1 00:00:00,240 --> 00:00:05,000 Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes. 2 00:00:05,040 --> 00:00:07,400 Speaker 1: The economy is in the process of rebounding. Will the 3 00:00:07,400 --> 00:00:10,479 Speaker 1: Federal Reserve have its own digital currency? The financial stories 4 00:00:10,520 --> 00:00:12,879 Speaker 1: that chief hard work. Many people think the eels are 5 00:00:12,880 --> 00:00:15,080 Speaker 1: just going to keep marching up. We have more spending 6 00:00:15,120 --> 00:00:17,160 Speaker 1: coming out of Congress. One of the big questions I 7 00:00:17,200 --> 00:00:19,880 Speaker 1: think on investor's mind inflations through the eyes of the 8 00:00:19,920 --> 00:00:23,560 Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary, 9 00:00:23,640 --> 00:00:27,240 Speaker 1: Bryan Wynahan back of America, Will sar Ceo, Charlie Sharp, 10 00:00:27,360 --> 00:00:31,560 Speaker 1: Bloomberg wool Street Week with David Weston from Bloomberg Radio. 11 00:00:32,280 --> 00:00:35,760 Speaker 1: The dawn days of Summer meet, a busy newsweek and 12 00:00:35,800 --> 00:00:39,440 Speaker 1: the markets take it all in stride. This is Bloomberg 13 00:00:39,440 --> 00:00:42,280 Speaker 1: Wall Street Week. I'm David Weston, take us through the 14 00:00:42,280 --> 00:00:44,760 Speaker 1: week in the markets. Welcome down, Nancy Davis. She's chief 15 00:00:44,760 --> 00:00:48,120 Speaker 1: investment officer and managing partner at Quadratic Capital Management. And 16 00:00:48,159 --> 00:00:51,640 Speaker 1: Sarah Mallick, chief investment officer for equities at Nouvene. So, Sara, 17 00:00:51,760 --> 00:00:54,959 Speaker 1: let me start with you on the equity side. Despite 18 00:00:55,000 --> 00:00:56,400 Speaker 1: all the news that came out and there was some 19 00:00:56,600 --> 00:00:59,360 Speaker 1: up and down. The equity market just kept going up, 20 00:00:59,400 --> 00:01:02,360 Speaker 1: although not quite as fast as it had. Equity markets 21 00:01:02,360 --> 00:01:05,480 Speaker 1: and bond markets definitely became disconnected this week. This is 22 00:01:05,520 --> 00:01:09,400 Speaker 1: around the great debate around economic data and also inflation. 23 00:01:09,480 --> 00:01:13,280 Speaker 1: We saw a cooler CPI data, hotter PPI data. Our 24 00:01:13,360 --> 00:01:16,319 Speaker 1: view is that the cooler CPI data wins out because 25 00:01:16,360 --> 00:01:19,480 Speaker 1: the factors driving that down are more permanent. Well, the 26 00:01:19,520 --> 00:01:21,959 Speaker 1: PPI data is hotter, but that's around the one time 27 00:01:22,000 --> 00:01:25,080 Speaker 1: reopening other data points we watched this week for the 28 00:01:25,120 --> 00:01:30,039 Speaker 1: infrastructure package billion in new spending that's good for industrials. 29 00:01:30,120 --> 00:01:32,399 Speaker 1: And then of course consumer sentiment coming in at the 30 00:01:32,440 --> 00:01:36,040 Speaker 1: lowest level in a decade. If you look at consumer sentiment, 31 00:01:36,319 --> 00:01:39,039 Speaker 1: it's not always tied to consumer spending. We saw low 32 00:01:39,120 --> 00:01:42,119 Speaker 1: numbers in the fourth quarter of while equity markets still 33 00:01:42,160 --> 00:01:45,840 Speaker 1: produce positive returns, we're watching economic data like the Conference 34 00:01:45,840 --> 00:01:49,560 Speaker 1: Board data, which remains over one standard deviation above its mean. Nancy, 35 00:01:49,640 --> 00:01:51,040 Speaker 1: let's turn to you, because you've made something of a 36 00:01:51,160 --> 00:01:54,360 Speaker 1: name for yourself in investing in and around inflation, really 37 00:01:54,400 --> 00:01:56,200 Speaker 1: knowing how to take this into account as an investor, 38 00:01:56,400 --> 00:01:59,200 Speaker 1: What do you make of those CPI and PPI numbers 39 00:01:59,240 --> 00:02:02,080 Speaker 1: which seem to go a bit in different directions this week. Well, 40 00:02:02,080 --> 00:02:04,160 Speaker 1: I think if you look at the long term trend, 41 00:02:04,200 --> 00:02:08,880 Speaker 1: if we start at say the first quarter of UE, 42 00:02:09,480 --> 00:02:12,280 Speaker 1: you know, the ten year yield was one seventy five, 43 00:02:12,440 --> 00:02:16,280 Speaker 1: and then we've had four CPI prints well above the 44 00:02:16,280 --> 00:02:19,480 Speaker 1: two percent target from the Fed. We had four point 45 00:02:19,520 --> 00:02:23,720 Speaker 1: to first, then five, then to five point four prints, 46 00:02:23,800 --> 00:02:25,840 Speaker 1: and you would kind of scratch your head. And if 47 00:02:25,880 --> 00:02:28,639 Speaker 1: you had a crystal ball at the start of Q 48 00:02:28,880 --> 00:02:31,600 Speaker 1: two and you knew the CPI prints were going to 49 00:02:31,680 --> 00:02:35,240 Speaker 1: come in that much higher than two percent, what would 50 00:02:35,280 --> 00:02:39,040 Speaker 1: most rational people do. You would sell bonds because you 51 00:02:39,040 --> 00:02:42,400 Speaker 1: would think yields would be going higher. But it's opposite 52 00:02:42,480 --> 00:02:45,120 Speaker 1: day in the markets, and yields have done nothing but 53 00:02:45,200 --> 00:02:49,120 Speaker 1: go lower um with all these higher CPI prints. So 54 00:02:49,160 --> 00:02:53,040 Speaker 1: I think there's definitely something screwy going on in the 55 00:02:53,080 --> 00:02:57,160 Speaker 1: markets where nobody believes inflation is actually going to be here, 56 00:02:57,200 --> 00:03:00,360 Speaker 1: because why would you be walking up your capital To 57 00:03:00,639 --> 00:03:03,240 Speaker 1: your point, David, that the ten years under one point 58 00:03:03,240 --> 00:03:06,120 Speaker 1: three percent right now, that doesn't make any sense if 59 00:03:06,160 --> 00:03:10,880 Speaker 1: you actually believe that inflation is coming. But Sarah, you're 60 00:03:10,880 --> 00:03:13,280 Speaker 1: an equities person, not a bond person. But how much 61 00:03:13,320 --> 00:03:15,160 Speaker 1: of the support of the equities markets that we're seeing 62 00:03:15,320 --> 00:03:18,040 Speaker 1: is exactly because what Nancy was talking about, because yields 63 00:03:18,080 --> 00:03:20,400 Speaker 1: actually have been very tame. People were talking about to 64 00:03:20,760 --> 00:03:23,520 Speaker 1: two point oh I'm talking about on the tenure. That's 65 00:03:23,560 --> 00:03:26,840 Speaker 1: definitely very makes equities look more attractive from an equity 66 00:03:26,880 --> 00:03:30,040 Speaker 1: portfolio point of view. We're definitely saying you need to 67 00:03:30,040 --> 00:03:32,680 Speaker 1: become more selective here. First of all, you need to 68 00:03:32,680 --> 00:03:34,800 Speaker 1: look for those companies that have the pricing power to 69 00:03:34,880 --> 00:03:38,520 Speaker 1: overcome these inflationary costs. We're also seeing profit margins at 70 00:03:38,520 --> 00:03:41,840 Speaker 1: about decade highs for companies, so these companies also need 71 00:03:41,880 --> 00:03:44,200 Speaker 1: to be able to raise prices in order to drive 72 00:03:44,240 --> 00:03:47,040 Speaker 1: their margins higher. Areas that we think are attractive are 73 00:03:47,080 --> 00:03:50,120 Speaker 1: actually small caps. They're now training at the largest discount 74 00:03:50,360 --> 00:03:53,640 Speaker 1: to large caps that we've seen since September. They're back 75 00:03:53,640 --> 00:03:56,880 Speaker 1: at valuation levels of January. They tend to do well 76 00:03:56,920 --> 00:04:00,160 Speaker 1: in periods of rising inflation and interest rates, and like 77 00:04:00,240 --> 00:04:04,320 Speaker 1: industrials because as that infrastructure package kicks in, industrials will 78 00:04:04,360 --> 00:04:06,880 Speaker 1: have that cyclical tail when behind them to help them 79 00:04:06,880 --> 00:04:09,800 Speaker 1: grow their businesses and increase their profit margins well and 80 00:04:09,840 --> 00:04:12,280 Speaker 1: it's not just the infrastructure package. We now have the 81 00:04:12,320 --> 00:04:14,080 Speaker 1: Democrats in the senat at least saying we want it 82 00:04:14,080 --> 00:04:17,320 Speaker 1: would like another three point five percent incremental spending in 83 00:04:17,320 --> 00:04:20,040 Speaker 1: that sort of second wave, the build back Better plan, 84 00:04:20,200 --> 00:04:22,800 Speaker 1: as President Biden calls it. So So, Sarah, if in 85 00:04:22,839 --> 00:04:25,360 Speaker 1: fact that comes to pass, and forget the three point five, 86 00:04:25,360 --> 00:04:27,560 Speaker 1: so it's just two or two point five, What does 87 00:04:27,600 --> 00:04:30,120 Speaker 1: that mean potentially for investors? I mean for investors, I 88 00:04:30,120 --> 00:04:33,119 Speaker 1: think it means we have more confidence in economic growth 89 00:04:33,120 --> 00:04:36,440 Speaker 1: going forward. If you look at third year past, the 90 00:04:36,480 --> 00:04:39,599 Speaker 1: recession market turns actually tend to be pretty strong. We 91 00:04:39,600 --> 00:04:42,320 Speaker 1: see high single digit earnings growth next year. That's not 92 00:04:42,360 --> 00:04:45,080 Speaker 1: recessionary levels. It's not where you would be for a 93 00:04:45,120 --> 00:04:49,160 Speaker 1: bear market. We think that drives markets higher rather than evaluations, 94 00:04:49,400 --> 00:04:51,520 Speaker 1: and that's supported by economic growth. Now, we do have 95 00:04:51,560 --> 00:04:53,880 Speaker 1: two headwinds next year. One is how are we going 96 00:04:53,920 --> 00:04:56,640 Speaker 1: to pay for that infrastructure and all that spending. Probably 97 00:04:56,760 --> 00:04:59,719 Speaker 1: higher taxes that's going to negatively impact that earnings growth 98 00:04:59,800 --> 00:05:02,680 Speaker 1: none or And also we need to worry about taper timing. 99 00:05:02,880 --> 00:05:05,320 Speaker 1: The FED has been taking baby steps the words taper timing. 100 00:05:05,560 --> 00:05:08,400 Speaker 1: We think they're watching August payroll data. If that looks 101 00:05:08,440 --> 00:05:10,719 Speaker 1: as high as July data, Um, we think the FED 102 00:05:10,720 --> 00:05:14,320 Speaker 1: could announce tapering in September and start tapering in early two. 103 00:05:14,600 --> 00:05:17,080 Speaker 1: But as long as the yield curve doesn't flatten, we 104 00:05:17,120 --> 00:05:19,920 Speaker 1: think that markets can remain with positive returns even through 105 00:05:19,960 --> 00:05:23,480 Speaker 1: tapering and higher interest rates. So, Nancy, I don't want 106 00:05:23,480 --> 00:05:24,919 Speaker 1: to misquote you, but I think you said the market 107 00:05:24,920 --> 00:05:26,560 Speaker 1: a little bit screwy, I think was the word you 108 00:05:27,160 --> 00:05:29,640 Speaker 1: given what the CPI numbers have been being and what 109 00:05:29,720 --> 00:05:31,800 Speaker 1: the year over year inflation is despite the fact people 110 00:05:31,800 --> 00:05:33,520 Speaker 1: don't think it's gonna come. How much of that do 111 00:05:33,560 --> 00:05:35,840 Speaker 1: you think, maybe because of the delta variant, that people 112 00:05:35,880 --> 00:05:39,760 Speaker 1: are really subdued, And we had really stunning numbers at 113 00:05:39,760 --> 00:05:41,920 Speaker 1: the end of the week on the consumer confidence out 114 00:05:41,920 --> 00:05:43,400 Speaker 1: of the University of Michigan and lowest I think in 115 00:05:43,400 --> 00:05:46,279 Speaker 1: eleven years. How much of that is really constraining? So 116 00:05:46,440 --> 00:05:49,039 Speaker 1: what we otherwise might have with consumer spending, well, I 117 00:05:49,040 --> 00:05:52,200 Speaker 1: think to Sarah's point, um, the yield curve is the 118 00:05:52,240 --> 00:05:56,080 Speaker 1: most important measure to be watching. It's very forward looking, 119 00:05:56,600 --> 00:06:00,800 Speaker 1: and since the feds June FM Cement meeting, we've had 120 00:06:00,839 --> 00:06:04,320 Speaker 1: the largest flattening in the forward yield curve since a 121 00:06:04,400 --> 00:06:08,160 Speaker 1: financial crisis, and that should be ringing, you know, ringing 122 00:06:08,200 --> 00:06:12,680 Speaker 1: the alert for equity and credit investors because corporates are 123 00:06:12,760 --> 00:06:16,680 Speaker 1: priced to perfection. Right, everybody is expecting growth, everybody is 124 00:06:16,720 --> 00:06:19,719 Speaker 1: expecting earnings per share. But what if we actually have 125 00:06:20,200 --> 00:06:24,480 Speaker 1: higher labor costs or shortages of goods and services, or 126 00:06:24,480 --> 00:06:28,760 Speaker 1: shipping delays, all those things. Um, the guild curve is expecting. 127 00:06:29,080 --> 00:06:33,000 Speaker 1: UH has had a massive flattening. And um, that's also 128 00:06:33,040 --> 00:06:37,880 Speaker 1: because the market has priced in the FED hiking rates. Okay, 129 00:06:37,880 --> 00:06:39,360 Speaker 1: thank you so much to both of you that Sara 130 00:06:39,400 --> 00:06:42,840 Speaker 1: Manic of New Vine and Nancy Davis of Quodai Capital Management. 131 00:06:42,880 --> 00:06:44,400 Speaker 1: Great to have you with us on Wall Street Week. 132 00:06:44,800 --> 00:06:48,320 Speaker 1: Coming up, the enigma that is the labor market. Is 133 00:06:48,400 --> 00:06:50,839 Speaker 1: it possible that we are seeing a shift in power 134 00:06:50,920 --> 00:06:54,120 Speaker 1: back towards the labor side of the ledger? We ask 135 00:06:54,200 --> 00:06:57,440 Speaker 1: Steve Rattner of will It Advisors. That's next on Wall 136 00:06:57,440 --> 00:07:07,000 Speaker 1: Street Week on Bloomberg. This is Bloomberg Wall Street Week 137 00:07:07,200 --> 00:07:11,920 Speaker 1: with David Weston from Bloomberg Radio. The pandemic disrupted employment 138 00:07:12,000 --> 00:07:15,559 Speaker 1: around the world, and as the economy recovers, we can't 139 00:07:15,600 --> 00:07:17,800 Speaker 1: assume that we'll go back to working the way we 140 00:07:17,840 --> 00:07:21,200 Speaker 1: did before. We've added millions of jobs since the low point, 141 00:07:21,400 --> 00:07:24,160 Speaker 1: but the unemployment rate in the US is still above 142 00:07:24,240 --> 00:07:28,680 Speaker 1: five and taken as a proportion of the population, employment 143 00:07:28,760 --> 00:07:32,560 Speaker 1: is actually close to a four decade low. Here's Bloomberg 144 00:07:32,600 --> 00:07:36,800 Speaker 1: Opinion columnist Bill Dudley. One hand, the labor supply seems tight. 145 00:07:37,080 --> 00:07:38,760 Speaker 1: On the other hand, when you chip judged by the 146 00:07:38,840 --> 00:07:40,880 Speaker 1: number of jobs were short from where we were in February, 147 00:07:41,640 --> 00:07:44,360 Speaker 1: the rate still seems like a bit of slack in 148 00:07:44,520 --> 00:07:47,320 Speaker 1: US labor marketing. It's a trend that's affecting companies from 149 00:07:47,360 --> 00:07:50,560 Speaker 1: services to Wall Street. A range of firms are raising 150 00:07:50,640 --> 00:07:54,520 Speaker 1: salaries and paying bonuses, while others are offering perks like 151 00:07:54,640 --> 00:07:57,920 Speaker 1: a free Peloton bike or an all expenses paid vacation. 152 00:07:58,440 --> 00:08:00,920 Speaker 1: We're definitely trying to do the bad job to attract 153 00:08:01,000 --> 00:08:04,960 Speaker 1: the widest array of talent possible. Competition is important, and 154 00:08:05,040 --> 00:08:07,119 Speaker 1: we've always, i think, been a leader in that area. 155 00:08:07,520 --> 00:08:11,240 Speaker 1: That's Blackstones John Gray. Inflation and the labor market go 156 00:08:11,440 --> 00:08:15,160 Speaker 1: hand in hand. Higher prices lead workers to ask for raises, 157 00:08:15,520 --> 00:08:19,160 Speaker 1: and as we get back toward full employment, employers may 158 00:08:19,280 --> 00:08:22,480 Speaker 1: have no choice but to pay them here's Larry Summers. 159 00:08:22,880 --> 00:08:28,080 Speaker 1: I think we're not far from full employment. We're within 160 00:08:28,360 --> 00:08:31,120 Speaker 1: nine months or a year, certainly maybe less than that 161 00:08:31,880 --> 00:08:36,720 Speaker 1: of getting uh to full employment. And now the pandemic 162 00:08:36,760 --> 00:08:39,079 Speaker 1: has added a new dimension to the traditional back and 163 00:08:39,240 --> 00:08:42,360 Speaker 1: forth over pay and hours. Now there's the option of 164 00:08:42,440 --> 00:08:46,120 Speaker 1: working from home as well. Bloomberg's John author says it 165 00:08:46,200 --> 00:08:49,079 Speaker 1: wouldn't be the first time that a pandemic strengthened the 166 00:08:49,160 --> 00:08:52,360 Speaker 1: hand of labor at the expense of capital. One of 167 00:08:52,440 --> 00:08:56,480 Speaker 1: the reasonable lessons from history about pandemics, not that we've 168 00:08:56,520 --> 00:08:58,559 Speaker 1: had too many pandemics that exactly like this one, was 169 00:08:58,679 --> 00:09:01,800 Speaker 1: that it does tends to strengthen the hands of labor 170 00:09:02,360 --> 00:09:06,559 Speaker 1: compared to capital. That's Bloomberg's John authors. A University of 171 00:09:06,640 --> 00:09:10,160 Speaker 1: Chicago study suggests that if employers try to make employees 172 00:09:10,280 --> 00:09:12,839 Speaker 1: work from home five days a week, more than a 173 00:09:12,960 --> 00:09:17,920 Speaker 1: third of their workforce may just quit. Here's Barkley's Just Staley. 174 00:09:18,240 --> 00:09:21,040 Speaker 1: You know that physical presence I think is important for people, 175 00:09:21,400 --> 00:09:23,240 Speaker 1: but also the pandemic has taught us that we can 176 00:09:23,280 --> 00:09:26,520 Speaker 1: be quite flexible. Steve Brodner has spent his professional career 177 00:09:26,760 --> 00:09:29,960 Speaker 1: looking at the balance between labor and capital. First as 178 00:09:29,960 --> 00:09:33,199 Speaker 1: a successful banker on Wall Street, then as leading the 179 00:09:33,280 --> 00:09:37,040 Speaker 1: efforts to renegotiate and restructure the auto industry under President Obama, 180 00:09:37,400 --> 00:09:40,079 Speaker 1: and now as chairman and CEO of Will and Advisors, 181 00:09:40,280 --> 00:09:43,520 Speaker 1: which invests the personal and philanthropic assets of Michael Bloomberg, 182 00:09:43,720 --> 00:09:47,680 Speaker 1: the founder and principal shareholder of our parent company. Steve, 183 00:09:47,720 --> 00:09:49,640 Speaker 1: thank you so much for being back on Wall Street week. 184 00:09:49,880 --> 00:09:51,760 Speaker 1: So let me ask you how we can have what 185 00:09:51,880 --> 00:09:53,800 Speaker 1: we have right now in the labor industry. We have 186 00:09:54,120 --> 00:09:56,240 Speaker 1: more than four million new jobs we've created the last 187 00:09:56,280 --> 00:09:59,800 Speaker 1: six months. We have at the same time a record 188 00:10:00,040 --> 00:10:03,560 Speaker 1: were job openings, and yet we have the lowest percentage 189 00:10:03,800 --> 00:10:06,200 Speaker 1: of people actually employed in the of the old war 190 00:10:06,360 --> 00:10:09,480 Speaker 1: population in something like forty years. David, As you said, 191 00:10:09,520 --> 00:10:12,200 Speaker 1: I have been watching this for forty years actually as 192 00:10:12,240 --> 00:10:15,360 Speaker 1: it happens myself, and we've never seen I've never seen 193 00:10:15,440 --> 00:10:17,920 Speaker 1: anything quite like it. I think this will be an 194 00:10:18,000 --> 00:10:20,120 Speaker 1: enormous amount of grisp for the mill of economists to 195 00:10:20,160 --> 00:10:23,240 Speaker 1: study in the years going forward. But essentially, yes, there's 196 00:10:23,280 --> 00:10:25,760 Speaker 1: strong demand for labor. The country at least so far 197 00:10:26,240 --> 00:10:29,080 Speaker 1: has been reopening, in large part thanks to the federal 198 00:10:29,120 --> 00:10:31,760 Speaker 1: government and all the stimulus and yet a large number 199 00:10:31,760 --> 00:10:34,719 Speaker 1: of Americans are reluctant to go back to work for 200 00:10:34,760 --> 00:10:36,640 Speaker 1: a variety of reasons. There's a lot of polling down 201 00:10:36,720 --> 00:10:39,199 Speaker 1: on this. Some of it is our health concerns. Some 202 00:10:39,360 --> 00:10:41,719 Speaker 1: of it is the fact that they've decided simply to 203 00:10:41,800 --> 00:10:44,280 Speaker 1: leave the labor force and retire. Some of it has 204 00:10:44,400 --> 00:10:47,880 Speaker 1: expanded unemployment benefits that actually pay some people more for 205 00:10:48,000 --> 00:10:50,959 Speaker 1: not working than they were getting working. And a lot 206 00:10:51,040 --> 00:10:53,679 Speaker 1: of it, though, is the fact that people's balance sheets, 207 00:10:53,720 --> 00:10:56,679 Speaker 1: the household balance sheets, are in extraordinarily good shape. You 208 00:10:56,800 --> 00:10:59,160 Speaker 1: had an enormous amount of financial support from the federal 209 00:10:59,200 --> 00:11:03,160 Speaker 1: government last year. Total income earned by Americans, including federal 210 00:11:03,240 --> 00:11:06,560 Speaker 1: transfer payments, was actually a trillion dollars above what would 211 00:11:06,600 --> 00:11:09,480 Speaker 1: normally have occurred last year, and households spent about a 212 00:11:09,559 --> 00:11:12,400 Speaker 1: trillion dollars less than they would normally spend last year. 213 00:11:12,880 --> 00:11:15,040 Speaker 1: And so people don't have to go back to work 214 00:11:15,080 --> 00:11:17,240 Speaker 1: because in many case, and I obviously I'm giving you 215 00:11:17,320 --> 00:11:20,360 Speaker 1: broad generalizations. There are plenty of exceptions in both directions, 216 00:11:20,760 --> 00:11:24,640 Speaker 1: but on an aggregate basis, households are in extraordinarily good shape, 217 00:11:24,640 --> 00:11:26,560 Speaker 1: and many people don't have to go back to work, 218 00:11:26,800 --> 00:11:30,079 Speaker 1: and they're choosing not to before this pandemic. I think 219 00:11:30,160 --> 00:11:32,320 Speaker 1: some people might have said, it's sort of a buyer's market. 220 00:11:32,360 --> 00:11:34,920 Speaker 1: If we make the employer the buyer, that basically they 221 00:11:34,960 --> 00:11:38,120 Speaker 1: can largely dictate the term. The bargaining position was really 222 00:11:38,160 --> 00:11:41,040 Speaker 1: stronger for the employer. Is it possible that's shifted because 223 00:11:41,080 --> 00:11:45,199 Speaker 1: the pandemic, Well, as I think it's shifted for the moment, 224 00:11:45,280 --> 00:11:48,120 Speaker 1: I'm not sure it's shifted forever. It shifted for the 225 00:11:48,200 --> 00:11:50,720 Speaker 1: moment for the reasons that I just described that people. 226 00:11:50,880 --> 00:11:54,240 Speaker 1: I think in general, again broad generalizations, people have the 227 00:11:54,280 --> 00:11:56,680 Speaker 1: wherewithal to not go back to work, and so they 228 00:11:56,760 --> 00:11:58,719 Speaker 1: are able, to a greater degree than they have in 229 00:11:58,760 --> 00:12:01,760 Speaker 1: the past, as you suggest, dictate the terms under which 230 00:12:01,800 --> 00:12:03,920 Speaker 1: they're going to go back to work. That should be 231 00:12:04,000 --> 00:12:08,600 Speaker 1: a somewhat transitory effect. People can't can't spend their savings forever. 232 00:12:08,720 --> 00:12:11,400 Speaker 1: At some point, most Americans need to go back to work, 233 00:12:11,440 --> 00:12:13,079 Speaker 1: and they will have to go back to work. But 234 00:12:13,240 --> 00:12:15,199 Speaker 1: in the short run, what's going on, as you well 235 00:12:15,280 --> 00:12:19,320 Speaker 1: know and everybody knows, is that employers are raising pay, 236 00:12:19,760 --> 00:12:21,920 Speaker 1: especially for people at the bottom, which is in many 237 00:12:21,960 --> 00:12:24,240 Speaker 1: ways welcome news to try to get them to come 238 00:12:24,240 --> 00:12:26,880 Speaker 1: back to work, And as you also said, we have 239 00:12:27,040 --> 00:12:29,320 Speaker 1: created a lot of your jobs so slowly but surely 240 00:12:29,679 --> 00:12:31,840 Speaker 1: they are coming back, and I would expect that trend 241 00:12:31,920 --> 00:12:35,880 Speaker 1: to continue over time. It's early going, and you know, 242 00:12:35,960 --> 00:12:37,800 Speaker 1: the danger is better than I have trying to make 243 00:12:37,920 --> 00:12:40,760 Speaker 1: long term projections off of single data points. At the 244 00:12:40,840 --> 00:12:42,920 Speaker 1: same time, what do you think about the work from 245 00:12:43,000 --> 00:12:47,080 Speaker 1: home phenomenon? Has it injected into the negotiation between labor 246 00:12:47,280 --> 00:12:49,319 Speaker 1: and management a new element Where it used to be 247 00:12:49,440 --> 00:12:52,280 Speaker 1: mainly about pay and hours, now we have where we're 248 00:12:52,280 --> 00:12:54,040 Speaker 1: gonna be working from We see a lot of people saying, 249 00:12:54,080 --> 00:12:55,760 Speaker 1: you know what, I'm going to go back, but only 250 00:12:55,800 --> 00:12:58,800 Speaker 1: if I can work from home. There's no question. Again, 251 00:12:58,880 --> 00:13:01,360 Speaker 1: the polling data brings a lot of this out. There's 252 00:13:01,400 --> 00:13:04,040 Speaker 1: no question that the work from home and just a 253 00:13:04,200 --> 00:13:06,680 Speaker 1: lot of things that relate to the pandemic, this extraordinary, 254 00:13:06,720 --> 00:13:09,440 Speaker 1: once in a century event have changed the way people 255 00:13:09,520 --> 00:13:12,079 Speaker 1: think about many of these things. And yes, there's no 256 00:13:12,240 --> 00:13:15,720 Speaker 1: question from the data that people are putting a greater 257 00:13:15,920 --> 00:13:17,760 Speaker 1: value on the ability to work from home. And if 258 00:13:17,800 --> 00:13:20,319 Speaker 1: they're for many of them, if they're choosing between two jobs, 259 00:13:20,480 --> 00:13:22,120 Speaker 1: one of which they're allowed to work from home, one 260 00:13:22,160 --> 00:13:24,480 Speaker 1: of which they're not. They're more likely to choose the 261 00:13:24,559 --> 00:13:26,880 Speaker 1: one in which they can work from home. But that's 262 00:13:26,920 --> 00:13:29,120 Speaker 1: okay for employers too. For many of these people, you 263 00:13:29,200 --> 00:13:31,160 Speaker 1: can work from home. But as I said, I do 264 00:13:31,280 --> 00:13:34,000 Speaker 1: think in the fullness of time, the luxury that people 265 00:13:34,040 --> 00:13:37,360 Speaker 1: have today, which I'm fine with and thrilled by being 266 00:13:37,360 --> 00:13:39,480 Speaker 1: able to make these kinds of choices, will diminish, and 267 00:13:39,559 --> 00:13:41,680 Speaker 1: people are going to be in a position where they're 268 00:13:41,679 --> 00:13:43,439 Speaker 1: going to need to work, and the jobs will be 269 00:13:43,520 --> 00:13:45,520 Speaker 1: what the jobs are. Some of them can be done remotely, 270 00:13:45,600 --> 00:13:47,960 Speaker 1: but many of them can. Steve, let's inject one other 271 00:13:48,040 --> 00:13:50,320 Speaker 1: element into this that you know well, and that's organized labor. 272 00:13:50,400 --> 00:13:53,400 Speaker 1: Certainly you dealt with that when you restructure the auto industry. 273 00:13:53,920 --> 00:13:56,760 Speaker 1: President Biden and his administration have made a priority of 274 00:13:56,960 --> 00:14:00,520 Speaker 1: really advancing the cause for organized labor, which had happened 275 00:14:00,520 --> 00:14:02,600 Speaker 1: would reverse something that's been going on for some time. 276 00:14:02,640 --> 00:14:04,679 Speaker 1: We're done to just over ten I think of the 277 00:14:04,760 --> 00:14:08,280 Speaker 1: private workforce that's organized right now under a union. Is 278 00:14:08,360 --> 00:14:10,960 Speaker 1: it possible for the by administration to turn that around? 279 00:14:11,320 --> 00:14:13,840 Speaker 1: I think they can make some difference. There's no question 280 00:14:14,000 --> 00:14:17,040 Speaker 1: that the balance of power has had shifted over the 281 00:14:17,120 --> 00:14:20,840 Speaker 1: last forty years away from organized labor and two employers, 282 00:14:21,720 --> 00:14:25,880 Speaker 1: labor share of of of profits and the economy had 283 00:14:25,960 --> 00:14:28,880 Speaker 1: dropped to a relatively low level. Corporate profits have been 284 00:14:28,880 --> 00:14:33,160 Speaker 1: incredibly strong a real way just had not done particularly well. 285 00:14:33,560 --> 00:14:36,160 Speaker 1: And so yes, it is it is both necessary and 286 00:14:36,280 --> 00:14:39,200 Speaker 1: possible to begin to shift that around that. Steve Rutner 287 00:14:39,280 --> 00:14:42,960 Speaker 1: from will It Advisers. Coming up, Disney comes roaring back 288 00:14:43,040 --> 00:14:46,040 Speaker 1: from COVID. But was it old fashioned theme parks or 289 00:14:46,200 --> 00:14:48,560 Speaker 1: was it the high tech streaming? We talked with media 290 00:14:48,600 --> 00:14:51,640 Speaker 1: executive and entrepreneur Michael Wolfe of Activating That's coming up 291 00:14:51,680 --> 00:15:07,520 Speaker 1: next on Wall Street Week on Bloomberg. This is Bloomberg 292 00:15:07,600 --> 00:15:11,840 Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. Streaming 293 00:15:11,880 --> 00:15:15,040 Speaker 1: giants like Netflix and Disney were among the few winners 294 00:15:15,200 --> 00:15:18,240 Speaker 1: during the pandemic as lockdowns forced people to stay home. 295 00:15:18,680 --> 00:15:21,840 Speaker 1: But Netflix earnings last month raised some questions, some initial 296 00:15:21,880 --> 00:15:23,880 Speaker 1: questions at least about whether it was just a blip 297 00:15:24,200 --> 00:15:27,040 Speaker 1: or a long term trend. This week, Disney show that 298 00:15:27,200 --> 00:15:29,960 Speaker 1: it could keep the momentum going with better than expected 299 00:15:30,000 --> 00:15:33,920 Speaker 1: subscriber growth for its Disney Plus streaming service. Michael Wolfe 300 00:15:34,080 --> 00:15:37,080 Speaker 1: has served as president of and CEO of MTV, on 301 00:15:37,160 --> 00:15:39,320 Speaker 1: the board of Yahoo, and is the co founder and 302 00:15:39,440 --> 00:15:42,760 Speaker 1: CEO of Activate, which advises tech and media companies. Michael, 303 00:15:42,800 --> 00:15:45,080 Speaker 1: great to have you, the guru of media and tech. 304 00:15:45,520 --> 00:15:47,760 Speaker 1: So first of all, it's start with Disney and a 305 00:15:47,840 --> 00:15:51,160 Speaker 1: basic question at this point as an investor, do you 306 00:15:51,360 --> 00:15:53,640 Speaker 1: invest in Disney as a tech sack or a media 307 00:15:53,680 --> 00:15:55,680 Speaker 1: sack because, as you and I both know, the multiples 308 00:15:55,760 --> 00:15:58,680 Speaker 1: quite different. Yeah. I mean when when you think about 309 00:15:58,720 --> 00:16:02,680 Speaker 1: when investors are cited about they're starting to look at, yes, 310 00:16:02,760 --> 00:16:07,440 Speaker 1: the hundred and sixteen million in total subscribers globally, which 311 00:16:07,520 --> 00:16:11,440 Speaker 1: compares to Netflix at two millions, So they're getting they're 312 00:16:11,480 --> 00:16:15,080 Speaker 1: getting up there. If you look historically Disney with trading 313 00:16:15,160 --> 00:16:20,000 Speaker 1: in the same neighborhood as Netflix and and Amazon really 314 00:16:20,080 --> 00:16:24,040 Speaker 1: in the fifties. Um. Going forward, Um, it looks like 315 00:16:24,120 --> 00:16:27,680 Speaker 1: they're trading and around thirty seven if UM, and and 316 00:16:27,800 --> 00:16:31,240 Speaker 1: someone that just has questions about their ability to execute 317 00:16:31,640 --> 00:16:35,240 Speaker 1: with Bob jay Pick in place, who Bob is incredibly 318 00:16:35,320 --> 00:16:39,160 Speaker 1: exquisited execution. Um, there's a lot of upside in the 319 00:16:39,200 --> 00:16:40,840 Speaker 1: stock if they were to hit the same kind of 320 00:16:40,960 --> 00:16:45,480 Speaker 1: multiples as Netflix and Amazon. You're talking between thirty the 321 00:16:45,600 --> 00:16:49,200 Speaker 1: fifty pers and increase in shareholder value for this company. 322 00:16:49,760 --> 00:16:52,480 Speaker 1: But Michael reason my question mind the question of there's 323 00:16:52,480 --> 00:16:54,840 Speaker 1: a lot to the Disney beyond streaming. They have the 324 00:16:54,920 --> 00:16:56,640 Speaker 1: theme parks, they have the cruise ships, they have a 325 00:16:56,680 --> 00:16:59,640 Speaker 1: television network. After all, they said that is that ballast 326 00:16:59,760 --> 00:17:01,640 Speaker 1: at the sort of rights the ship if it might 327 00:17:01,680 --> 00:17:03,880 Speaker 1: go off, or does it limit their upside because when 328 00:17:03,880 --> 00:17:06,159 Speaker 1: you talk about Netflix, for example, they have pretty much 329 00:17:06,160 --> 00:17:09,560 Speaker 1: all their eggs in one basket, which is the tech basket. Right, 330 00:17:10,080 --> 00:17:13,720 Speaker 1: Disney has a great deal more to play with and 331 00:17:14,200 --> 00:17:16,440 Speaker 1: and and a great deal more to underwrite their risk 332 00:17:16,560 --> 00:17:21,000 Speaker 1: from streaming. The fact is that the parks are back delta, 333 00:17:21,160 --> 00:17:24,720 Speaker 1: no doubt delta. We should see a stunning recovery from 334 00:17:24,880 --> 00:17:27,880 Speaker 1: in the parks, a lot of other places, and their 335 00:17:27,920 --> 00:17:31,439 Speaker 1: business are doing well. But let's remember, compared to Netflix, 336 00:17:31,800 --> 00:17:35,800 Speaker 1: they have licensing and merchandizing this, they have the theme parks, 337 00:17:36,200 --> 00:17:39,399 Speaker 1: they can create other shows, they can create other networks, 338 00:17:39,880 --> 00:17:44,040 Speaker 1: so they're fundamentally in a better position than Netflix in 339 00:17:44,080 --> 00:17:46,440 Speaker 1: a lot of ways. You're similar to Amazon, which is 340 00:17:46,640 --> 00:17:50,520 Speaker 1: streaming is the only part of the picture, and and 341 00:17:50,840 --> 00:17:53,960 Speaker 1: the revenue mix. So we've been talking about Netflix and 342 00:17:54,080 --> 00:17:56,720 Speaker 1: Amazon and Disney. There so other players out there, right, 343 00:17:57,200 --> 00:18:00,920 Speaker 1: We have people like a Comcast for example, we have 344 00:18:01,040 --> 00:18:04,480 Speaker 1: BA CBS. We had other players discovering Goodness Notes, which 345 00:18:04,480 --> 00:18:06,600 Speaker 1: is going through a big transaction. So what is the 346 00:18:06,720 --> 00:18:09,760 Speaker 1: future of the business overall? What sort of consolidation wanted 347 00:18:09,800 --> 00:18:11,720 Speaker 1: me to see? After all, I think Disney got there 348 00:18:11,760 --> 00:18:13,960 Speaker 1: in park Is Baby really bellied up to the bar 349 00:18:14,200 --> 00:18:17,360 Speaker 1: and bought all those assets from Fox. Well, he bought 350 00:18:17,400 --> 00:18:20,600 Speaker 1: the assets from Fox, but he also barred Lucasfilm with 351 00:18:20,720 --> 00:18:24,960 Speaker 1: Star Wars. He bought Marvel with um the entire Marvel 352 00:18:25,040 --> 00:18:28,600 Speaker 1: cinematic universe. And so you see what we're gonna see 353 00:18:28,640 --> 00:18:34,000 Speaker 1: as it continued in consolidation frenzy among the major media companies. 354 00:18:34,480 --> 00:18:38,040 Speaker 1: If you look over time, what what's happened is every 355 00:18:38,119 --> 00:18:42,359 Speaker 1: new wave of technology has driven um changes in the 356 00:18:42,480 --> 00:18:45,960 Speaker 1: composition of this industry, but it's actually increased revenue in 357 00:18:46,040 --> 00:18:49,560 Speaker 1: the industry. So, um, you some of the things that 358 00:18:49,640 --> 00:18:52,280 Speaker 1: are driving it is the growth of streaming, but it's 359 00:18:52,280 --> 00:18:55,560 Speaker 1: also some others. One is the decline in in cable, 360 00:18:56,000 --> 00:19:00,840 Speaker 1: and cable has been the driver of revenue growth and profitability, 361 00:19:00,880 --> 00:19:05,720 Speaker 1: and all these companies, increased rise of connected TV. Within 362 00:19:05,800 --> 00:19:08,520 Speaker 1: a couple of years, practically every American home will have 363 00:19:08,640 --> 00:19:11,720 Speaker 1: a connected TV, whether it's a Roku or it's a 364 00:19:11,880 --> 00:19:16,000 Speaker 1: video and UM. But also it's this need to compete 365 00:19:16,040 --> 00:19:20,359 Speaker 1: against Amazon and Google and Facebook and Apple, and so 366 00:19:20,560 --> 00:19:23,920 Speaker 1: we're gonna see a lot more consolidation. Each of these 367 00:19:24,000 --> 00:19:26,080 Speaker 1: companies one way the other is going to have their 368 00:19:26,119 --> 00:19:30,159 Speaker 1: own streaming services. I'm very upbeat about what does Warner 369 00:19:30,240 --> 00:19:32,959 Speaker 1: Discovery will be able to do. I believe that between 370 00:19:33,040 --> 00:19:36,440 Speaker 1: Discovery Plus and HBO Max they will also get to 371 00:19:36,520 --> 00:19:41,400 Speaker 1: two million UM subscribers will worldwide. So so, Michael, much 372 00:19:41,440 --> 00:19:43,320 Speaker 1: are all the consolidation thus far, I would say is 373 00:19:43,359 --> 00:19:46,240 Speaker 1: within sort of the media space. What about even outside 374 00:19:46,240 --> 00:19:49,360 Speaker 1: of that space? People say maybe Apple should buy CBS 375 00:19:49,480 --> 00:19:51,480 Speaker 1: or by Comcast or something. Do you expect it to 376 00:19:51,560 --> 00:19:53,880 Speaker 1: go beyond just the four corners of the media world 377 00:19:53,920 --> 00:19:57,760 Speaker 1: as they consolidate in the streaming world? Um. Yes, the 378 00:19:58,240 --> 00:20:01,480 Speaker 1: first of all week the Amazon's eight billion dollar acquisition 379 00:20:01,600 --> 00:20:05,359 Speaker 1: of MGM, and once approved, it is Apple practice to 380 00:20:05,960 --> 00:20:10,400 Speaker 1: a massive library historically of shows and also the ability 381 00:20:10,440 --> 00:20:14,160 Speaker 1: to produce going forward. But I expect that every one 382 00:20:14,240 --> 00:20:17,200 Speaker 1: of the technology companies will one way or the other 383 00:20:17,800 --> 00:20:23,320 Speaker 1: find themselves into production, either television or films. And the 384 00:20:23,480 --> 00:20:24,920 Speaker 1: results of that is they're not going to be able 385 00:20:24,960 --> 00:20:28,800 Speaker 1: to build these services just on a new production. They're 386 00:20:28,800 --> 00:20:31,840 Speaker 1: going to build a lot of it on on libraries. Uh. 387 00:20:31,960 --> 00:20:34,320 Speaker 1: And if you also look at the amount of money 388 00:20:34,440 --> 00:20:38,000 Speaker 1: that each of these companies are spending, Apple TV Plus 389 00:20:38,119 --> 00:20:41,600 Speaker 1: is costing billions of dollars a year um. It isn't 390 00:20:41,680 --> 00:20:46,600 Speaker 1: It is really a part of the entire Apple ecosystem 391 00:20:46,640 --> 00:20:49,520 Speaker 1: and support so many of the things. So we will 392 00:20:49,640 --> 00:20:52,880 Speaker 1: see mergers between these companies. Thank you so much. It's 393 00:20:52,880 --> 00:20:55,120 Speaker 1: great to have you with us. As Michael Well of Activist. 394 00:20:55,520 --> 00:20:57,720 Speaker 1: Coming up, we wrap up the week with our special 395 00:20:57,760 --> 00:21:01,600 Speaker 1: contributor Larry Summers of Harvard. That's next on Wall Street 396 00:21:01,640 --> 00:21:11,040 Speaker 1: Week on Bloomberg. This is Bloomberg Wall Street Week with 397 00:21:11,200 --> 00:21:14,320 Speaker 1: David Weston from Bloomberg Radio. As we come to the 398 00:21:14,440 --> 00:21:16,320 Speaker 1: end of the week, we've turned to our special contributor, 399 00:21:16,320 --> 00:21:18,200 Speaker 1: to Larry Summers, to really bring out some of the 400 00:21:18,240 --> 00:21:20,720 Speaker 1: most important things of the week. Larry, Welcome, it's great 401 00:21:20,720 --> 00:21:22,560 Speaker 1: to have you back. I'm gonna actually start with last 402 00:21:22,600 --> 00:21:24,320 Speaker 1: week if I may, because when you are on Wall 403 00:21:24,359 --> 00:21:25,879 Speaker 1: Street Week you said something of the FED that a 404 00:21:25,960 --> 00:21:29,040 Speaker 1: lot of people reacted to. They ask questions why that is? 405 00:21:29,240 --> 00:21:32,159 Speaker 1: You said, in their bond buying program, there are, perversely, 406 00:21:32,240 --> 00:21:34,320 Speaker 1: i think was the word you use, actually shifting us 407 00:21:34,359 --> 00:21:36,800 Speaker 1: towards shorter term funding structure when we should be going 408 00:21:36,880 --> 00:21:39,560 Speaker 1: to longer term funding structure. Could you connect those two 409 00:21:39,600 --> 00:21:42,280 Speaker 1: things up for us? First idea, the FED is a 410 00:21:43,080 --> 00:21:47,280 Speaker 1: creature of the Treasury. The Treasury owns UH. The FED 411 00:21:47,720 --> 00:21:50,920 Speaker 1: like the subsidiary of a company in a financial sense. 412 00:21:51,680 --> 00:21:54,520 Speaker 1: What does the FED do? And it does quantitative easy. 413 00:21:55,160 --> 00:21:59,440 Speaker 1: It puts out money which carries a short term floating 414 00:22:00,320 --> 00:22:05,120 Speaker 1: interest rate as bank reserves, and it buys up long 415 00:22:05,240 --> 00:22:09,480 Speaker 1: term bonds and so in effect, the government now has 416 00:22:10,040 --> 00:22:14,320 Speaker 1: a floating rate short term liability outstanding rather than a 417 00:22:14,440 --> 00:22:19,200 Speaker 1: long term UH fixed interest rate UH liability. Since the 418 00:22:19,600 --> 00:22:22,720 Speaker 1: FED is owned by the Treasury, at a moment of 419 00:22:23,200 --> 00:22:27,520 Speaker 1: super uncertainty, at a moment when many people think rates 420 00:22:27,560 --> 00:22:33,920 Speaker 1: are remarkably low, a decision to fund more short seems 421 00:22:34,320 --> 00:22:39,000 Speaker 1: UH bizarre. And that's just one of the reasons why 422 00:22:39,160 --> 00:22:43,480 Speaker 1: I think as as quickly as we prudinently can without 423 00:22:43,560 --> 00:22:47,160 Speaker 1: destabilizing things, we should be bringing HUE to an end. 424 00:22:47,840 --> 00:22:49,520 Speaker 1: At the same time, this week we found out that 425 00:22:49,640 --> 00:22:51,159 Speaker 1: the government, at least part of the government, would like 426 00:22:51,240 --> 00:22:53,040 Speaker 1: to borrow more money as we had that three point 427 00:22:53,160 --> 00:22:56,920 Speaker 1: five trillion dollar budget resolution passed the Senate now headed 428 00:22:57,000 --> 00:22:59,480 Speaker 1: over to the House. As Congress looks at this, because 429 00:22:59,520 --> 00:23:01,200 Speaker 1: it's there's a lot of steps to take before it 430 00:23:01,240 --> 00:23:03,920 Speaker 1: actually gets made into law, what should they be thinking about? 431 00:23:03,920 --> 00:23:07,200 Speaker 1: What's your Congress we concerned about? In terms of macroeconomic policy. Look, 432 00:23:07,840 --> 00:23:12,520 Speaker 1: the broad message of bionomics of build back better, that 433 00:23:12,840 --> 00:23:17,080 Speaker 1: investment deficits are just as serious or more serious than 434 00:23:17,160 --> 00:23:20,840 Speaker 1: financial deficits and we have to address them, is right. 435 00:23:21,840 --> 00:23:25,920 Speaker 1: But as we do it, we need to one pay 436 00:23:26,080 --> 00:23:31,879 Speaker 1: for all the investments that we make with genuine revenue increases, 437 00:23:32,800 --> 00:23:38,520 Speaker 1: to be very careful about locking in future liabilities that 438 00:23:38,640 --> 00:23:42,560 Speaker 1: we don't pay for by, for example, funding very popular 439 00:23:42,680 --> 00:23:48,639 Speaker 1: tax credits for just a few years, And three making 440 00:23:48,720 --> 00:23:53,000 Speaker 1: sure that what we call investments really are investments that 441 00:23:53,200 --> 00:23:56,760 Speaker 1: augment the supply capacity of the economy. If we do 442 00:23:56,920 --> 00:24:00,480 Speaker 1: those three things, this can be a contributor to non 443 00:24:00,560 --> 00:24:04,760 Speaker 1: inflationary growth and rising standards of living for years to come. 444 00:24:05,359 --> 00:24:08,040 Speaker 1: But if we don't. There's a real risk that it's 445 00:24:08,080 --> 00:24:12,880 Speaker 1: going to fuel and inflationary psychology and actually bring forward 446 00:24:13,400 --> 00:24:17,400 Speaker 1: UH the date of the next bout of financial instability 447 00:24:17,600 --> 00:24:20,679 Speaker 1: or recession. So you have talked to me about inflation 448 00:24:20,760 --> 00:24:24,080 Speaker 1: of fair amount. The Bidom instation reportedly took some steps 449 00:24:24,119 --> 00:24:26,080 Speaker 1: maybe to keep down at least the price of gas 450 00:24:26,280 --> 00:24:29,040 Speaker 1: at the pump this week. Ironically, when they're trying to 451 00:24:29,080 --> 00:24:31,520 Speaker 1: cut back in the greenhouse gas emissions, they ask OPEC 452 00:24:31,720 --> 00:24:35,119 Speaker 1: plus to increase to increase its production. What did you 453 00:24:35,160 --> 00:24:37,000 Speaker 1: make of that as a matter of policy. Look, I 454 00:24:37,080 --> 00:24:41,480 Speaker 1: don't really hear the malady quite right on some of this, 455 00:24:42,560 --> 00:24:51,720 Speaker 1: with buy American, with raising UH tariffs, with various regulatory policies, 456 00:24:52,520 --> 00:24:56,880 Speaker 1: the with so called worker based trade policies. The goal 457 00:24:56,960 --> 00:25:00,240 Speaker 1: of the Biden administration sometimes seems like it's to aise 458 00:25:00,320 --> 00:25:03,960 Speaker 1: the price to consumers of most things, to help workers 459 00:25:04,320 --> 00:25:08,400 Speaker 1: and to help businesses, and then to reduce the price 460 00:25:08,520 --> 00:25:12,520 Speaker 1: of gasoline. Since we've seen this week that energy consumption 461 00:25:12,680 --> 00:25:16,000 Speaker 1: is the most toxic form of consumption that households engage in, 462 00:25:16,880 --> 00:25:20,240 Speaker 1: I think it's highly problematic to be trying to bring 463 00:25:20,320 --> 00:25:23,919 Speaker 1: its price down while trying to bring every other price up. 464 00:25:24,520 --> 00:25:27,720 Speaker 1: I think there's no more important price to increase in 465 00:25:27,800 --> 00:25:33,880 Speaker 1: the American economy than the price of carbon based UH fuels, 466 00:25:34,320 --> 00:25:39,560 Speaker 1: and so this is a perverse UH kind of UH 467 00:25:40,160 --> 00:25:42,960 Speaker 1: step of from my point of view, I'd much rather 468 00:25:43,040 --> 00:25:46,800 Speaker 1: see us do it in other ways than by helping 469 00:25:47,480 --> 00:25:51,800 Speaker 1: uh OPEQ. But in general, the right direction for guest 470 00:25:51,880 --> 00:25:55,360 Speaker 1: prices is up, and the right direction for most other 471 00:25:55,480 --> 00:25:59,880 Speaker 1: prices is down. At a time of inflation, and policy 472 00:26:00,359 --> 00:26:02,760 Speaker 1: seems to me in important respects to be pushing in 473 00:26:02,840 --> 00:26:05,960 Speaker 1: the opposite direction. You mentioned vaccines. Let's go there. Because 474 00:26:05,960 --> 00:26:08,680 Speaker 1: you're part of a very important group, the Aspen Economic 475 00:26:08,720 --> 00:26:10,640 Speaker 1: Strategy Group. They came up with a statement this week 476 00:26:10,880 --> 00:26:13,439 Speaker 1: really calling on the US to take a leadership position 477 00:26:13,600 --> 00:26:16,840 Speaker 1: on vaccination. Tell us about that, David. We're spending or 478 00:26:16,880 --> 00:26:22,200 Speaker 1: proposing to spend three and a half trillion dollars on 479 00:26:22,720 --> 00:26:27,760 Speaker 1: investing in the country's future. I cannot understand why we 480 00:26:27,840 --> 00:26:32,040 Speaker 1: would not spend one percent of that at least on 481 00:26:32,280 --> 00:26:37,800 Speaker 1: protecting the country's future with a forward defense investment in 482 00:26:38,720 --> 00:26:44,280 Speaker 1: vaccinating the world. It protects against evolution that could be 483 00:26:44,480 --> 00:26:47,800 Speaker 1: very damaging to US as we get variants beyond the 484 00:26:47,880 --> 00:26:51,560 Speaker 1: delta virus. It would be a huge source of American 485 00:26:51,720 --> 00:26:55,760 Speaker 1: prestige and influence. Let's face at, our vaccines work much 486 00:26:55,800 --> 00:27:02,679 Speaker 1: better than the Chinese vaccines. We're constantly talking about shoring 487 00:27:02,760 --> 00:27:07,200 Speaker 1: up our alliances and concrete ways. There's no way more 488 00:27:07,359 --> 00:27:13,680 Speaker 1: concrete for more countries UH than this, And it showcases 489 00:27:14,200 --> 00:27:20,359 Speaker 1: what has been a huge success of American private sector 490 00:27:20,440 --> 00:27:25,679 Speaker 1: public sector UH collaboration. So on the model of when 491 00:27:25,760 --> 00:27:28,080 Speaker 1: we sent a man to the Moon, on the model 492 00:27:28,160 --> 00:27:31,560 Speaker 1: of the Marshal Plan, on the model of and I 493 00:27:31,720 --> 00:27:35,919 Speaker 1: wasn't usually a supporter of his the Bush Administration's UH 494 00:27:36,359 --> 00:27:41,120 Speaker 1: pepfar initiative that people in Africa are still so grateful 495 00:27:41,200 --> 00:27:44,320 Speaker 1: for fifteen years later because of what it meant for 496 00:27:44,400 --> 00:27:49,520 Speaker 1: the worldwide fight against AIDS. This is an area where 497 00:27:49,560 --> 00:27:52,000 Speaker 1: we need to be leading from the front. So Larry, 498 00:27:52,040 --> 00:27:54,960 Speaker 1: I'm really curious because you've really led at very high 499 00:27:55,080 --> 00:27:57,720 Speaker 1: levels in the US government, including his Treasury secretary. You 500 00:27:57,880 --> 00:28:00,480 Speaker 1: have seen the intersection in politics on the inside and 501 00:28:00,600 --> 00:28:02,280 Speaker 1: policy on there, and there's a themes from what you 502 00:28:02,359 --> 00:28:05,680 Speaker 1: said today. I think, for example, in the pressure for 503 00:28:05,920 --> 00:28:08,800 Speaker 1: lower gasoline prices at the pump, that's a political matter. 504 00:28:08,880 --> 00:28:11,879 Speaker 1: I suspect fundamentally at the same time leading around the 505 00:28:11,920 --> 00:28:15,560 Speaker 1: world on vaccines that doesn't rest necessarily so well at home. 506 00:28:15,800 --> 00:28:19,000 Speaker 1: How do you try to broker that deal between politics 507 00:28:19,080 --> 00:28:22,720 Speaker 1: on one hand, you can't ignore in Washington and good policy. Look, 508 00:28:22,840 --> 00:28:26,520 Speaker 1: I think there's no one, with all his years as 509 00:28:26,720 --> 00:28:30,160 Speaker 1: chairman of the Senate Foreign Relations Committee as Vice President 510 00:28:30,880 --> 00:28:36,240 Speaker 1: who's got more experience in striking those balances UH than 511 00:28:36,760 --> 00:28:41,480 Speaker 1: H Joe Biden. And I was always mindful when I 512 00:28:41,640 --> 00:28:45,760 Speaker 1: served in UH government and if I was anything, and 513 00:28:46,120 --> 00:28:50,280 Speaker 1: I was, I perhaps had some expertise. I certainly wasn't 514 00:28:50,600 --> 00:28:55,680 Speaker 1: a politician or someone who anyone had ever elected to office. 515 00:28:55,760 --> 00:28:59,000 Speaker 1: So I think one needs to respect the fact that 516 00:28:59,120 --> 00:29:03,920 Speaker 1: in a democrat see, policies should UH follow the will 517 00:29:04,000 --> 00:29:07,000 Speaker 1: of the people. And so I think it's right that 518 00:29:07,240 --> 00:29:12,760 Speaker 1: these decisions are made UH politically. And I'm always offended 519 00:29:12,920 --> 00:29:17,400 Speaker 1: when people somehow suggests that authoritarian governments will do it 520 00:29:17,560 --> 00:29:22,000 Speaker 1: better because they can follow the advice of technocrats. But 521 00:29:22,160 --> 00:29:26,360 Speaker 1: I think sometimes and this is something that constitution very 522 00:29:26,480 --> 00:29:33,600 Speaker 1: much UH recognized, you need to lead UH the people 523 00:29:34,320 --> 00:29:40,200 Speaker 1: rather than UH follow the people. And that's what we 524 00:29:40,360 --> 00:29:46,360 Speaker 1: did with UH the Martial Plan. And we're gonna need 525 00:29:46,920 --> 00:29:50,560 Speaker 1: uh some of that. I believe with respect to what 526 00:29:50,800 --> 00:29:55,600 Speaker 1: I think are the most important global security challenges, climate 527 00:29:55,760 --> 00:30:02,560 Speaker 1: change and uh pandemic uh disease. And my reading of 528 00:30:03,080 --> 00:30:09,480 Speaker 1: American history is that the American people respond to leadership 529 00:30:10,280 --> 00:30:13,920 Speaker 1: when it comes. It's so terribly helpful. Thank you. Larry 530 00:30:13,920 --> 00:30:16,080 Speaker 1: Summer is our special contributor here at Wall Street weeken 531 00:30:16,160 --> 00:30:21,880 Speaker 1: of course of Harvard University. Thank you. Finally, one more thought, cryptocurrency, 532 00:30:22,320 --> 00:30:26,280 Speaker 1: meet Hay Street. The Gospel of Matthew warns that there's 533 00:30:26,440 --> 00:30:29,920 Speaker 1: risk when you try to pour new wine into old bottles, 534 00:30:30,000 --> 00:30:33,160 Speaker 1: and this week in Washington, we saw once again why 535 00:30:34,280 --> 00:30:37,560 Speaker 1: the new wine, this time came in the form of cryptocurrency, 536 00:30:37,920 --> 00:30:41,000 Speaker 1: that new fangled thing. We aren't quite sure what it is. 537 00:30:41,320 --> 00:30:43,560 Speaker 1: Is it a form of money, Is that a commodity? 538 00:30:43,720 --> 00:30:46,200 Speaker 1: Is an investment or is it just a way to speculate? Well, 539 00:30:46,240 --> 00:30:48,680 Speaker 1: whatever it is, a lot of people. Are you gonna 540 00:30:48,760 --> 00:30:51,080 Speaker 1: get it and trade it? And yes, you better believe 541 00:30:51,200 --> 00:30:53,840 Speaker 1: make money off of it. And if you make money, 542 00:30:54,040 --> 00:30:57,120 Speaker 1: you have to pay taxes, right, And that's where the 543 00:30:57,280 --> 00:31:00,360 Speaker 1: old part comes in. When the Senate needed to find 544 00:31:00,400 --> 00:31:02,720 Speaker 1: a way to pay for some of that Infrastructure Bill. 545 00:31:03,160 --> 00:31:08,000 Speaker 1: It sees on requiring brokers to report transactions and cryptocurrencies 546 00:31:08,160 --> 00:31:10,280 Speaker 1: so the I r S can make sure people pay 547 00:31:10,360 --> 00:31:14,480 Speaker 1: the taxes that they owe. But the cryptocurrency industry said 548 00:31:14,640 --> 00:31:17,520 Speaker 1: they were going way too far, and so they did 549 00:31:17,600 --> 00:31:20,760 Speaker 1: what industries have done since the middle of the nineteenth century. 550 00:31:21,200 --> 00:31:25,400 Speaker 1: They allobbied that time arnored tradition named for the lobby 551 00:31:25,480 --> 00:31:28,440 Speaker 1: of the Willard Hotel on Pennsylvania Avenue, where all the 552 00:31:28,560 --> 00:31:31,440 Speaker 1: real work got done way back in the Grant administration, 553 00:31:32,000 --> 00:31:34,840 Speaker 1: and through their efforts, they got a bipartisan group of 554 00:31:34,920 --> 00:31:37,560 Speaker 1: senators to come up with new language that the buying 555 00:31:37,560 --> 00:31:42,280 Speaker 1: administration could support. Problem solved right, Well, not so fast. 556 00:31:42,800 --> 00:31:44,360 Speaker 1: It turns out that they are cane. Rules of the 557 00:31:44,440 --> 00:31:47,320 Speaker 1: Senate give any single senator the right to stop the 558 00:31:47,360 --> 00:31:51,120 Speaker 1: proposed changes, and Republican Senator Richard Shelby did just that, 559 00:31:51,800 --> 00:31:55,440 Speaker 1: and he did it repeatedly, leaving the tougher language in 560 00:31:55,520 --> 00:31:58,880 Speaker 1: the bill that actually passed. But don't just spare these 561 00:31:58,960 --> 00:32:02,400 Speaker 1: blockchain upstar It's are a pretty resourceful bunch, and maybe 562 00:32:02,560 --> 00:32:06,719 Speaker 1: you can teach new dogs old tricks. Heck, maybe all 563 00:32:06,800 --> 00:32:08,600 Speaker 1: it takes is for them to figure out how to 564 00:32:08,680 --> 00:32:13,200 Speaker 1: get all those political packs to take bitcoin. That does it. 565 00:32:13,320 --> 00:32:15,480 Speaker 1: For this episode of Wall Street Week. I'm David Weston. 566 00:32:15,560 --> 00:32:17,520 Speaker 1: This is Bloomberg. See you next week.