320 Speaker 1: in fact, by changing expectations and changing their signals, that 476 00:26:17,560 --> 00:26:21,679 Speaker 1: is policy in the monetary sphere, and they were rewarded 477 00:26:21,760 --> 00:26:25,960 Speaker 1: for it. I think that optimistic view might be right. 478 00:26:26,600 --> 00:26:30,280 Speaker 1: It might also be that markets My old mentor Bob 479 00:26:30,359 --> 00:26:33,680 Speaker 1: Ruby used to say, markets go up, markets go down, 480 00:26:33,840 --> 00:26:39,240 Speaker 1: and we shouldn't be interpreting every relative movement to intensely 481 00:26:39,840 --> 00:26:45,160 Speaker 1: days after a major a major event. But look, obviously 482 00:26:46,359 --> 00:26:51,280 Speaker 1: we're gonna have to see what happens on uh the taper. 483 00:26:51,440 --> 00:26:56,480 Speaker 1: I think most market participants saw this as probably bringing 484 00:26:56,600 --> 00:27:00,960 Speaker 1: forward the moment when the tape he was going to 485 00:27:01,800 --> 00:27:09,440 Speaker 1: uh start uh to happen. I think that's a positive thing. Uh. Frankly, 486 00:27:09,520 --> 00:27:11,800 Speaker 1: I would have preferred it if the chairman had not 487 00:27:13,080 --> 00:27:16,639 Speaker 1: been as dismissive of the dot plot um as he 488 00:27:17,000 --> 00:27:21,399 Speaker 1: was uh in his UH in his press conference. But 489 00:27:21,920 --> 00:27:27,240 Speaker 1: that's a that's a tactical detail. We're gonna have to see. 490 00:27:27,359 --> 00:27:29,800 Speaker 1: This is a this is a long this is a 491 00:27:29,920 --> 00:27:34,080 Speaker 1: long game. But um, you know, we're now in the 492 00:27:34,240 --> 00:27:39,440 Speaker 1: second inning, um not in not still waiting for the 493 00:27:39,560 --> 00:27:43,680 Speaker 1: first pitch. And I think that's a uh, that's a 494 00:27:43,760 --> 00:27:47,240 Speaker 1: welcome that's a welcome development here, Larry. I certainly take 495 00:27:47,320 --> 00:27:49,919 Speaker 1: your point about the danger of over interpreting the markets 496 00:27:49,960 --> 00:27:52,240 Speaker 1: and what they're telling is but address one thing in particular, 497 00:27:52,320 --> 00:27:54,119 Speaker 1: and that is the flattening yield curve. Because one of 498 00:27:54,160 --> 00:27:56,280 Speaker 1: the things that happened this week was a pretty dramatic 499 00:27:56,359 --> 00:27:58,960 Speaker 1: flattening the yield curve. So the short end came up 500 00:27:58,960 --> 00:28:01,719 Speaker 1: because the Fed certainly could arrived that quite immediately, at 501 00:28:01,800 --> 00:28:04,600 Speaker 1: the same time the long end didn't. If anything came down, 502 00:28:04,960 --> 00:28:06,760 Speaker 1: does that reflect the fact that the marks might think 503 00:28:06,800 --> 00:28:11,760 Speaker 1: that maybe they are getting their arms around inflation. It 504 00:28:11,960 --> 00:28:16,480 Speaker 1: reflects two things, and in just what proportions is hard 505 00:28:16,560 --> 00:28:20,440 Speaker 1: to know. I think it reflects certainly an expectation that 506 00:28:20,760 --> 00:28:25,600 Speaker 1: they may be getting their arms around UH inflation. But 507 00:28:25,800 --> 00:28:30,200 Speaker 1: you know, inflation expectations moved hugely. It may also be 508 00:28:30,520 --> 00:28:33,800 Speaker 1: that if you thought that we were going to need 509 00:28:33,920 --> 00:28:38,280 Speaker 1: to have some kind of big collision between monetary policy 510 00:28:38,400 --> 00:28:42,920 Speaker 1: and the economy, those kinds of collisions send long rates 511 00:28:43,000 --> 00:28:46,680 Speaker 1: way up, and we probably have taken out a bit 512 00:28:46,800 --> 00:28:51,400 Speaker 1: of the risk of UH that kind of collision. So 513 00:28:51,960 --> 00:28:54,600 Speaker 1: and we've made the world probably a safer place and 514 00:28:54,800 --> 00:28:57,760 Speaker 1: taking risk premiums out. So I think all of those 515 00:28:57,880 --> 00:29:03,520 Speaker 1: things are contribute itters to UH, the flattening UH, to 516 00:29:03,720 --> 00:29:09,360 Speaker 1: the flattening of UH the curve. But um, David, I've 517 00:29:10,040 --> 00:29:15,680 Speaker 1: I've learned in this that it's easy to form a 518 00:29:15,760 --> 00:29:20,280 Speaker 1: beautiful theory around the market pattern, UM, and then have 519 00:29:20,440 --> 00:29:25,560 Speaker 1: that pattern dissipate on you two days UH later. And 520 00:29:26,240 --> 00:29:30,080 Speaker 1: so I think the more detailed the pattern ones commenting 521 00:29:30,280 --> 00:29:36,160 Speaker 1: on UH, the less confident one should be in prescribing 522 00:29:36,240 --> 00:29:38,960 Speaker 1: a detailed theory. Okay, Larry, it's always great to end 523 00:29:39,000 --> 00:29:41,360 Speaker 1: our week with you. That is our special contributor, Larry 524 00:29:41,440 --> 00:29:45,680 Speaker 1: Summers of Harvard. Finally, one more thought, going back to 525 00:29:45,800 --> 00:29:49,000 Speaker 1: go forward, the important events of this week went beyond 526 00:29:49,160 --> 00:29:53,000 Speaker 1: summit diplomacy and fed adjustments. The week ended with June 527 00:29:53,080 --> 00:29:58,400 Speaker 1: tenth named for June eighteen sixty, when federal troops entered Galveston, 528 00:29:58,480 --> 00:30:01,480 Speaker 1: Texas to announce that the Civil War was officially over 529 00:30:01,960 --> 00:30:05,080 Speaker 1: and that all slaves in the state were free. It 530 00:30:05,240 --> 00:30:07,480 Speaker 1: was the last state in the Union to receive word, 531 00:30:07,760 --> 00:30:09,600 Speaker 1: and it was two and a half years after the 532 00:30:09,640 --> 00:30:15,320 Speaker 1: Emancipation Proclamation had taken effect. Juneteenth or Jubilee Day, has 533 00:30:15,400 --> 00:30:18,400 Speaker 1: been commemorated by some Americans as far back as eighteen 534 00:30:18,560 --> 00:30:23,120 Speaker 1: sixty six, when black citizens in Texas held celebrations. It's 535 00:30:23,120 --> 00:30:26,400 Speaker 1: been an official state holiday in Texas since nineteen eighty 536 00:30:26,680 --> 00:30:29,040 Speaker 1: and is now a holiday or a day of observation 537 00:30:29,400 --> 00:30:33,400 Speaker 1: in forty six states. Still a gallop hole this month 538 00:30:33,560 --> 00:30:37,080 Speaker 1: found that some sixty percent of Americans knew nothing at 539 00:30:37,160 --> 00:30:41,280 Speaker 1: all or only a little bit about Juneteenth. It took 540 00:30:41,360 --> 00:30:44,440 Speaker 1: the police killings of black citizens like George Floyd and 541 00:30:44,480 --> 00:30:47,479 Speaker 1: Briana Taylor last year to put it on the national 542 00:30:47,520 --> 00:30:51,200 Speaker 1: agenda and this week this week we made Juneteenth are 543 00:30:51,280 --> 00:30:55,520 Speaker 1: eleventh national holiday. There is no doubt that it is 544 00:30:55,520 --> 00:30:58,960 Speaker 1: an important day in American history. But what does Juneteenth 545 00:30:59,080 --> 00:31:02,800 Speaker 1: have to do with Wall Street and financial markets in business? Well, 546 00:31:02,920 --> 00:31:05,320 Speaker 1: some of the most prominent corporations in the country have 547 00:31:05,480 --> 00:31:08,960 Speaker 1: made it an official company holiday places like Twitter and 548 00:31:09,360 --> 00:31:12,520 Speaker 1: The New York Times and Quicken Loans, And in the end, 549 00:31:12,640 --> 00:31:15,240 Speaker 1: it's not so much about commemorating a day as it 550 00:31:15,360 --> 00:31:18,480 Speaker 1: is making up for so much lost time and making 551 00:31:18,520 --> 00:31:21,600 Speaker 1: sure that everyone is included in the workplace as well 552 00:31:21,800 --> 00:31:25,040 Speaker 1: as in life. Bank of American CEO Brian moynihan says 553 00:31:25,120 --> 00:31:27,960 Speaker 1: when he sought a way to measure that inclusion, he 554 00:31:28,120 --> 00:31:31,440 Speaker 1: asked his fellow workers. Teammates came forward and said, why 555 00:31:31,480 --> 00:31:33,320 Speaker 1: can't people have the kinds of conversations We have a 556 00:31:33,360 --> 00:31:37,720 Speaker 1: work about the realities of being of a specific ethnicity 557 00:31:37,720 --> 00:31:40,640 Speaker 1: in America day in case we have black or Hispanic, 558 00:31:40,880 --> 00:31:44,000 Speaker 1: or a woman or a person with a disability, why 559 00:31:44,040 --> 00:31:45,960 Speaker 1: can't they have these conversations about what they mean. So 560 00:31:46,080 --> 00:31:48,719 Speaker 1: we we did that to help have those conversations outside 561 00:31:48,760 --> 00:31:51,400 Speaker 1: our company. Meanwhile, we've been had a lot of conversations 562 00:31:51,480 --> 00:31:54,560 Speaker 1: inside the company, led by Tom Montag and many others 563 00:31:54,920 --> 00:31:57,040 Speaker 1: that are just wonderful to get people thinking about it 564 00:31:57,160 --> 00:32:00,240 Speaker 1: from not their standpoint but the other person stand point. 565 00:32:00,280 --> 00:32:02,360 Speaker 1: And that's very important too. I worked for one of 566 00:32:02,400 --> 00:32:05,040 Speaker 1: the best of the most successful CEOs of his generation, 567 00:32:05,160 --> 00:32:07,760 Speaker 1: Tom Murphy of Caps Cities, and I remember the day 568 00:32:07,800 --> 00:32:09,680 Speaker 1: he came into the office and said that as he 569 00:32:09,800 --> 00:32:13,000 Speaker 1: looked around at his senior management team, he realized we 570 00:32:13,120 --> 00:32:15,760 Speaker 1: were leaving on the sidelines more than half of the 571 00:32:15,880 --> 00:32:20,160 Speaker 1: brains and the talent because the underrepresentation of women and 572 00:32:20,320 --> 00:32:24,480 Speaker 1: people of color. Now, this isn't about woke, It isn't 573 00:32:24,520 --> 00:32:27,400 Speaker 1: even about doing the right thing. June tenth is a 574 00:32:27,520 --> 00:32:29,800 Speaker 1: day to reflect on what we all need to do 575 00:32:30,120 --> 00:32:33,200 Speaker 1: to include everyone in the effort to be our collective 576 00:32:33,320 --> 00:32:36,640 Speaker 1: best that does it. For this episode of Wall Street Week, 577 00:32:36,760 --> 00:32:39,920 Speaker 1: I'm David Weston. This is Bloomberg. See you next week.