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Speaker 1: China has more virus cases than we knew, and the

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Speaker 1: stock market gets used to Bernie Sanders. I'm David Weston.

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Speaker 1: This is Bloomberg Wall Street Week. I think was a

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Speaker 1: kind of last hurrah for the central bankers. It's one

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Speaker 1: of the things that's kept rates so low as inflation,

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Speaker 1: and so inflation for variety of reasons has been a

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Speaker 1: no show. We will see a much bigger variation between

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Speaker 1: companies within the same sector. And what we're really looking

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Speaker 1: for is the ways that affect the customer today, because

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Speaker 1: this is a customer driven revolution. Possibly China is a

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Speaker 1: deformer diversification, It's very likely to be a decoupling between

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Speaker 1: the United States and China. American workers outcomes, the American

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Speaker 1: economy's outcomes are determined much more in Washington than they

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Speaker 1: are in Beijing. Consistently is more important in volatility. So

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Speaker 1: I think it makes a lot of sense for a

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Speaker 1: lot of these institutions to begin to diversify their income

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Speaker 1: streams to get a little more consistency within the business level.

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Speaker 1: FED chair J. Powell made his semi annual trek up

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Speaker 1: to Capitol Hill this week, and for once, the focus

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Speaker 1: wasn't just on interest rates, or whether Mr Powell or

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Speaker 1: Mr Trump were getting along these days. No. This time,

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Speaker 1: members of Congress were eager to get J. Powell's views

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Speaker 1: on the state of public health, specifically the public health

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Speaker 1: of Ubei Province in central China, and whether the spreading

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Speaker 1: coronavirus there will take down the world economy. The real

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Speaker 1: question for the Fed is what is a likely effect

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Speaker 1: on the U S economy? And I think we'll so

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Speaker 1: we'll see that. We'll begin to see it in economic

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Speaker 1: data coming up fairly soon. And we don't it's too

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Speaker 1: uncertain to even speculate about what the what the level

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Speaker 1: of that will be, and whether it will be persistent,

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Speaker 1: or whether it will lead to a material change in

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Speaker 1: the outlook. For their thoughts on the coronavirus and what

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Speaker 1: it could mean for the economy, we welcome to our

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Speaker 1: contributors of Sonny Bechelist, CEO of global investment firm Rock Creek.

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Speaker 1: Sony founded Rock Creek after a distinguished career at the

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Speaker 1: World Bank and the Carlog Group. And Stephen Ratner, Chairman

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Speaker 1: and CEO of Willard Advisors, the private investment group that

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Speaker 1: manages the personal and filmthropic assets of Michael R. Bloomberg,

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Speaker 1: the founder and majority owner of Bloomberg LP. So welcome both.

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Speaker 1: You're good to have you here. Son. Let me start

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Speaker 1: start with you. You've done a lot with China. Do

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Speaker 1: we trust the numbers because this week China revised upward

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Speaker 1: the number of cases substantially from what we thought it was.

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Speaker 1: I think, as with all other cases in China. Uh,

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Speaker 1: just like the GDP numbers and other data that we

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Speaker 1: have looked at, people who have been watching China did

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Speaker 1: not necessarily believe the data that they were seeing. There

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Speaker 1: was a question mark as to whether there was a

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Speaker 1: shortage of kids to test people or whether the government

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Speaker 1: was actually limiting the number of kids. And of course

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Speaker 1: we just had the revision in terms of the kind

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Speaker 1: of testing you need to make sure we knew if

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Speaker 1: somebody had the virus so or not. I think the

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Speaker 1: government is not all along since you know the first

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Speaker 1: case in December that this is a bigger problem. But

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Speaker 1: they've tried to manage the news just like they do

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Speaker 1: with other data, and I think it has now created

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Speaker 1: a major PR problem for the leader and his and

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Speaker 1: his party, a major PR problems to do. But it's

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Speaker 1: also a major problem for investors. For J Powell for

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Speaker 1: that matter, trying to get your arms around projecting what

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Speaker 1: is going to happen. You have to know where you are.

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Speaker 1: If we don't trust the numbers, how do we know

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Speaker 1: where we are? Well, we don't, and I think J.

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Speaker 1: Powell was appropriately candid about that. And all we can

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Speaker 1: do is watch and wait and see how the data unfolds.

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Speaker 1: I think there is a perception in the market, and

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Speaker 1: Asani certainly knows more about the actual facts around this,

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Speaker 1: there's a perception in the market that this is not

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Speaker 1: going to be a life changing well it's a bad expression,

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Speaker 1: not gonna be an earth shaking event from a economic

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Speaker 1: point of view, and that we may even be on

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Speaker 1: the downward side of the curve in terms of the

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Speaker 1: number of cases and so on and so forth. But

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Speaker 1: is it possible kets getting too eager to call us

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Speaker 1: a V rather than a U or even an L. Well.

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Speaker 1: I think there's a lot of things going on the

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Speaker 1: market which we can talk about whenever you want, not

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Speaker 1: just the coronavirus as to why the market moves away.

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Speaker 1: It moves, but if you go back and look at

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Speaker 1: the experience around Stars, it was a V basically in

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Speaker 1: the market, it went down to turn around and went

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Speaker 1: back up again, and a different, completely different set of facts.

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Speaker 1: But the same thing happened in March of two thousand

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Speaker 1: and nine when the market looked like it was collapsing

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Speaker 1: and then suddenly it became a v So I think

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Speaker 1: there are a number of investors who look at this

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Speaker 1: and want to be careful they don't run for the exits,

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Speaker 1: just as just as the party's resuming stars, right, is

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Speaker 1: that the right animal? I think it's it's a really

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Speaker 1: important analog. Even though you know, at that point, obviously

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Speaker 1: the size of the economy in China was much smaller,

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Speaker 1: the interactions and sort of the global nature of China's

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Speaker 1: exports was different. But I think what's the set is

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Speaker 1: really important in the sense that UH, with what's going

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Speaker 1: on in China, if you look at the actual numbers,

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Speaker 1: markets are not down that much, not the way we

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Speaker 1: would have expected to be. The other thing, which is

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Speaker 1: very interesting is if you look inside the numbers, technology stocks,

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Speaker 1: you know, are doing well. Anything related to the Internet

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Speaker 1: where people are using the systems to buy goods and

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Speaker 1: get things delivered, are doing well. Biologics and UH and

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Speaker 1: the health sector are up like eight, depending on what

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Speaker 1: you're looking at. So within a market that is very,

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Speaker 1: very stressed, in the market where people, you know, less

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Speaker 1: than ten percent of the labor in many parts of

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Speaker 1: the provinces, larger provinces are coming to work. It's interesting

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Speaker 1: and frankly a little surprising that the Chinese market itself

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Speaker 1: has not been affected as much as let's say, the

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Speaker 1: total market in Indonesia or some other neighboring countries. So

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Speaker 1: whether the stars I'm sorry, coronavirus does cause it do

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Speaker 1: turn or not. Jpa was asked well what tools he

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Speaker 1: had to address a downturn, and he basically said, don't

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Speaker 1: count a monetary policy, look to fiscal The current low

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Speaker 1: interest rate environment also means that it would be important

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Speaker 1: for fiscal policy to help help support the economy if

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Speaker 1: it weakens. Putting the federal budget on a sustainable path

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Speaker 1: when the economy is strong would help ensure that policymakers

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Speaker 1: have the space to use fiscal policy to assist in

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Speaker 1: stabilizing the economy during a downturn. A more sustainable federal

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Speaker 1: budget could also support the economy's growth over the long term.

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Speaker 1: So it Steven strikes me, we've got a budget proposal

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Speaker 1: out of the Trump administration this week UH, and it

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Speaker 1: certainly had stimulus in it. We have the definits going

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Speaker 1: up to thirty trillion dollars eventually. I'm not sure that

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Speaker 1: Mr Pope would call that sustainable. No. I think what

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Speaker 1: the chairman was saying in and FED speak was that

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Speaker 1: he was not happy with the Trump UH budget, not

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Speaker 1: so much their proposals as their policies and other it's's

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Speaker 1: a little bit like watch what he does, not what

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Speaker 1: he says. They put out a budget document that does

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Speaker 1: theoretically provide for balance, and I think it's twenty five

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Speaker 1: or something like that, but everything they've done since that

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Speaker 1: came into office was too massive, tax cuts, massive spending,

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Speaker 1: increasing concert with the Democrats and fairness and so basically

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Speaker 1: you've had more than a doubling in the budget deficit

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Speaker 1: from less than half of a trillion to a trillion

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Speaker 1: just because of that. So I think what Power is

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Speaker 1: saying is, um, there is not much space on the

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Speaker 1: monetary side. We've talked about this before, we can talk

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Speaker 1: about it again. But he's also saying at the moment

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Speaker 1: there isn't necessary that we haven't made enough space on

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Speaker 1: the fiscal side either because a trillion dollar deficits big

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Speaker 1: enough by itself. But if Sunny United is not alone

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Speaker 1: in this regard, I mean Stantardi has going by the

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Speaker 1: way side. We had the chancel. Exchequers stepped down this

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Speaker 1: week in UK the pound went up because they think, well,

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Speaker 1: maybe bors can spend more money. Exactly. It seems like

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Speaker 1: every world leader is taking a page out of the

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Speaker 1: Chinese leader. And it started in China, where deficit spending

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Speaker 1: was not a problem. The US has definitely been on

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Speaker 1: a rampage on that front, but Europe with Mrs Merco

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Speaker 1: also not just in the UK what we saw today

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Speaker 1: with the pound going up, but Mrs Markel in her

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Speaker 1: more recent interviews, has been quite um interested in looking

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Speaker 1: at infrastructure, looking at the green economy now being sources

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Speaker 1: of stimulus. Okay, but let's let's put this in perspective.

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Speaker 1: This is Merkel being interested in stimulus from where she's

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Speaker 1: starting and China. You know, we all talk about the

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Speaker 1: problems in China. I would probably trade our their balance

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Speaker 1: sheet for our balance sheet if I wanted to pick

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Speaker 1: the best balance sheet. Okay, we're gonna be back with

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Speaker 1: our contributors shortly coming up. Next. Dan Jurgen HIGHHS Market

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Speaker 1: Device Chairman on what the coronavirus means for oil. This

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Speaker 1: is Bloomberg Wall Street Week. This is Bloomberg Wall Street Week.

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Speaker 1: I'm David weston the coronavirus has hit oil particularly hard,

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Speaker 1: and it's not like it was doing all that well

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Speaker 1: even before the epidemic. Crude has been soft because of

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Speaker 1: concerns about global growth in the short term and over

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Speaker 1: the long term. No one quite knows what going green

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Speaker 1: will mean for fossil fuels. But then the virus hit

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Speaker 1: and the price of crude fell below fifty dollars a

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Speaker 1: barrel at its lows, with the i e A now

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Speaker 1: saying overall demand for oil will go down this quarter

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Speaker 1: for the first time in a decade. In the end,

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Speaker 1: it's first and foremost a human tragedy, But those in

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Speaker 1: the energy industry are also trying to come to grips

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Speaker 1: with how bad this will get and how long it

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Speaker 1: will last. It is a human tragedy, and our thoughts

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Speaker 1: go to the people that are that are impacted. Beyond

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Speaker 1: that into the marketplace. UM, I think the question, of course,

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Speaker 1: on everybody's mind is just how long this will last?

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Speaker 1: Our CFO last week, I think said that the impact

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Speaker 1: could be in the region of three to five thousand

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Speaker 1: barrels a day. So I think time will tell as

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Speaker 1: to how this plays out. First of all, it's a tragedy,

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Speaker 1: and secondly, the question is duration and that will ultimately

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Speaker 1: determine the impact on on GDP worldwide and on supplies.

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Speaker 1: Here to give us his prescription for what ails the

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Speaker 1: oil industry is Dan Jurgen, vice chairman of I H

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Speaker 1: S Market and author of the Poltzer Prize winning book

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Speaker 1: on the subject. The prize, The Epic Quest for Oil,

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Speaker 1: Money and Power, our contributor to Steve Rattner and Sony

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Speaker 1: bechelists are still with this, so Dan, thank you so

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Speaker 1: much for joining us. We've talked about the possible downturn

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Speaker 1: from the economy overall from coronavirus, specifically with oil. What

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Speaker 1: are you looking at? And particularly we talked about V

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Speaker 1: versus you versus L What are you looking at? Well,

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Speaker 1: we're already looking at a very big decline that in February,

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Speaker 1: Chinese oil demand is more than lower than it was

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Speaker 1: a year ago, and world oil demand is certainly going

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Speaker 1: to be much lower than had been anticipated. We think

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Speaker 1: it's going to be lower than the growth and other

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Speaker 1: people think. And I think it also continues and turns

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Speaker 1: into other commodities. Are material Price Index shows that commodity

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Speaker 1: prices last week went down six percent. So all of

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Speaker 1: this is a result of China. Just when you thought

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Speaker 1: the trade deals done, things are recovered, we're not going

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Speaker 1: to decouple. Well, we now see China slowing down and

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Speaker 1: a de facto decoupling with airlines cutting their air service

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Speaker 1: to China. Okay, so that's on the demand side. Whether

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Speaker 1: the supply is open PLUS gonna weigh in and cut more, well,

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Speaker 1: they've been going back and forth, and I think it

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Speaker 1: in particular has to do with whether the Russians. The

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Speaker 1: most important part of the PLUS is Russia, and whether

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Speaker 1: they want to get on board. And they've been hanging back, partly,

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Speaker 1: I think because the Russians say, if you cut UH supplies,

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Speaker 1: who's it's only going to benefit the US and we

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Speaker 1: don't want to give more market share to the US.

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Speaker 1: But I think the signs are that they're going to

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Speaker 1: edge towards that and try and put some kind of

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Speaker 1: floor under under the price in this very uncertain situation. Hi, Dan,

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Speaker 1: it's Steve, but the oil market itself. I think roults

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Speaker 1: have to all those changes in demand that you talked about,

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Speaker 1: and also on the supply side, I think the neutral

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Speaker 1: zone right in between Quwayt and Saudi Arabia is coming

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Speaker 1: back online. I'm actually kind of surprised oil hasn't gone

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Speaker 1: down more. It's sort of hung in there around this

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Speaker 1: fifty dollar level, even given everything you've said, Well, there's

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Speaker 1: been one other factor that's been out there. You mentioned

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Speaker 1: neutral zone and other supplies. Libya. Libya is almost completely

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Speaker 1: shut down, and Libya has really become a war between

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Speaker 1: not only between the two sides and that internal battle

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Speaker 1: that Turkey on one side with gutter and Saudia's UAE

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Speaker 1: and Egypt on the other side. And that's shut down,

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Speaker 1: and that's removed almost a million barrels a day from

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Speaker 1: the market. If Libya was in the market, we would certainly,

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Speaker 1: as your suggesting, seat oil prices lower than they are today.

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Speaker 1: DAN is a growth of shale trickling off here in

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Speaker 1: the United States is pragmattery. I know they're having some

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Speaker 1: problems with the investments. Some bills are getting due right well,

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Speaker 1: I think what's happened there is the investors have said,

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Speaker 1: show me the money. We want returns, and that means

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Speaker 1: that it's no longer growth at any cost, it's growth

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Speaker 1: at what So we think we're not going to see

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Speaker 1: these one and a half two million barrel a day

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Speaker 1: extraordinary growth that we've seen for several years. This year

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Speaker 1: we would have expected about four hundred thousand barrels a

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Speaker 1: day maybe with lower prices will be lower than that

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Speaker 1: and basically a flattening out. The US still stays the

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Speaker 1: world's largest oil producer, but not with that kind of

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Speaker 1: upward growth that has been such a dynamic in the marketplace.

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Speaker 1: So Dan, the new BPCO is taking a fairly aggressive

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Speaker 1: position now on carbon. Is this the first of many

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Speaker 1: in the oil industry? Well, I think, first of all,

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Speaker 1: it is a bold step in a very changing energy future. Uh.

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Speaker 1: You'd had the other European majors Shell and a smaller

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Speaker 1: Spanish one reps Al, doing it, but nobody has done

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Speaker 1: it in the form this kind of comprehensive form, and

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Speaker 1: it reflects I think the way the world has changed,

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Speaker 1: the force of the regulators, particularly the Bank of England,

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Speaker 1: the attitude of investors, and what governments are doing. Uh.

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Speaker 1: The new President of the EU has said climate is

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Speaker 1: the number one political issue facing Europe and countries and

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Speaker 1: EU are aiming net zero carbon, and so what Bernard

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Speaker 1: Looney has really said at BPS, we're going to get

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Speaker 1: on board and we're going to do that, and it's

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Speaker 1: gonna take a lot of investment and a lot of

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Speaker 1: technology to get there. Then he also said that the

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Speaker 1: price of oil could go as far down as forty

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Speaker 1: dollars maybe in his scenarios that he came up with. Uh.

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Speaker 1: And then when we look at the actual numbers that

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Speaker 1: BPS spending on renewable energy or things related to renewable

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Speaker 1: energy versus their classic oil and gas business, it's a

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Speaker 1: tiny fraction at about five six hundred million versus fourteen billions.

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Speaker 1: So how do you sort of put that's together? So

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Speaker 1: I fundy. I think first of all, just to keep

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Speaker 1: oil production where it is, you're gonna have to add

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Speaker 1: forty billion barrels over the next twenty five years or so.

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Speaker 1: And people are not going to throw away their automobiles

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Speaker 1: right away. Mean, we have three million cars in the

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Speaker 1: United States, so that supply is really going to be necessary.

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Speaker 1: I think the issue people have and you probably have

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Speaker 1: it as an investor, there aren't a huge number of

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Speaker 1: things to invest in in the renewable sector at this point.

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Speaker 1: Mostly solar panels are made in China. Obviously wind is

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Speaker 1: the other big thing, but people are looking at what

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Speaker 1: else can you do. You've got to do carbon capture,

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Speaker 1: maybe you capture carbon from the air. Maybe plants have

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Speaker 1: a much more important role. So it's it's not like

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Speaker 1: you can just uh put you know, windmills everywhere. And

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Speaker 1: by the way, most cars don't operate electricity. You know,

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Speaker 1: we have uh one point four billion cars in the

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Speaker 1: world that operate on gasoline and they're not going to

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Speaker 1: go away overnight. Well, Dan, to your point. Coincidentally, we

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Speaker 1: met yesterday with an investment firm that does upstream oil

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Speaker 1: and gas or was doing it anyway, and uh that

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Speaker 1: quite We got to this question renewables and they're trying

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Speaker 1: to do renewables. But there are two problems and just

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Speaker 1: what you said. One, and there's not that much to you.

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Speaker 1: You can invest billions of dollars profitably. And secondly, we've

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Speaker 1: looked ourselves at quite a number of renewable ideas over

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Speaker 1: the last few years. We have yet to find one

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Speaker 1: where the economics pencil out to what we would expect

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Speaker 1: to get from another investment. You can do it for

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Speaker 1: social reasons, but we haven't found one yet to do

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Speaker 1: for financial reasons. But putting all that aside, I think

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Speaker 1: the question I'd like to ask you is what when

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Speaker 1: you boil it all down, then, what do you see

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Speaker 1: as the long term outlook for oil prices. If oil

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Speaker 1: goes down to forty dollars, you're gonna have drigs laid

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Speaker 1: down all over the Permian basin, which will shut supply

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Speaker 1: down put some upward pressure on prices. On the other hand,

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Speaker 1: you do have this in these enormous forces trying to

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Speaker 1: curb demand. Whether it'll be successful or not, we'll see.

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Speaker 1: So when you guys put it all together, what do

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Speaker 1: you think, Well, at this point, are our base case

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Speaker 1: still as we see oil demand rising until the kind

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Speaker 1: of mid twenty thirties because world adds two billion people

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Speaker 1: because incomes go up, and then you get a flattening

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Speaker 1: out of that. Uh, it has to come with a

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Speaker 1: much more carbon capture to get there. But the point

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Speaker 1: that you make is that you really technology is going

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Speaker 1: to be the really big thing. We we did a

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Speaker 1: study with Ernie Moore needs the former Energy Secretary for

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Speaker 1: Bill Gates's group on what are the breakthrough areas that

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Speaker 1: you need? And there there are a number of them

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Speaker 1: where you need big breakthroughs, whether it's in storage, whether

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Speaker 1: it's in carbon capture, and those are going to have

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Speaker 1: to be part of the armory to really address the

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Speaker 1: kind of climate goals. So Europe has these very aggressive goals,

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Speaker 1: but they don't really know how they're going to get there,

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Speaker 1: and they don't yet know how they're going to pay

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Speaker 1: for it. So Zan, if you're the CEO of BP,

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Speaker 1: or of Shell or of Exxon, uh, do at some

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Speaker 1: point become essentially a cash cow in this sense you

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Speaker 1: can say I'm gonna move into renewables. Let's assume at

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Speaker 1: some point there are things to invest in your renewals.

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Speaker 1: Why are you gonna be better at that than somebody else,

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Speaker 1: a tech company or somebody else. Why does what you

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Speaker 1: know as an oil and gas producer translate over into willows,

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Speaker 1: into solar things like that. Well, it does, it does

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Speaker 1: in terms of scale. For instance, if you're going to

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Speaker 1: do offshore wind, if you have scales in terms of

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Speaker 1: doing off score offshore oil, you have some really bring

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Speaker 1: to the party, and I think we'll see the oil

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Speaker 1: majors move into offshore wind in a more significant way.

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Speaker 1: But that's really a question that almost goes back to Steve.

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Speaker 1: If you're investing, Steve in renewables or off sani, do

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Speaker 1: you want to invest in somebody who's a specialist in

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Speaker 1: that or do you want to invest in a general

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Speaker 1: company that's that's doing that the short The short answer

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Speaker 1: is there really aren't very many people who know about renewables.

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Speaker 1: It's a relatively new thing, and our view would be

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Speaker 1: that someone who's a good investor, who knows the energy

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Speaker 1: space and that maybe has some experience of offshore this

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Speaker 1: or that is qualified as anybody if they can to

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Speaker 1: figure it out. But as I said, we've yet to

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Speaker 1: see a project that meets yeah. I think the other

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Speaker 1: thing that I see among the majors is there's a

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Speaker 1: focus on technological innovation, on new technologies, un venture capital.

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Speaker 1: Going to what you're saying, Steve, that really never seen

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Speaker 1: at this level of intensity. To say you have to

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Speaker 1: go on a number of paths if you want to

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Speaker 1: be a player in the future. You see them. They're

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Speaker 1: in fast charging vehicles, for instance, battery research, saying we

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Speaker 1: want to be a player and what's going to be

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Speaker 1: the future, even if the future is not yet very clear,

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Speaker 1: don as you know better than anybody else, shall BP

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Speaker 1: and all the large matures used to have large renewable

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Speaker 1: groups within the oil companies in the eighties, and in

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Speaker 1: fact they shut them down later in the nineties, and

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Speaker 1: of course a lot of venture money was lost around

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Speaker 1: two thousand eight. But at the same time as that

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Speaker 1: has been going on there there has been people who

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Speaker 1: have been experienced in this area. And if especially you're

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Speaker 1: going to emerging markets, pretty much outside of China, a

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Speaker 1: lot of the new energy capacity that is getting built

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Speaker 1: out is um the energy based on renewable sources. So

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Speaker 1: if you go to uh to, whether it's India, whether

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Speaker 1: it is whether it is Bangladesh, whether it is Pakistan

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Speaker 1: and or read of let me let me disagree a

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Speaker 1: little bit. I think that's true. But if you go

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Speaker 1: to India, we work closely with India and they're doing renewables.

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Speaker 1: They're also very committed to really increasing natural gas used

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Speaker 1: in their economy to clean up their air. And it's

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Speaker 1: interesting China, half the new capacity in wind and solar

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Speaker 1: every year goes into China. But by the way, China

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Speaker 1: is also building three new coal fired plants a month,

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Speaker 1: so it's a kind of mixed picture. That's why I

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Speaker 1: think the notion of a transition really describes something that's

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Speaker 1: gonna unfold over a couple of decades. Okay, Dan, thank

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Speaker 1: you so very much. As Dan, you're going to joining

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Speaker 1: us from Washington more with our contributors next. And if

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Speaker 1: you missed an episode of Bloomberg Wall Street Week, full

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Speaker 1: episodes are now available on YouTube, the Bloomberg Terminal, and

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Speaker 1: Bloomberg dot Com. This is Wall Street Week. This is

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Speaker 1: Wall Street Week on David Weston, And we're gonna talk

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Speaker 1: without contries now about what caught my eye. I usually

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Speaker 1: ask them, but I'm gonna say what caught my And

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Speaker 1: that's newspapers. Steve, I gotta turn to you. You were

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Speaker 1: a New York Times reporter. After all, you advise newspapers.

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Speaker 1: But we had several things. McClatchy declared bankruptcy. I took

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Speaker 1: McClatchy public, did you really long? But McClatchy, I mean,

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Speaker 1: really an icon in the publishing business. We had We

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Speaker 1: had a Charlie Munger and Warren Buffett sort of throwing

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Speaker 1: in the towel newspapers saying you can't make it work.

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Speaker 1: At the same time, New York Times in Wall Street

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Speaker 1: Journal are shooting out the lights and subscriptions. What's going on, Well,

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Speaker 1: there's a bifurcation. Uh, there's still a place for the

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Speaker 1: very high end, very high quality. The Economists, which calls

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Speaker 1: itself into paper, oddly enough, is although it's magazine, isn't

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Speaker 1: that same kind of category? People? As these local papers

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Speaker 1: get slimmer and slimmer worse than less and less contact.

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Speaker 1: There are a group of people who happily will pay

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Speaker 1: for the very high end product. But for the average,

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Speaker 1: the average newspaper, it's going to be like passenger trains.

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Speaker 1: There are going to be many, many important cities that

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Speaker 1: just don't even have them. Is there anything substituting coming

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Speaker 1: into that space, either on the business inside or the

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Speaker 1: news side. There's a There are a number of things

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Speaker 1: there are in many of these communities. There are small

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Speaker 1: sometimes nonprofits, sometimes for profits, digital only, you know, fairly

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Speaker 1: eclectic groups. But I would say that, going back to

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Speaker 1: my day as a reporter in the nineteen seventies, the

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Speaker 1: real tragedy of this is the coverage of local governments

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Speaker 1: and state governments has has really diminished, if not evaporated,

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Speaker 1: in many places, and you need newspapers or journalists of

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Speaker 1: any kind to hold these people accountable. Yes, I think

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00:22:27,440 --> 00:22:30,520
Speaker 1: it's undeniable. Local reporting is really going away of the

432
00:22:30,600 --> 00:22:32,199
Speaker 1: horse and buggy. At the same time, it wasn't an

433
00:22:32,200 --> 00:22:36,200
Speaker 1: admiration to begin with. Well, I think the local local

434
00:22:36,359 --> 00:22:39,480
Speaker 1: newspapers in this country have been so important, and in fact,

435
00:22:39,800 --> 00:22:42,520
Speaker 1: there was a story this week I think of local

436
00:22:42,880 --> 00:22:46,719
Speaker 1: paper where a local entrepreneur came and saved it for

437
00:22:46,760 --> 00:22:49,280
Speaker 1: the reasons that Steve was just talking about. But do

438
00:22:49,320 --> 00:22:52,280
Speaker 1: you see any model, Steve in terms of local papers

439
00:22:52,720 --> 00:22:55,760
Speaker 1: doing what you're talking about. No, I think the days

440
00:22:55,840 --> 00:22:59,399
Speaker 1: of newspapers being printed on paper and these communities is

441
00:22:59,400 --> 00:23:02,159
Speaker 1: pretty much over. I think there is potentially a model

442
00:23:02,640 --> 00:23:05,160
Speaker 1: for local journalism of one sort or another. I think

443
00:23:05,200 --> 00:23:08,480
Speaker 1: the nonprofit model, the pro public kind of model, may

444
00:23:08,480 --> 00:23:10,199
Speaker 1: be the best hope. And I think we should all

445
00:23:10,320 --> 00:23:12,080
Speaker 1: even think about the idea of some kind of public

446
00:23:12,080 --> 00:23:15,280
Speaker 1: funding the way the BBC public television are funded. I

447
00:23:15,280 --> 00:23:17,040
Speaker 1: know there's a lot of political issues, a little kinds

448
00:23:17,040 --> 00:23:19,800
Speaker 1: of issues, but we need we need, we need reporters.

449
00:23:20,000 --> 00:23:22,560
Speaker 1: Politicians wouldn't want to have anything to say about the news.

450
00:23:22,600 --> 00:23:24,159
Speaker 1: If I don't want to know, I don't want to

451
00:23:24,160 --> 00:23:27,520
Speaker 1: say anything, but I'd like some financing. Okay. The more

452
00:23:27,560 --> 00:23:29,479
Speaker 1: of the contributor is coming up next, and you can

453
00:23:29,560 --> 00:23:31,480
Speaker 1: check out what's coming up next week on Wall Street

454
00:23:31,480 --> 00:23:34,760
Speaker 1: Week by heading to Bloomberg Market's official Twitter account. We'll

455
00:23:34,760 --> 00:23:37,080
Speaker 1: have a poll each week focused on what you'd like

456
00:23:37,119 --> 00:23:39,280
Speaker 1: to hear from our contributors. The results for this week

457
00:23:39,280 --> 00:23:42,200
Speaker 1: are in. We asked what would have Bernie Sanders nomination

458
00:23:42,240 --> 00:23:46,520
Speaker 1: for president meaning for the stock market. Sixty of voters

459
00:23:46,560 --> 00:23:48,840
Speaker 1: said it will send it lower. We'll find out whether

460
00:23:48,880 --> 00:23:51,240
Speaker 1: that's right or not. That's next. This is Bloomberg Wall

461
00:23:51,240 --> 00:24:10,200
Speaker 1: Street Week. Welcome back from New York. This is Wall

462
00:24:10,240 --> 00:24:14,000
Speaker 1: Street Week. I'm David Weston, a socialist in the White House.

463
00:24:14,119 --> 00:24:16,679
Speaker 1: You'd think the prospect would send Wall Street running for

464
00:24:16,720 --> 00:24:19,560
Speaker 1: the hills. But Bernie Sanders won in New Hampshire this

465
00:24:19,600 --> 00:24:21,960
Speaker 1: week and is ahead in the national polls. So we

466
00:24:22,000 --> 00:24:24,639
Speaker 1: have a front runner for the Democratic nomination who is

467
00:24:24,680 --> 00:24:28,000
Speaker 1: a self described democratic socialist who wants to tax wealth,

468
00:24:28,320 --> 00:24:31,000
Speaker 1: have the federal government take over all of healthcare, and

469
00:24:31,040 --> 00:24:33,680
Speaker 1: would nationalize a good deal the energy sector as part

470
00:24:33,720 --> 00:24:36,880
Speaker 1: of a Green New Deal, and the market's reaction reaching

471
00:24:37,000 --> 00:24:40,040
Speaker 1: for new highs and our contributor Larry Summers has a

472
00:24:40,080 --> 00:24:44,200
Speaker 1: possible explanation for a stock market bullish on a Sanders nomination.

473
00:24:46,560 --> 00:24:50,400
Speaker 1: I do think that UH a number of Bernie Sanders

474
00:24:50,600 --> 00:24:56,800
Speaker 1: um policies will be gat, will create uncertainty, will potentially

475
00:24:56,840 --> 00:25:01,920
Speaker 1: be damaging to growth and employ minton that over time

476
00:25:02,000 --> 00:25:07,280
Speaker 1: does affect UH markets. But I also do think that

477
00:25:07,960 --> 00:25:13,000
Speaker 1: Bernie Sanders nomination probably does make the re election of

478
00:25:13,040 --> 00:25:18,280
Speaker 1: Donald Trump more likely, and for that reason, I think

479
00:25:18,400 --> 00:25:22,479
Speaker 1: it UH would tend to make the market UH go

480
00:25:22,640 --> 00:25:26,040
Speaker 1: up still with us our contributor to Steve Rattner and

481
00:25:26,040 --> 00:25:27,639
Speaker 1: a son a besche Lass. So let's talk about it.

482
00:25:27,680 --> 00:25:29,960
Speaker 1: First of all, I mean, you work with Mike Bloomberg,

483
00:25:30,040 --> 00:25:31,680
Speaker 1: but you don't have a position on the campaign. I

484
00:25:31,680 --> 00:25:33,720
Speaker 1: want to make that clear. I don't have on Camplaign,

485
00:25:33,760 --> 00:25:36,320
Speaker 1: but I do have a dog in the fight. We

486
00:25:36,359 --> 00:25:38,880
Speaker 1: won't tell him that you call them dog, but but

487
00:25:38,880 --> 00:25:40,879
Speaker 1: but give us a sense. So you're heard from Larry Summers.

488
00:25:40,920 --> 00:25:43,120
Speaker 1: The policies of Bernie standards will be bad for the markets,

489
00:25:43,400 --> 00:25:45,880
Speaker 1: but maybe the markets like the possibility of nomination because

490
00:25:45,920 --> 00:25:47,879
Speaker 1: they say that makes sure Donald Trump when we like,

491
00:25:48,119 --> 00:25:50,640
Speaker 1: we'll be back in office. Yeah. I understand Larry's point,

492
00:25:50,680 --> 00:25:52,760
Speaker 1: and it's of course, like everything Larry says not wrong

493
00:25:52,760 --> 00:25:55,720
Speaker 1: at all, and but I think he I think he's

494
00:25:55,720 --> 00:25:58,560
Speaker 1: maybe being a little too more sophisticated than the market is.

495
00:25:59,240 --> 00:26:01,160
Speaker 1: I think the select it's still a long way away

496
00:26:01,160 --> 00:26:02,840
Speaker 1: from the market's point of view. I don't think you

497
00:26:02,880 --> 00:26:05,520
Speaker 1: can see it reacting day to day to whatever happens

498
00:26:05,520 --> 00:26:07,960
Speaker 1: politically in terms of who's up or who's down. I

499
00:26:08,000 --> 00:26:10,320
Speaker 1: think the big driver behind the market right this minute

500
00:26:10,359 --> 00:26:13,280
Speaker 1: are is the falling interest rates. Long term interist rates

501
00:26:13,320 --> 00:26:16,120
Speaker 1: because of everything we've been talking about, have been coming down,

502
00:26:16,200 --> 00:26:18,639
Speaker 1: which makes stocks more attractive. And it's really been I

503
00:26:18,680 --> 00:26:21,479
Speaker 1: think the principal propellant behind the market for quite some

504
00:26:21,520 --> 00:26:23,360
Speaker 1: time now. So is that what it is? Interest rates low?

505
00:26:23,640 --> 00:26:25,760
Speaker 1: I think interest rates are low. J Pal said that

506
00:26:26,040 --> 00:26:28,760
Speaker 1: also in his testimony. Also, you have huge amounts of

507
00:26:28,760 --> 00:26:32,479
Speaker 1: liquidity sitting on the site of the market trying to

508
00:26:32,520 --> 00:26:35,639
Speaker 1: get into the market. And then, last but not least,

509
00:26:35,680 --> 00:26:38,639
Speaker 1: I think the question is whether those same people believe

510
00:26:38,760 --> 00:26:42,480
Speaker 1: that that Bernie will will win, and so if people

511
00:26:42,560 --> 00:26:45,159
Speaker 1: do not really think that's credible, it may not be

512
00:26:45,240 --> 00:26:47,320
Speaker 1: so impactful on the market. So how sophisticate it is

513
00:26:47,320 --> 00:26:49,520
Speaker 1: the market is there also possible they're saying, Okay, even

514
00:26:49,560 --> 00:26:51,760
Speaker 1: if you got the nomination, there's a limit of what

515
00:26:51,800 --> 00:26:54,560
Speaker 1: he could get through as a practical thing got elected. Yeah. Yeah,

516
00:26:54,600 --> 00:26:56,960
Speaker 1: I think that is another level of analysis you could do,

517
00:26:57,080 --> 00:27:00,199
Speaker 1: which is that the probability of the Democrats take the

518
00:27:00,240 --> 00:27:02,800
Speaker 1: Senate back, which they would have to do, it's probably

519
00:27:02,800 --> 00:27:04,879
Speaker 1: a bit less than fifty fifty. To get a lot

520
00:27:04,960 --> 00:27:06,680
Speaker 1: of stuff done, you need sixty votes in the Senate,

521
00:27:06,680 --> 00:27:09,040
Speaker 1: which obviously neither party is almost certainly going to have.

522
00:27:09,480 --> 00:27:11,000
Speaker 1: So yeah, I think part of what the market is

523
00:27:11,040 --> 00:27:13,119
Speaker 1: also saying is a limit to what what are you

524
00:27:13,119 --> 00:27:14,960
Speaker 1: gonna Look? The markets are not perfect. You remember that

525
00:27:15,000 --> 00:27:18,359
Speaker 1: when Donald Trump got elected, the market immediately went down.

526
00:27:18,960 --> 00:27:21,080
Speaker 1: Then it turned around within about two hours and went

527
00:27:21,160 --> 00:27:23,480
Speaker 1: up when it realized that a Trump presidency actually could

528
00:27:23,480 --> 00:27:26,800
Speaker 1: be good for the market. So markets are not perfect. Well,

529
00:27:26,840 --> 00:27:28,639
Speaker 1: and they may not be perfect. What's what's driven them

530
00:27:28,720 --> 00:27:32,080
Speaker 1: up during President Trump's term? Because we have one person

531
00:27:32,119 --> 00:27:34,520
Speaker 1: for Blooming Opinion who wrote a thoughtful pieces. We can said,

532
00:27:34,680 --> 00:27:36,520
Speaker 1: if you look at it closely, it's not tax cuts,

533
00:27:36,920 --> 00:27:39,520
Speaker 1: it's not the regulation, it's actually definite spending that that

534
00:27:39,600 --> 00:27:42,040
Speaker 1: really is driving the market more than anything else. I'm

535
00:27:42,040 --> 00:27:43,760
Speaker 1: not sure I would agree with that. I think I

536
00:27:43,760 --> 00:27:46,280
Speaker 1: think it's pretty clear the tax cut, and in retrospect

537
00:27:46,320 --> 00:27:48,200
Speaker 1: I kicked myself because I didn't really see this. I

538
00:27:48,200 --> 00:27:49,760
Speaker 1: think it's pretty clear the tax kind of had a

539
00:27:49,880 --> 00:27:52,480
Speaker 1: significant one time effect on the market. When you cut

540
00:27:52,480 --> 00:27:55,880
Speaker 1: the corporate rate from thirty one, earnings quo a lot

541
00:27:56,280 --> 00:27:58,560
Speaker 1: pe multiples come down, and then the stocks go up

542
00:27:58,600 --> 00:28:01,600
Speaker 1: to offset that. So that I think absolutely played a role.

543
00:28:01,880 --> 00:28:04,880
Speaker 1: The fact that the economic recovery has remained very steady,

544
00:28:05,400 --> 00:28:08,320
Speaker 1: uh and the consumer particularly has remained very stronger than

545
00:28:08,320 --> 00:28:10,960
Speaker 1: probably most people would have guessed. And the third major

546
00:28:11,000 --> 00:28:13,800
Speaker 1: factor in my opinion is low interest rates and the

547
00:28:13,840 --> 00:28:16,440
Speaker 1: fact that what they call the equity risk premium, the

548
00:28:16,520 --> 00:28:19,160
Speaker 1: difference between treasuries and and what you get on equities,

549
00:28:19,160 --> 00:28:22,440
Speaker 1: even a dividend yield on the SMP make stocks very

550
00:28:22,520 --> 00:28:24,520
Speaker 1: very compelling. And as if Sonny said, there's a huge

551
00:28:24,520 --> 00:28:26,439
Speaker 1: amount of liquidity in the world. So if sunny we

552
00:28:26,480 --> 00:28:28,680
Speaker 1: now have seen a budget proposals, not a budget, but

553
00:28:28,720 --> 00:28:31,639
Speaker 1: a budget of proposal from the Trump administration that takes

554
00:28:31,640 --> 00:28:33,960
Speaker 1: on more and more debt and spends a lot more money,

555
00:28:33,960 --> 00:28:36,919
Speaker 1: frankly more on military. It actually decouples it from the

556
00:28:36,960 --> 00:28:39,680
Speaker 1: discretionary spending on the social side. What would that mean

557
00:28:39,720 --> 00:28:41,760
Speaker 1: for the US economy? What would it mean for investors?

558
00:28:42,480 --> 00:28:45,160
Speaker 1: I actually think it could be negative for investors because

559
00:28:45,200 --> 00:28:47,200
Speaker 1: since a lot of money being is that is being

560
00:28:47,240 --> 00:28:49,920
Speaker 1: taken off the table is in things that are related

561
00:28:49,960 --> 00:28:54,240
Speaker 1: to social programs and student loans, and having a population

562
00:28:54,680 --> 00:28:58,040
Speaker 1: that has a bigger student loan problem or a bigger

563
00:28:58,600 --> 00:29:02,040
Speaker 1: health build problem, you're going to have people spend less

564
00:29:02,240 --> 00:29:05,640
Speaker 1: in that kind of economy. The other side of the budget,

565
00:29:05,760 --> 00:29:08,400
Speaker 1: I think which was interesting in the on the military

566
00:29:08,400 --> 00:29:10,440
Speaker 1: side that I'm no expert on the military side, but

567
00:29:10,520 --> 00:29:13,760
Speaker 1: it was very much hardware oriented. A lot of what's

568
00:29:13,880 --> 00:29:16,840
Speaker 1: very interesting right now on R and D going into

569
00:29:16,840 --> 00:29:19,960
Speaker 1: military is really using a lot of technology. And not

570
00:29:20,120 --> 00:29:22,680
Speaker 1: that that would not be important, but a lot of

571
00:29:22,720 --> 00:29:25,880
Speaker 1: the very large numbers that were in that budget document

572
00:29:26,240 --> 00:29:31,800
Speaker 1: were more traditional than modern kind of technology use in military.

573
00:29:32,160 --> 00:29:35,160
Speaker 1: So Steve, going into the next election, President Trump is

574
00:29:35,160 --> 00:29:36,640
Speaker 1: going to make the cases making the case right now,

575
00:29:36,680 --> 00:29:38,600
Speaker 1: he's been really good for the economy, good for employment,

576
00:29:39,280 --> 00:29:43,360
Speaker 1: uh tame inflation. Has been a good economy and growth economy.

577
00:29:43,760 --> 00:29:48,160
Speaker 1: At the same time, we see um asset valuations going

578
00:29:48,240 --> 00:29:51,720
Speaker 1: up much faster than wages, for example, and and much

579
00:29:51,760 --> 00:29:54,160
Speaker 1: of the real growth rate. What accounts for that? What's

580
00:29:54,200 --> 00:29:57,959
Speaker 1: the difference? Why are asset Yeah, valuation is going up

581
00:29:57,960 --> 00:30:00,200
Speaker 1: so much fast in the rest of the economy. Well, again,

582
00:30:00,280 --> 00:30:02,400
Speaker 1: I think it's a factor of lower interest rates and

583
00:30:02,400 --> 00:30:04,240
Speaker 1: and the value of an asset, whether it's a piece

584
00:30:04,240 --> 00:30:06,520
Speaker 1: of real estate or real estate is the best example.

585
00:30:06,600 --> 00:30:09,719
Speaker 1: Real estate essentially trades that what we call a cap right,

586
00:30:09,800 --> 00:30:12,840
Speaker 1: it's essentially the inverse of an interest rate. When interest

587
00:30:12,920 --> 00:30:15,040
Speaker 1: rates go down, the value real estate goes up because

588
00:30:15,040 --> 00:30:18,160
Speaker 1: it's so heavily dependent on financing. But I think, I

589
00:30:18,160 --> 00:30:22,440
Speaker 1: think income inequalities is terrible. It's probably not gotten worse

590
00:30:22,520 --> 00:30:24,520
Speaker 1: in some ways. It's oddly eno've gotten better for the

591
00:30:24,520 --> 00:30:26,920
Speaker 1: people at the very bottom, and that's because of statementium

592
00:30:26,920 --> 00:30:30,720
Speaker 1: wage increases. And so Trump actually has a case to make.

593
00:30:30,840 --> 00:30:33,640
Speaker 1: I don't happen to think personally that his policies have

594
00:30:33,800 --> 00:30:36,200
Speaker 1: created this economic environment. And I think there are many

595
00:30:36,200 --> 00:30:38,760
Speaker 1: measures by which the economy today is doing no better

596
00:30:38,800 --> 00:30:40,720
Speaker 1: than it did under Obama. Well, you've written about that.

597
00:30:40,760 --> 00:30:43,160
Speaker 1: I have, but sometimes the fact of the matter maybe

598
00:30:43,160 --> 00:30:45,200
Speaker 1: different than the political factor that I totally agree with,

599
00:30:45,280 --> 00:30:47,920
Speaker 1: even if that is true to much, really true to

600
00:30:47,920 --> 00:30:49,800
Speaker 1: the polity to the people going into the voting booths,

601
00:30:49,800 --> 00:30:51,600
Speaker 1: and he said, look at he's the president. Looks pretty

602
00:30:51,600 --> 00:30:53,280
Speaker 1: good at I think there's two things to say about that.

603
00:30:53,360 --> 00:30:55,120
Speaker 1: One is that JP Morgan put out of paper you

604
00:30:55,200 --> 00:30:57,000
Speaker 1: might have seen it, which they calculated that he has

605
00:30:57,040 --> 00:31:00,920
Speaker 1: the greatest economic tailwin of any incumbents scene, and that's

606
00:31:00,960 --> 00:31:03,000
Speaker 1: using these headline numbers that people tend to look at.

607
00:31:03,200 --> 00:31:05,160
Speaker 1: And secondly, if you look at the public opinion polls

608
00:31:05,200 --> 00:31:07,680
Speaker 1: and whether people still think the right track wrong, numbers

609
00:31:07,680 --> 00:31:09,840
Speaker 1: are still very negative. But if you ask people, are

610
00:31:09,840 --> 00:31:11,840
Speaker 1: you better off economically than you were a year ago,

611
00:31:11,840 --> 00:31:14,280
Speaker 1: two years ago, those numbers have been going up very steadily,

612
00:31:14,320 --> 00:31:16,760
Speaker 1: and that's Trump's tailwin. I'm signing as an investor. What

613
00:31:16,880 --> 00:31:19,440
Speaker 1: do you want to see? I think what stif? That

614
00:31:19,600 --> 00:31:22,120
Speaker 1: is really important because policy seems to take a very

615
00:31:22,120 --> 00:31:26,240
Speaker 1: long time to turn into numbers, so really important to

616
00:31:26,320 --> 00:31:28,760
Speaker 1: have the right kind of economic policy and not to

617
00:31:29,160 --> 00:31:32,160
Speaker 1: um not to for example, slow down the economy at

618
00:31:32,160 --> 00:31:34,760
Speaker 1: this time, and not to put too much fuel in

619
00:31:34,800 --> 00:31:39,200
Speaker 1: it either because either could be very damaging for the market.

620
00:31:39,240 --> 00:31:41,960
Speaker 1: The other thing I think that as investors we like

621
00:31:42,080 --> 00:31:44,080
Speaker 1: to see in the market in the marketplace is more

622
00:31:44,160 --> 00:31:47,320
Speaker 1: certainty because risk is something that you can put down

623
00:31:47,360 --> 00:31:50,200
Speaker 1: probabilities and make a decision on right or wrong. But

624
00:31:50,360 --> 00:31:54,480
Speaker 1: uncertainty is something that is very damaging to decision making

625
00:31:54,480 --> 00:32:00,480
Speaker 1: an investments. So that is very much around today. Are

626
00:32:00,560 --> 00:32:03,680
Speaker 1: you better off under President Trump? Yours fund, your investments?

627
00:32:03,680 --> 00:32:05,560
Speaker 1: Have you done well under President Trump? I think there

628
00:32:05,560 --> 00:32:08,280
Speaker 1: has been a lot of upward movement in the markets

629
00:32:08,280 --> 00:32:11,800
Speaker 1: that has benefited us, just like everybody else. At the

630
00:32:11,840 --> 00:32:14,920
Speaker 1: same time, I think that is coming to an end.

631
00:32:15,200 --> 00:32:17,960
Speaker 1: I think moving forward at the next ten years will

632
00:32:18,000 --> 00:32:20,280
Speaker 1: not be as easy as the last ten years for

633
00:32:20,400 --> 00:32:23,200
Speaker 1: us or for anyone else. Okay, our contributors will be

634
00:32:23,240 --> 00:32:26,760
Speaker 1: staying with us and coming up. Scanda Amaranth from Employee

635
00:32:26,760 --> 00:32:29,600
Speaker 1: America here with a second opinion on how Chair Pile

636
00:32:29,760 --> 00:32:33,040
Speaker 1: should be looking at the job market. This is Bloomberg

637
00:32:33,040 --> 00:32:49,640
Speaker 1: Wall Street Week. This is Bloomberg Wall Street Week. I'm

638
00:32:49,720 --> 00:32:52,520
Speaker 1: David Weston bed chair J Pile took us through the

639
00:32:52,600 --> 00:32:56,600
Speaker 1: regular paces this week. Strong economy, strong job market, low inflation,

640
00:32:56,880 --> 00:32:59,080
Speaker 1: no need at this point to rock the boat. But

641
00:32:59,160 --> 00:33:01,640
Speaker 1: are he in his leagues looking at the right things

642
00:33:01,960 --> 00:33:04,760
Speaker 1: for a second opinion? We welcome now Scanda Amaranth. He

643
00:33:04,920 --> 00:33:07,960
Speaker 1: is director of Research and Analysis that Employ America, a

644
00:33:08,040 --> 00:33:11,080
Speaker 1: think tank that analyzes the labor market and economic policy.

645
00:33:11,280 --> 00:33:13,520
Speaker 1: Scanda has a new way to think about our labor

646
00:33:13,560 --> 00:33:16,120
Speaker 1: market and whether the FED is getting the job done.

647
00:33:16,520 --> 00:33:18,680
Speaker 1: So with us are our contributors Steve Rattner and a

648
00:33:18,760 --> 00:33:21,040
Speaker 1: Sonic Bechelost. So Scanda welcomes. Great to have you here,

649
00:33:21,080 --> 00:33:22,920
Speaker 1: Thank you for having me on. So tell us about

650
00:33:22,920 --> 00:33:26,040
Speaker 1: g l I exactly what is it? What would it do? So?

651
00:33:26,200 --> 00:33:28,680
Speaker 1: G l I stands for gross labor income, which you

652
00:33:28,720 --> 00:33:30,959
Speaker 1: can think of as the sum of every employed person's

653
00:33:30,960 --> 00:33:34,880
Speaker 1: paycheck UM. And so it's a different way of orienting

654
00:33:34,920 --> 00:33:37,320
Speaker 1: how the FED should think about its framework from this

655
00:33:37,360 --> 00:33:39,800
Speaker 1: sort of inflation centric framework that they are working with

656
00:33:39,920 --> 00:33:42,280
Speaker 1: right now. So currently the FED has adopted a two

657
00:33:42,280 --> 00:33:46,400
Speaker 1: percent inflation target and they're undergoing this review of of

658
00:33:46,800 --> 00:33:49,840
Speaker 1: where inflation, where the inflation target should be in order

659
00:33:49,880 --> 00:33:52,440
Speaker 1: for them to really meet their goals going forward. We've

660
00:33:52,480 --> 00:33:56,120
Speaker 1: had seven years or eight years actually now on under

661
00:33:56,160 --> 00:33:59,640
Speaker 1: the two percent inflation target regime, and the FED has

662
00:33:59,680 --> 00:34:02,320
Speaker 1: missed in that target. And so the FED is trying

663
00:34:02,360 --> 00:34:05,600
Speaker 1: to revise its methods in part because they're running out

664
00:34:05,600 --> 00:34:07,840
Speaker 1: of ammunition. Right, So the question is how do they

665
00:34:08,320 --> 00:34:10,560
Speaker 1: actually get some of that ammunition back? So is the

666
00:34:10,640 --> 00:34:12,200
Speaker 1: essence of it. It's not so much how much we

667
00:34:12,400 --> 00:34:14,440
Speaker 1: pay for things, is how much they get paid. How

668
00:34:14,520 --> 00:34:16,759
Speaker 1: much people get paid, right, So jobs and wages, right,

669
00:34:16,800 --> 00:34:19,400
Speaker 1: the accumulation of those two facts and what and the

670
00:34:19,440 --> 00:34:22,720
Speaker 1: FED really calibrating its policies more towards jobs and wages,

671
00:34:23,040 --> 00:34:26,279
Speaker 1: because when we think about inflation target, it's the kind

672
00:34:26,280 --> 00:34:28,520
Speaker 1: of thing that's hard to really argue for from below.

673
00:34:28,680 --> 00:34:30,480
Speaker 1: Do we really want to see higher inflation or are

674
00:34:30,480 --> 00:34:32,680
Speaker 1: we really talking about is higher wage growth and more

675
00:34:32,680 --> 00:34:35,000
Speaker 1: plentiful job growth. That's the real dilemma I think the

676
00:34:35,040 --> 00:34:38,160
Speaker 1: FED has right now. I think I understand that, and

677
00:34:38,200 --> 00:34:40,719
Speaker 1: that all assumes very plausible to me. But I guess

678
00:34:40,800 --> 00:34:43,200
Speaker 1: the question that is, at the end of the day,

679
00:34:43,280 --> 00:34:45,239
Speaker 1: when you if you were to go your way, what

680
00:34:45,320 --> 00:34:48,160
Speaker 1: are the actual implications for FED policy relative to what

681
00:34:48,160 --> 00:34:50,120
Speaker 1: they're doing now, what they What do you think the

682
00:34:50,120 --> 00:34:51,680
Speaker 1: interest rate should be? What do you think they should

683
00:34:51,680 --> 00:34:53,640
Speaker 1: be doing. I think right now, especially if you look

684
00:34:53,640 --> 00:34:55,239
Speaker 1: at the trends and job growth and wage growth, the

685
00:34:55,520 --> 00:34:58,080
Speaker 1: wage groaths is disappointed, I'd say more recently, but job

686
00:34:58,120 --> 00:35:01,160
Speaker 1: growth has picked up again, especially in a couple of

687
00:35:01,200 --> 00:35:04,120
Speaker 1: different surveys. So standing pat as Joe pal is doing

688
00:35:04,200 --> 00:35:06,960
Speaker 1: right now is actually something that's pretty defensible. We're seeing

689
00:35:07,200 --> 00:35:10,400
Speaker 1: not really the inflation that's a sign of a hot economy.

690
00:35:10,440 --> 00:35:12,759
Speaker 1: At the same time we are seeing robust growth. I

691
00:35:12,800 --> 00:35:15,000
Speaker 1: think what really stands out is when we see the FED,

692
00:35:15,640 --> 00:35:18,200
Speaker 1: especially during the six mansion, repeatedly they tried to lift

693
00:35:18,239 --> 00:35:21,120
Speaker 1: off rates exit accommodative policy, only to do a one

694
00:35:21,160 --> 00:35:26,080
Speaker 1: eighty in six months time you saw eleven, twelve, thirteen. UM.

695
00:35:26,120 --> 00:35:28,799
Speaker 1: So the real thing value, hopefully to this framework is

696
00:35:28,840 --> 00:35:32,000
Speaker 1: to not hit the brakes so aggressively and to be

697
00:35:32,080 --> 00:35:34,640
Speaker 1: a little bit more patient. J Palill through his credit

698
00:35:34,680 --> 00:35:38,000
Speaker 1: has really taken that on board to some extent. Your

699
00:35:38,040 --> 00:35:41,760
Speaker 1: research seems to show also that inflation is a lagging

700
00:35:41,800 --> 00:35:47,160
Speaker 1: indicator versus wages. How do you look at that? Um?

701
00:35:47,200 --> 00:35:49,399
Speaker 1: You know, can teach us a little bit more about that. Sure,

702
00:35:49,480 --> 00:35:52,759
Speaker 1: So inflation itself oftentimes as a red herring in the

703
00:35:52,760 --> 00:35:55,200
Speaker 1: pivotal moments of business cycles. So if you think about

704
00:35:55,200 --> 00:35:57,799
Speaker 1: two thou eight, when inflation was actually quite strong in

705
00:35:57,840 --> 00:35:59,400
Speaker 1: the middle two eight and there was a lot of

706
00:35:59,440 --> 00:36:01,280
Speaker 1: concern that the that was gonna have to hike rates

707
00:36:01,600 --> 00:36:02,839
Speaker 1: by the end of two thousand and I think there's

708
00:36:02,960 --> 00:36:05,839
Speaker 1: like three hikes priced. We obviously went to zero by

709
00:36:05,840 --> 00:36:09,240
Speaker 1: the end of the end of the year. Um inn

710
00:36:09,280 --> 00:36:12,040
Speaker 1: we saw something similar again where inflation sort of sends

711
00:36:12,080 --> 00:36:14,680
Speaker 1: the market in one direction even though actually the underlying

712
00:36:14,719 --> 00:36:17,040
Speaker 1: economy is moving in another, and then it gets reflected

713
00:36:17,080 --> 00:36:20,120
Speaker 1: inflation to some extent, but it's really with a twelve

714
00:36:20,160 --> 00:36:23,200
Speaker 1: to eighteen month lag. Uh. Wage growth does have a

715
00:36:23,239 --> 00:36:24,840
Speaker 1: little bit of a lag too, but not to the

716
00:36:24,880 --> 00:36:26,759
Speaker 1: same extent. And I would also argue that even a

717
00:36:26,840 --> 00:36:30,600
Speaker 1: couple it with job growth, job growth's actually more coincident

718
00:36:30,719 --> 00:36:34,480
Speaker 1: to the economy than say, inflation. Everything is sort of

719
00:36:34,480 --> 00:36:37,399
Speaker 1: has a certain lags and pitfalls. But I would say

720
00:36:37,640 --> 00:36:40,080
Speaker 1: calibrating policy to where the trends in job growth and

721
00:36:40,080 --> 00:36:42,160
Speaker 1: wage growth with that's telling us will give us a

722
00:36:42,160 --> 00:36:44,680
Speaker 1: better guide to the downside risks to the economy, which

723
00:36:44,680 --> 00:36:46,279
Speaker 1: is what we've really been grappling with for the last

724
00:36:46,280 --> 00:36:49,239
Speaker 1: thirty years. One problem some people have had with the

725
00:36:49,280 --> 00:36:52,440
Speaker 1: inflation target is the monetary policy wouldn't get you there.

726
00:36:52,640 --> 00:36:54,440
Speaker 1: They've tried to get it up too person will do it?

727
00:36:54,760 --> 00:36:57,319
Speaker 1: Are there gonna be any more able to get to

728
00:36:57,360 --> 00:36:59,319
Speaker 1: a g l I target? I mean, is a better

729
00:36:59,360 --> 00:37:01,400
Speaker 1: tool to get to that than to get to inflation?

730
00:37:01,600 --> 00:37:04,759
Speaker 1: Necessary but probably not sufficient in all circumstances. I think

731
00:37:04,760 --> 00:37:07,400
Speaker 1: that's fair, which is that monetary policy has a valuable

732
00:37:07,520 --> 00:37:10,280
Speaker 1: role to play and sort of not pitting the break

733
00:37:10,280 --> 00:37:13,480
Speaker 1: too quickly, especially coming out of recessions, but fiscal policy

734
00:37:13,480 --> 00:37:15,760
Speaker 1: also has to do its part in sort of fostering

735
00:37:15,760 --> 00:37:18,879
Speaker 1: the kind of economic growth and income growth, because really

736
00:37:18,880 --> 00:37:22,240
Speaker 1: talked about inflation. Inflation ultimately sort of reflection of a

737
00:37:22,280 --> 00:37:25,399
Speaker 1: sort of higher nominal income growth economy. That's the sort

738
00:37:25,440 --> 00:37:27,800
Speaker 1: of circumstance of the seventies when we did see inflation

739
00:37:27,840 --> 00:37:30,160
Speaker 1: show up. But right now we've been a really nominal

740
00:37:30,239 --> 00:37:32,919
Speaker 1: income growth has been constrained for quite some time, and

741
00:37:33,320 --> 00:37:36,200
Speaker 1: fiscal policy has more of a role in supporting that process,

742
00:37:36,360 --> 00:37:39,040
Speaker 1: especially around recessions and they're gonna have to We're gonna

743
00:37:39,040 --> 00:37:41,920
Speaker 1: have to see um sort of Congress, and the President's

744
00:37:42,160 --> 00:37:43,840
Speaker 1: up to the plate whenever that time comes. Okay, But

745
00:37:43,880 --> 00:37:45,960
Speaker 1: as we sit here today, the budget deficits at a

746
00:37:46,000 --> 00:37:49,719
Speaker 1: trillion dollars in the eleventh year of a recovery. It's

747
00:37:49,719 --> 00:37:53,040
Speaker 1: not what we all learned in economics one. So what

748
00:37:53,080 --> 00:37:55,239
Speaker 1: do you think should be different about fiscal policy right

749
00:37:55,280 --> 00:37:58,040
Speaker 1: at this minute? I think the quality of the deficit

750
00:37:58,160 --> 00:38:00,719
Speaker 1: is really the thing that's most problematic in terms of

751
00:38:00,960 --> 00:38:02,799
Speaker 1: if we look at what happened with the Tax Cuts

752
00:38:02,800 --> 00:38:06,200
Speaker 1: and Jobs Act, we saw the one time UM sort

753
00:38:06,239 --> 00:38:09,000
Speaker 1: of changing the corporate rate. We saw the widening out

754
00:38:09,000 --> 00:38:11,000
Speaker 1: of deficits, but it didn't actually move the needle on

755
00:38:11,080 --> 00:38:13,200
Speaker 1: demand in a meaningful way. So we didn't really see

756
00:38:13,200 --> 00:38:15,920
Speaker 1: the growth acceleration and demand really sustained itself over a

757
00:38:15,920 --> 00:38:19,240
Speaker 1: period of time, And we didn't really see the change

758
00:38:19,239 --> 00:38:21,720
Speaker 1: in inflation either, to be honest, right, So we actually

759
00:38:22,360 --> 00:38:26,120
Speaker 1: government borrowing costs, which really price signals also matter UM,

760
00:38:26,200 --> 00:38:28,160
Speaker 1: are historically low, right, And if we look at even

761
00:38:28,160 --> 00:38:30,200
Speaker 1: other countries that have sort of higher depth sits and

762
00:38:30,239 --> 00:38:33,800
Speaker 1: higher death burdens, Japan being the sort of vilified example

763
00:38:33,840 --> 00:38:37,560
Speaker 1: of this, UM also has actually lower borrowing costs too.

764
00:38:37,840 --> 00:38:40,080
Speaker 1: Now that's I think that tells you the bigger economic

765
00:38:40,120 --> 00:38:42,600
Speaker 1: structure and the problem of generating sustained income growth is

766
00:38:42,640 --> 00:38:45,480
Speaker 1: it play? And so I don't. I'd say I have

767
00:38:45,520 --> 00:38:47,279
Speaker 1: to take more issue with the quality of deficits. The

768
00:38:47,280 --> 00:38:49,960
Speaker 1: actual quantity really depends on how much demand generation you're

769
00:38:49,960 --> 00:38:52,279
Speaker 1: getting for each deficit dollar. So if you didn't get

770
00:38:52,280 --> 00:38:55,840
Speaker 1: demand from tax cuts, what would give you demand growth?

771
00:38:55,960 --> 00:38:58,600
Speaker 1: Because I mean, putting more people money in people's pockets

772
00:38:58,600 --> 00:39:00,680
Speaker 1: you think would have them spend more. Yeah, I think

773
00:39:00,680 --> 00:39:02,480
Speaker 1: part of that is where it's skewed to write. So

774
00:39:02,480 --> 00:39:04,040
Speaker 1: if you look at the flow of funds accounts from

775
00:39:04,040 --> 00:39:06,239
Speaker 1: the FED, they seem to show that's really been a

776
00:39:06,280 --> 00:39:09,480
Speaker 1: surge in corporate saving rates that's happened UM. At the

777
00:39:09,560 --> 00:39:12,080
Speaker 1: same time, you've seen that really not as much as

778
00:39:12,080 --> 00:39:15,399
Speaker 1: flow to the lower end. Also, at the lower end,

779
00:39:16,200 --> 00:39:19,080
Speaker 1: if people are getting just a minimum wage, you might

780
00:39:19,120 --> 00:39:21,839
Speaker 1: be seeing the employment numbers going up in your measure, right,

781
00:39:21,880 --> 00:39:24,839
Speaker 1: but the actual total income is not going up by

782
00:39:24,880 --> 00:39:28,360
Speaker 1: that much, so you can't actually spend that. That is

783
00:39:28,440 --> 00:39:30,479
Speaker 1: exactly right, Which is that, especially when we think about

784
00:39:30,600 --> 00:39:33,200
Speaker 1: what kinds of jobs. Also, the quality of job growth

785
00:39:33,239 --> 00:39:36,399
Speaker 1: something that's harder to parse from the NFP headline net

786
00:39:36,480 --> 00:39:39,200
Speaker 1: numbers from not on pay rolls, but um, it's really

787
00:39:39,360 --> 00:39:42,160
Speaker 1: if you think about a dollar weighted um average, this

788
00:39:42,239 --> 00:39:44,280
Speaker 1: is not the kind of thing that the lower income

789
00:39:44,360 --> 00:39:47,200
Speaker 1: is going to necessarily push the aggregate to the same

790
00:39:47,239 --> 00:39:49,799
Speaker 1: extent um. And even if you think about right now

791
00:39:49,840 --> 00:39:51,680
Speaker 1: we've seen actually a lot of the sort of higher

792
00:39:51,680 --> 00:39:54,720
Speaker 1: paying blue collar jobs, the job growth there has actually

793
00:39:54,719 --> 00:39:58,120
Speaker 1: slowed down quite a bit, especially manufacturing, which is stagnated,

794
00:39:58,800 --> 00:40:02,000
Speaker 1: whereas we're seeing still decent growth in sort of food services,

795
00:40:02,000 --> 00:40:04,799
Speaker 1: some growth in healthcare job growth, but it's not the

796
00:40:04,840 --> 00:40:07,560
Speaker 1: same sort of quality job growth in terms of sort

797
00:40:07,560 --> 00:40:10,160
Speaker 1: of pushing the aggregate forward. Does that all argue for

798
00:40:10,160 --> 00:40:12,279
Speaker 1: the possibility that President Trump might be right about a

799
00:40:12,320 --> 00:40:15,239
Speaker 1: so called middle class tax cut, that if he did

800
00:40:15,239 --> 00:40:17,680
Speaker 1: a tax cut that was more targeted to the lower income,

801
00:40:17,719 --> 00:40:21,279
Speaker 1: it would be more demand generator, I think dollar for dollar, yes, right,

802
00:40:21,320 --> 00:40:24,000
Speaker 1: So if you think about the dollar the dollar amount

803
00:40:24,000 --> 00:40:25,919
Speaker 1: of tax cuts for middle income and if you sort

804
00:40:25,920 --> 00:40:28,200
Speaker 1: of compare that to what t c g A was

805
00:40:28,239 --> 00:40:30,319
Speaker 1: the tax Us and Jobs Act, um, you would have

806
00:40:30,320 --> 00:40:33,120
Speaker 1: seen more demand generation. These are people who are liquid

807
00:40:33,120 --> 00:40:34,799
Speaker 1: and you constrain in a lot of ways, who do

808
00:40:35,040 --> 00:40:37,400
Speaker 1: tend to spend a little more paycheck to paycheck, And

809
00:40:37,400 --> 00:40:39,200
Speaker 1: so I think that does move the needle at least

810
00:40:39,200 --> 00:40:41,040
Speaker 1: in that sense. Well, you know, the President called the

811
00:40:41,080 --> 00:40:44,000
Speaker 1: t c J a middle class tax cut, but as

812
00:40:44,120 --> 00:40:46,040
Speaker 1: was just pointed out, it wasn't so when he calls

813
00:40:46,080 --> 00:40:48,040
Speaker 1: for one, Now, who knows what he actually means air

814
00:40:48,160 --> 00:40:51,840
Speaker 1: point by point? And Tom Starter was talking about wage

815
00:40:51,920 --> 00:40:56,719
Speaker 1: levels being minimum wage being twenty two verses fifteen. Uh,

816
00:40:56,840 --> 00:41:00,359
Speaker 1: does that help your index? I need to know more

817
00:41:00,400 --> 00:41:04,080
Speaker 1: details about Tom Styer's idea and how he's indexing that,

818
00:41:04,280 --> 00:41:06,120
Speaker 1: but I'm going to refrain. But what do you think

819
00:41:06,120 --> 00:41:08,040
Speaker 1: about because you said earlier that part of the reason

820
00:41:08,080 --> 00:41:11,880
Speaker 1: that we're actually seeing over indexing in the lower income

821
00:41:12,000 --> 00:41:14,720
Speaker 1: levels is because of minimum wage laws across the country

822
00:41:14,719 --> 00:41:17,239
Speaker 1: and states. So should we keep going with that? Well,

823
00:41:17,280 --> 00:41:18,920
Speaker 1: you can track it literally, you can go state by

824
00:41:18,920 --> 00:41:21,120
Speaker 1: state and see the states that raise their minimum wage

825
00:41:21,160 --> 00:41:24,000
Speaker 1: people at the bottom are doing better. Um, so we

826
00:41:24,000 --> 00:41:27,160
Speaker 1: should certainly should keep going for a while. At some point,

827
00:41:27,239 --> 00:41:30,520
Speaker 1: there is obviously a trade off between jobs that get lost.

828
00:41:31,080 --> 00:41:33,520
Speaker 1: Alan Crewer, who sadly passed away, did some very seminal

829
00:41:33,560 --> 00:41:36,000
Speaker 1: research in this and concluded that up to some point,

830
00:41:36,080 --> 00:41:38,120
Speaker 1: I don't know that there was a specific point, it

831
00:41:38,160 --> 00:41:40,200
Speaker 1: does create more wages at the lower end, but there

832
00:41:40,280 --> 00:41:42,719
Speaker 1: is a point beyond which people put in machines or

833
00:41:42,760 --> 00:41:45,920
Speaker 1: otherwise move the labor somewhere else. And that has been

834
00:41:45,920 --> 00:41:49,120
Speaker 1: the interesting thing because so far employment is going up

835
00:41:49,200 --> 00:41:51,200
Speaker 1: and wages are going up, so a lot of the

836
00:41:51,239 --> 00:41:54,840
Speaker 1: companies that were screaming about increasing minimum wage have actually

837
00:41:54,880 --> 00:41:57,600
Speaker 1: been employing more people. Well, let's try a different idea,

838
00:41:57,640 --> 00:42:00,320
Speaker 1: because I've heard some people say that minimum wage actually

839
00:42:00,440 --> 00:42:03,080
Speaker 1: attacks on employers, that you're better off with an earned

840
00:42:03,120 --> 00:42:06,960
Speaker 1: income tax credit expansion because that distributes across the entire

841
00:42:07,480 --> 00:42:10,360
Speaker 1: tax being public. Is that a way to generate demand?

842
00:42:11,000 --> 00:42:13,640
Speaker 1: I think both probably have a similar demand effect. And

843
00:42:13,680 --> 00:42:15,520
Speaker 1: do you think there's probably a sort of who eats

844
00:42:15,560 --> 00:42:19,600
Speaker 1: the cost of um sort of higher minimum wage laws

845
00:42:19,760 --> 00:42:21,680
Speaker 1: and to somethings not even the cost that is also

846
00:42:21,719 --> 00:42:23,600
Speaker 1: offset by the fact that if lower and lower income

847
00:42:23,600 --> 00:42:26,279
Speaker 1: people are also spending more restaurants, it starts to create

848
00:42:26,280 --> 00:42:28,799
Speaker 1: more velocity. So I think that's, as sort of Seed

849
00:42:28,880 --> 00:42:31,319
Speaker 1: pointed out, is um. It's not as clear as some

850
00:42:31,360 --> 00:42:33,520
Speaker 1: of the econ one oh one taught us about minimum wage.

851
00:42:33,840 --> 00:42:37,080
Speaker 1: The government always prefers policies that have where the costs

852
00:42:37,120 --> 00:42:39,360
Speaker 1: are hidden and paid by somebody other than in the

853
00:42:39,520 --> 00:42:42,719
Speaker 1: through their own budget, and so I think so politically

854
00:42:42,760 --> 00:42:45,400
Speaker 1: and politically well, look, there's a lot of political support

855
00:42:45,440 --> 00:42:47,480
Speaker 1: for raising the earned income tax credit. I think people

856
00:42:47,520 --> 00:42:49,359
Speaker 1: on both sides of the aisle agree it is one

857
00:42:49,360 --> 00:42:53,960
Speaker 1: of the most effective UH income addressing policies we have.

858
00:42:54,400 --> 00:42:56,560
Speaker 1: But again there's a point at which they rather have

859
00:42:56,840 --> 00:42:59,200
Speaker 1: done through regulations that passed the cost down in the

860
00:42:59,200 --> 00:43:02,160
Speaker 1: private sector. Okay, Scanda Amaron, thanks so much for being here.

861
00:43:02,160 --> 00:43:05,959
Speaker 1: He's director of research and analysis at Employee America. Head

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Speaker 1: to Bloomberg dot com for more exclusive thoughts from our

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Speaker 1: weekly contributors, along with full episodes and the official Bloomberg

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Speaker 1: Wall Street Week podcast. This is Bloomberg Wall Street Week.

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Speaker 1: Welcome back to Wall Street Week. I'm David Weston. It's

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Speaker 1: time now of for some closing thoughts from our contributors.

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Speaker 1: We thought today we talked about green initiatives and maybe

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Speaker 1: some unintended consequences of them. As you mentioned, what about biomass,

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Speaker 1: particularly yes, because we've been hearing about trillion trees getting planted,

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Speaker 1: and I think everyone is very excited about that. The

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Speaker 1: other side of the equation that we haven't been thinking

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Speaker 1: about is the number of trees that get taken out

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Speaker 1: two feed biomass power. And what is interesting about biomass

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Speaker 1: is that it gets bundled together with all other renewables

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Speaker 1: that you know, what we talked about in terms of

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Speaker 1: solar wind and others that are truly renewable. But it

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Speaker 1: involves taking down trees, large trees, of course, and it

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Speaker 1: does take advantage of some other parts of trees. But

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Speaker 1: you're taking our trees that you would have to replant

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Speaker 1: and it will take thirty years, and worse than that,

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Speaker 1: you are putting in a lot of still two into

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Speaker 1: the air. In fact, it can be from a combustion

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Speaker 1: point of view, worse than natural gas a steep. As

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Speaker 1: we know, some of the best intentioned efforts sometimes have

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Speaker 1: unintended consequences. And even the trillion trees, which sounds like

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Speaker 1: a good idea of President Trump talked about it at Davos.

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Speaker 1: I talked to somebody days. So it depends on where

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Speaker 1: you plant them, because if you plant them somewhere that

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Speaker 1: otherwise would have been white, like with snow and ice,

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Speaker 1: it actually increases the temperature the planet, doesn't reduce it.

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Speaker 1: But as an investor, how do you sort out, if

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Speaker 1: you can, what are things that sound good on paper

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Speaker 1: to actually don't do anything good for the environment as

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Speaker 1: opposed to those that actually may make a difference. Well, first,

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Speaker 1: we're an investor, so we don't try to sort that out.

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Speaker 1: We try to figure out how we can earn a

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Speaker 1: high rated return. We have colleagues of Bloomberg philanthropies whose

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Speaker 1: job it is to give away all the money we

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Speaker 1: hopefully make, and they have a hard job of sorting

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Speaker 1: out what can actually make a difference. Look, it's their

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Speaker 1: complicated calculations because you have primary, secondary, tertiary whatever comes

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Speaker 1: after that effects of all these policies that you have

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Speaker 1: to work all the way back and figure out which

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Speaker 1: ones are actually net net reducing the amount of CO

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Speaker 1: two in the atmosphere and which ones aren't. But if

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Speaker 1: something are you seeing out there in the investment client community,

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Speaker 1: an increased desire to really invest in green companies or

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Speaker 1: greener companies, not because it's the right thing to do,

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Speaker 1: because they think in the longer term the returns will

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Speaker 1: be better. I think absolutely people are looking at it

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Speaker 1: as long term value creation and risk mitigation both. So

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Speaker 1: you've seen, particularly insurance companies that are implicitly looking at

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Speaker 1: the at the cost of c O two, not because

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Speaker 1: they believe or don't believe, but they're seeing that it's

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Speaker 1: going to impact their business. You're seeing a lot of

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Speaker 1: you know what we talked about BP looking at it

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Speaker 1: in terms of future business may not be just oil

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Speaker 1: and gas. They do have to diversify to be around.

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Speaker 1: And investors are looking at companies much more carefully in

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Speaker 1: terms of their value chain and how they are looking

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Speaker 1: at the use of energy. So, Steve, are you seeing

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Speaker 1: the investment community, because we have the Larry Thinks of

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Speaker 1: this world really being very bold and saying they're really

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Speaker 1: going to curtail their investments, direct their investments, remonstrate with

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Speaker 1: companies that don't comply with what they want. Is that

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Speaker 1: real or is it something we in the media like

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Speaker 1: to talk about a lot. Let's be frank. I think

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Speaker 1: we have to wait and see. Larry has been even

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Speaker 1: more outspoken this year than it was in previous years,

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Speaker 1: and we'll see what they end up doing. I think

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Speaker 1: you do have to be careful. We we do need

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Speaker 1: other kinds of energy as bridge fuels. We do need

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Speaker 1: companies to achieve high rates of profitability, not just comply

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Speaker 1: with all kinds of E s G sorts of things.

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Speaker 1: I am closer to Milton Friedman than further away from

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Speaker 1: him on the issue of what companies roles and responsibilities

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Speaker 1: are in society. We have the best companies in the world,

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Speaker 1: I believe, in terms of their efficiency, their management quality,

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Speaker 1: their focus, their allocation of capital, and quite frank I

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Speaker 1: would not want to see us become like companies in

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Speaker 1: some other parts of the world in Europe, for example,

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Speaker 1: where they get into all these different agendas and they

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Speaker 1: end up not producing as much value as we want

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Speaker 1: them to. So what's your agenda at Rock Creek? Our

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Speaker 1: agenda is to create value. And I think we are

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Speaker 1: now at the point in time where investment in things

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Speaker 1: related to climate actually will be very high return. I

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Speaker 1: hope you're right, but I haven't been convinced just yet.

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Speaker 1: But for investments, if you have some investments in the area,

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Speaker 1: he's open. He's open, he's open for business, will come visit. Yeah,

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Speaker 1: that's a good idea. Okay. Many thanks now to our

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Speaker 1: contributors of Sunny besche Lass and Steve Branner. This has

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Speaker 1: been another edition of Wall Street Week. See you next week.