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 cheap hard work. Many people think the eels are 5 00:00:12,880 --> 00:00:15,080 Speaker 1: just going to keep marching 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 minds inflation through the eyes of the 8 00:00:19,880 --> 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 a backup America Will Saro 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 00:00:32,520 --> 00:00:36,280 Speaker 1: Geopolitics to the forefront, even as the economy stays hot. 12 00:00:36,600 --> 00:00:39,760 Speaker 1: This is Bloomberg Wall Street Week. I'm David Weston. It 13 00:00:39,840 --> 00:00:42,040 Speaker 1: was a week when we woke up every morning and 14 00:00:42,080 --> 00:00:45,440 Speaker 1: looked to see whether Europe was still intact with concerns 15 00:00:45,440 --> 00:00:49,120 Speaker 1: about a possible Russian invasion of Ukraine, despite President Putin's 16 00:00:49,159 --> 00:00:51,720 Speaker 1: protests to the contrary, even as he said he was 17 00:00:51,800 --> 00:00:54,760 Speaker 1: running out of patients and appearing with the German Chancellor 18 00:00:54,840 --> 00:00:58,280 Speaker 1: Schultz suggesting bombing might be necessary to stop what he 19 00:00:58,360 --> 00:01:01,880 Speaker 1: called a genocide. We should allow me to add that 20 00:01:01,960 --> 00:01:04,440 Speaker 1: in our assessments, what is happening now in the don 21 00:01:04,520 --> 00:01:09,480 Speaker 1: Bass constitutes genocide. But while we were all focused on Ukraine, 22 00:01:09,640 --> 00:01:12,399 Speaker 1: we had more indications of just how hot the U 23 00:01:12,440 --> 00:01:15,720 Speaker 1: s economy really is, with retail sales nombers for January 24 00:01:15,760 --> 00:01:21,679 Speaker 1: surprisingly high retail sales, a strong advance in January, a 25 00:01:21,760 --> 00:01:25,040 Speaker 1: big rebound from what we saw in the month of December, 26 00:01:25,440 --> 00:01:28,880 Speaker 1: and corporate earnings continue to pour in with mixed results 27 00:01:29,080 --> 00:01:32,679 Speaker 1: from paramount CEO Bob Bakish falling short of expectations because 28 00:01:32,720 --> 00:01:37,000 Speaker 1: of his streaming investments. We would have peak streaming losses 29 00:01:37,520 --> 00:01:42,400 Speaker 1: UH in terms of investment in UH, and then they 30 00:01:42,440 --> 00:01:45,160 Speaker 1: would improve from there, which would return the company to 31 00:01:45,240 --> 00:01:48,720 Speaker 1: total earnings growth in twenty four and beyond. But in 32 00:01:48,800 --> 00:01:51,880 Speaker 1: the end, the geopolitics and continued concern about the Fed 33 00:01:51,960 --> 00:01:54,600 Speaker 1: one out over any positive news of the week, as 34 00:01:54,640 --> 00:01:57,080 Speaker 1: the Spire was down for a second week in a row, 35 00:01:57,120 --> 00:01:59,440 Speaker 1: this time by one point six putting it off by 36 00:01:59,520 --> 00:02:02,360 Speaker 1: nine said for the year. Today, the NAZAC fell by 37 00:02:02,400 --> 00:02:05,120 Speaker 1: one point seven six percent on the week, while bonds 38 00:02:05,200 --> 00:02:08,160 Speaker 1: fluctuated but ended up not far from where they started 39 00:02:08,280 --> 00:02:10,600 Speaker 1: with the yield in the tenure continue to hover just 40 00:02:10,800 --> 00:02:14,840 Speaker 1: over one and oil actually was down despite all the 41 00:02:14,880 --> 00:02:17,840 Speaker 1: anxiety over Ukraine, ending up at about ninety three dollars 42 00:02:17,840 --> 00:02:20,600 Speaker 1: of barrel for Brent. To put this all in perspective. 43 00:02:20,639 --> 00:02:23,239 Speaker 1: We welcome now Katherine Keating, she's CEO of b N 44 00:02:23,360 --> 00:02:27,360 Speaker 1: y Melon Wealth Management and Joanne Feeny Advisers Capital Management 45 00:02:27,400 --> 00:02:30,120 Speaker 1: portfolio Manager. Thank you both for being your welcome back 46 00:02:30,120 --> 00:02:31,760 Speaker 1: to walstere Week. Joe, and let me start with you 47 00:02:31,800 --> 00:02:34,120 Speaker 1: on this geopolitics. As you talked to your clients, how 48 00:02:34,160 --> 00:02:38,040 Speaker 1: concerned are they about this? What do you tell them? Well, 49 00:02:38,040 --> 00:02:41,080 Speaker 1: you know, in the last week, I've actually feeled a 50 00:02:41,160 --> 00:02:43,480 Speaker 1: number of calls with clients and some of them ask, 51 00:02:43,560 --> 00:02:45,959 Speaker 1: you know, why aren't more people talking a bit about 52 00:02:45,960 --> 00:02:49,240 Speaker 1: this on the investment front. So they're clearly concerned about 53 00:02:49,320 --> 00:02:52,120 Speaker 1: the you know, tensions in Ukraine, what we seem to 54 00:02:52,120 --> 00:02:55,360 Speaker 1: be escalating um in addition to the concerns we've been 55 00:02:55,360 --> 00:02:57,640 Speaker 1: talking about for months like inflation and interest rates and 56 00:02:57,720 --> 00:03:00,680 Speaker 1: slowing economic growth. So you know, they want to know 57 00:03:00,919 --> 00:03:03,079 Speaker 1: if they need to do anything different in their portfolios. 58 00:03:03,120 --> 00:03:05,359 Speaker 1: Do we need to change things for them um or 59 00:03:05,400 --> 00:03:08,480 Speaker 1: are they well positioned, and the answer that comes down to, really, 60 00:03:08,600 --> 00:03:11,680 Speaker 1: you know, what's their time frame. We've seen the world 61 00:03:11,720 --> 00:03:16,680 Speaker 1: confront pandemics, wars, recessions, the stock markets suffers for a 62 00:03:16,680 --> 00:03:20,000 Speaker 1: while but eventually recovers. So the time horizon for the 63 00:03:20,040 --> 00:03:23,680 Speaker 1: investor really matters here as well. There risk tolerance for 64 00:03:23,760 --> 00:03:26,639 Speaker 1: suffering through the volatility. So there are solutions out there, 65 00:03:26,880 --> 00:03:31,160 Speaker 1: and the solution really depends on the the individual investor. Yeah, 66 00:03:31,200 --> 00:03:32,960 Speaker 1: I agree with that, Joanne. And in fact, when we 67 00:03:33,000 --> 00:03:36,120 Speaker 1: think about geopolitical events, believe it or not, they tend 68 00:03:36,160 --> 00:03:39,160 Speaker 1: to have very short lived impact on the markets. What 69 00:03:39,360 --> 00:03:42,680 Speaker 1: really matters is the larger ecosystem in which they're happening. 70 00:03:42,680 --> 00:03:45,720 Speaker 1: So if we think about nine eleven terrible, terrible tragedy, 71 00:03:46,320 --> 00:03:49,000 Speaker 1: markets closed for four days. When they reopened the following week, 72 00:03:49,040 --> 00:03:51,680 Speaker 1: you had a very significant sell off, but within two 73 00:03:51,720 --> 00:03:55,400 Speaker 1: months that had actually been recovered. What was more important 74 00:03:55,560 --> 00:03:58,040 Speaker 1: was the was the ecosystem that that happened, and we 75 00:03:58,040 --> 00:04:02,080 Speaker 1: were already in a bear market on the tech bubble bursting, 76 00:04:02,440 --> 00:04:04,840 Speaker 1: and that market continued for a couple of years. I 77 00:04:04,880 --> 00:04:07,400 Speaker 1: think the other thing that is important when you're thinking 78 00:04:07,440 --> 00:04:11,360 Speaker 1: about war is um you know, worst take time right, 79 00:04:11,480 --> 00:04:13,320 Speaker 1: We've we've learned that as a country, they take time, 80 00:04:13,520 --> 00:04:17,640 Speaker 1: they can really impact your fiscal budget for a very 81 00:04:17,640 --> 00:04:20,160 Speaker 1: long time. Well. Part of the ecosystem, though, Catherine, order 82 00:04:20,279 --> 00:04:23,600 Speaker 1: is just volatility. We already had volative because the uncertainty 83 00:04:23,600 --> 00:04:25,960 Speaker 1: about the FED triggered by the inflation of the factors. 84 00:04:26,160 --> 00:04:29,840 Speaker 1: So putting more volatility into that more uncertainty, what does 85 00:04:29,839 --> 00:04:31,640 Speaker 1: that do to you as an investor? How do you 86 00:04:31,720 --> 00:04:34,320 Speaker 1: how do you deal with that kind of volatility going forward? Catherine, 87 00:04:34,440 --> 00:04:36,880 Speaker 1: so Joanne said it right, time horizon matters, and for 88 00:04:37,000 --> 00:04:39,640 Speaker 1: most investors, their time horizon is actually quite long. They're 89 00:04:39,640 --> 00:04:42,640 Speaker 1: saving for their retirement or maybe even their children and grandchildren, 90 00:04:42,920 --> 00:04:45,679 Speaker 1: and so you can withstand volatility if your time horizon 91 00:04:45,760 --> 00:04:48,359 Speaker 1: is long. The other thing I would say about volatility is, 92 00:04:48,640 --> 00:04:51,320 Speaker 1: you know, when we come out of a recession at 93 00:04:51,320 --> 00:04:53,839 Speaker 1: a bear market, as we did over the last two years, 94 00:04:54,240 --> 00:04:58,320 Speaker 1: those early months and years, everything goes in the same direction, 95 00:04:58,360 --> 00:05:00,760 Speaker 1: it goes up. You don't have the nor more volatility, 96 00:05:00,800 --> 00:05:03,080 Speaker 1: and we haven't. But in fact, when you look at 97 00:05:03,080 --> 00:05:07,280 Speaker 1: the s MP five hundred, the average intra year correction 98 00:05:07,400 --> 00:05:10,800 Speaker 1: over time is and yet seventy percent of the time 99 00:05:10,800 --> 00:05:12,479 Speaker 1: the market ends up by the end of the year. 100 00:05:13,120 --> 00:05:15,599 Speaker 1: This is normal volatility. It just may not feel that 101 00:05:15,640 --> 00:05:18,960 Speaker 1: way right now. Joanne entering Chasm just talked about a 102 00:05:18,960 --> 00:05:21,160 Speaker 1: bear market. Is it possible we are entering into a 103 00:05:21,200 --> 00:05:23,039 Speaker 1: bear market right now? Well, in some areas of the 104 00:05:23,040 --> 00:05:25,719 Speaker 1: stock market, we're already in a bear market, alright. Look 105 00:05:25,760 --> 00:05:28,320 Speaker 1: at info tech, look at other areas of growth, some 106 00:05:28,400 --> 00:05:31,680 Speaker 1: areas of consumer discretionary communication services. A lot of these 107 00:05:31,720 --> 00:05:34,080 Speaker 1: stocks have come down, you know, well more than ten 108 00:05:34,120 --> 00:05:37,359 Speaker 1: percent um and there multiples have come down accordingly. And 109 00:05:37,400 --> 00:05:40,560 Speaker 1: that started before really the UK intentions really heated up, 110 00:05:40,560 --> 00:05:43,000 Speaker 1: and it was primarily triggered by the FED signaling that 111 00:05:43,040 --> 00:05:45,320 Speaker 1: they were going to be raising rates and when rates 112 00:05:45,400 --> 00:05:48,600 Speaker 1: actually rose. But you know, back to Catherine's point on 113 00:05:48,600 --> 00:05:52,080 Speaker 1: on the environment in which this higher risk has now arrived. 114 00:05:52,520 --> 00:05:54,480 Speaker 1: We we are the U S economy and the global 115 00:05:54,480 --> 00:05:56,640 Speaker 1: economy still in the midst of a recovery from the 116 00:05:56,680 --> 00:05:59,880 Speaker 1: worst of the pandemic. So we have a backdrop of 117 00:06:00,080 --> 00:06:05,520 Speaker 1: production increasing, whether it's in industrials, consumer products, housing market, right, 118 00:06:05,560 --> 00:06:08,120 Speaker 1: and these are all trends that are likely to continue 119 00:06:08,520 --> 00:06:11,839 Speaker 1: despite what is happening in the Ukraine, because you know, 120 00:06:12,000 --> 00:06:14,840 Speaker 1: there's more and more production coming online cars for example, 121 00:06:14,839 --> 00:06:17,760 Speaker 1: it's really been held back and that should ease in 122 00:06:17,800 --> 00:06:20,919 Speaker 1: the back half of the year, for example, as semiconductor production. 123 00:06:21,320 --> 00:06:23,839 Speaker 1: A new factories come online starting in the middle of 124 00:06:23,880 --> 00:06:27,680 Speaker 1: this year. So the economic environment is actually fairly positive. 125 00:06:28,000 --> 00:06:31,560 Speaker 1: We worry, though, right about the Ukraine situation and how 126 00:06:31,600 --> 00:06:33,839 Speaker 1: the sanctions that may end up being triggered if this 127 00:06:33,920 --> 00:06:38,080 Speaker 1: really goes forward, will affect particularly the European economy. Thank 128 00:06:38,120 --> 00:06:40,039 Speaker 1: you so much, Katherine Keating and Joe A. Fini. They're 129 00:06:40,040 --> 00:06:41,640 Speaker 1: gonna be staying with us as we turned to the 130 00:06:41,680 --> 00:06:43,919 Speaker 1: question of what we should expect from the rest of 131 00:06:43,960 --> 00:06:46,160 Speaker 1: the year. That's gonna be up next on Wall Street 132 00:06:46,160 --> 00:06:58,680 Speaker 1: Week on Bloomberg. This is Bloomberg Wall Street Week with 133 00:06:58,800 --> 00:07:03,240 Speaker 1: David weston draw Bloomberg Radio. We are back with Joe 134 00:07:03,240 --> 00:07:06,400 Speaker 1: and Feeni of Advisor's Capital Management and Katherine Keating of 135 00:07:06,440 --> 00:07:09,200 Speaker 1: bny Melon Wealth Management. So Canton, when we come to you, 136 00:07:09,560 --> 00:07:11,640 Speaker 1: we add this discussion, good discussion. I was going to 137 00:07:11,680 --> 00:07:12,800 Speaker 1: ask you about the rest of the year where the 138 00:07:12,840 --> 00:07:16,320 Speaker 1: sp forget that, what about inflation, because that's what everyone's 139 00:07:16,360 --> 00:07:18,760 Speaker 1: talking about. Where do you see inflation now and where's 140 00:07:18,760 --> 00:07:20,200 Speaker 1: it going the rest of the year. Do you think 141 00:07:20,600 --> 00:07:22,640 Speaker 1: it is the most important question? Actually, and it's the 142 00:07:22,640 --> 00:07:24,600 Speaker 1: first one on everybody's minds. And I think to really 143 00:07:24,680 --> 00:07:27,560 Speaker 1: understand that, we have to step back and reflect for 144 00:07:27,600 --> 00:07:29,720 Speaker 1: a moment on what we've been through. As I said, 145 00:07:29,760 --> 00:07:32,240 Speaker 1: we were in a healthy business cycle that got interrupted 146 00:07:32,240 --> 00:07:35,560 Speaker 1: by a health recession, not a normal recession, a health recession. 147 00:07:35,880 --> 00:07:38,160 Speaker 1: People were getting sick from this terrible virus that made 148 00:07:38,200 --> 00:07:41,240 Speaker 1: the economy sick. And then we got an unusual kind 149 00:07:41,240 --> 00:07:44,760 Speaker 1: of medicine. Right, we got this six trillion dollars in 150 00:07:44,760 --> 00:07:49,040 Speaker 1: fiscal stimulus in this country, which really changed some things 151 00:07:49,240 --> 00:07:51,640 Speaker 1: in the recession. The first thing it changed is incomes 152 00:07:51,640 --> 00:07:55,200 Speaker 1: didn't go down. That's very unusual. Incomes didn't go down, 153 00:07:55,520 --> 00:07:58,840 Speaker 1: Spending didn't go down. That's very unusual. Normally in a pandemic, 154 00:07:58,880 --> 00:08:02,280 Speaker 1: we tighten our belts. It happened was people kept spending, 155 00:08:02,280 --> 00:08:05,200 Speaker 1: but they shifted their spending two goods. Right. We weren't 156 00:08:05,200 --> 00:08:07,880 Speaker 1: buying services, we weren't going on vacation, but we were 157 00:08:07,920 --> 00:08:10,160 Speaker 1: buying goods. All the things we needed to work at home. 158 00:08:10,240 --> 00:08:13,960 Speaker 1: The UM laptops and computers and monitors and all of 159 00:08:14,000 --> 00:08:17,080 Speaker 1: those things. UM and and all the things we needed 160 00:08:17,080 --> 00:08:19,040 Speaker 1: to do life everything in our lives at home, and 161 00:08:19,040 --> 00:08:21,160 Speaker 1: we're we're I think we're starting to get past some 162 00:08:21,240 --> 00:08:23,600 Speaker 1: of that. We see some of the um. You know, 163 00:08:24,000 --> 00:08:26,320 Speaker 1: it's sort of economics one oh one, right, you have 164 00:08:26,400 --> 00:08:28,640 Speaker 1: all of this demand for goods and you don't have 165 00:08:28,680 --> 00:08:31,080 Speaker 1: the supply to get them. We see that starting to 166 00:08:31,120 --> 00:08:33,280 Speaker 1: correct a little bit. The fourth quarter was really a 167 00:08:33,320 --> 00:08:36,720 Speaker 1: story about restocking inventories, and so I think the question 168 00:08:36,760 --> 00:08:41,400 Speaker 1: about inflation is does the torrid pace of consumers buying 169 00:08:41,559 --> 00:08:44,640 Speaker 1: goods start to come off of its peak and do 170 00:08:44,720 --> 00:08:48,520 Speaker 1: we see more normal behavior which is shifting two services? 171 00:08:50,360 --> 00:08:53,760 Speaker 1: Joe and aswer that question. Sure, that's exactly right. I'll 172 00:08:53,840 --> 00:08:56,079 Speaker 1: put on my economists at here for a second. But 173 00:08:56,280 --> 00:08:59,880 Speaker 1: uh yeah, when you have this demand so high, it's 174 00:09:00,000 --> 00:09:02,240 Speaker 1: apply not able to catch up, and interest rates not 175 00:09:02,440 --> 00:09:06,160 Speaker 1: rising for various reasons, the only place the pressure valve 176 00:09:06,240 --> 00:09:09,600 Speaker 1: can you know, can be turned is on the inflation front. 177 00:09:09,920 --> 00:09:12,200 Speaker 1: And we should, towards the middle of this year start 178 00:09:12,280 --> 00:09:15,840 Speaker 1: to lack some of the biggest price increases. So with 179 00:09:16,000 --> 00:09:20,079 Speaker 1: fiscal spending less um than last year, uh, and with 180 00:09:20,200 --> 00:09:23,040 Speaker 1: a shift back over to services spending, we're already seeing 181 00:09:23,040 --> 00:09:26,400 Speaker 1: that in the mobility data. More travel, more hotel bookings, 182 00:09:26,520 --> 00:09:29,400 Speaker 1: more Airbnb bookings coming. That should take a lot of 183 00:09:29,400 --> 00:09:32,800 Speaker 1: the pressure off inflation, uh is, particularly in the beginning 184 00:09:32,800 --> 00:09:35,080 Speaker 1: of the year. Plus more supplies I mentioned before, more 185 00:09:35,160 --> 00:09:37,720 Speaker 1: chips from the semiconductor companies mean more cars can be 186 00:09:37,760 --> 00:09:41,120 Speaker 1: produced and everything else. Um. You know, on the other hand, 187 00:09:41,120 --> 00:09:42,880 Speaker 1: that we have to worry a little bit about the 188 00:09:42,960 --> 00:09:46,840 Speaker 1: labor situation because the pandemic did trigger an awful lot 189 00:09:46,880 --> 00:09:50,000 Speaker 1: of people to just leave the workforce, particularly the baby 190 00:09:50,000 --> 00:09:52,760 Speaker 1: boomer generation, and they're not likely to come back. So 191 00:09:52,800 --> 00:09:54,920 Speaker 1: we have a shortage of labor. We're going to have 192 00:09:55,000 --> 00:09:57,640 Speaker 1: higher wages. That's going to continue to keep the upward 193 00:09:57,640 --> 00:10:00,800 Speaker 1: pressure on prices. But with the FEDS actions, with more 194 00:10:00,840 --> 00:10:03,400 Speaker 1: supply coming on, with the shift over to services spending, 195 00:10:04,040 --> 00:10:06,640 Speaker 1: you know, it's likely that the torrid pace of inflation 196 00:10:06,679 --> 00:10:09,200 Speaker 1: does ease a little bit through the course of this year, 197 00:10:09,720 --> 00:10:12,480 Speaker 1: but it's going to take some time. Probably inflation gets 198 00:10:12,480 --> 00:10:16,680 Speaker 1: worse as the housing price increases start to filter into 199 00:10:16,720 --> 00:10:20,120 Speaker 1: the measured inflation numbers UM, as they've begun to do. 200 00:10:20,160 --> 00:10:22,000 Speaker 1: It's probably gonna get a little bit worse before it 201 00:10:22,040 --> 00:10:25,360 Speaker 1: actually gets better. Yeah, we would agree with that. And 202 00:10:25,360 --> 00:10:27,600 Speaker 1: you know, the thing about goods inflation is that it 203 00:10:28,200 --> 00:10:31,160 Speaker 1: tends not to be very high. Right, there's so much competition, 204 00:10:31,280 --> 00:10:34,520 Speaker 1: so many brands out there competing for consumer dollars. Uh. 205 00:10:34,640 --> 00:10:36,920 Speaker 1: Sticky inflation is what we really worry about. So we 206 00:10:37,000 --> 00:10:40,880 Speaker 1: worry about um, you know, rents and wages in particular. 207 00:10:40,880 --> 00:10:42,960 Speaker 1: And if you asked us about the one thing we're 208 00:10:42,960 --> 00:10:46,120 Speaker 1: most focused on, it is that increase in labor costs 209 00:10:46,120 --> 00:10:48,480 Speaker 1: because it's running at about four percent a year right now. 210 00:10:48,920 --> 00:10:51,839 Speaker 1: And what we need is for the FED to do 211 00:10:51,920 --> 00:10:54,319 Speaker 1: what it will do, which is raizor rates a bit. 212 00:10:54,720 --> 00:10:56,920 Speaker 1: We need employers to do what they want to do, 213 00:10:57,120 --> 00:11:01,000 Speaker 1: which is manage their costs and grow their prof fits um. 214 00:11:01,040 --> 00:11:03,600 Speaker 1: And we need employees to come back to the workforce. 215 00:11:03,679 --> 00:11:05,959 Speaker 1: And there are things that we're missing, right. We didn't 216 00:11:05,960 --> 00:11:08,960 Speaker 1: have the normal mobility and immigration over the last couple 217 00:11:09,000 --> 00:11:11,280 Speaker 1: of years, which is which is very important. We didn't 218 00:11:11,280 --> 00:11:13,440 Speaker 1: have mobility of people be able to move from one 219 00:11:13,440 --> 00:11:16,000 Speaker 1: place to another to take a job. UM. I think 220 00:11:16,040 --> 00:11:19,200 Speaker 1: the flexibility that a lot of businesses are adopting are 221 00:11:19,200 --> 00:11:22,839 Speaker 1: going to invite will invite people back to the workforce. UM. 222 00:11:22,880 --> 00:11:26,200 Speaker 1: And we need productivity, which actually we've been living a 223 00:11:26,240 --> 00:11:29,520 Speaker 1: productivity boom. That's how you recover corporate earnings and recover 224 00:11:29,840 --> 00:11:32,720 Speaker 1: all the GDP that was lost without with fewer workers. 225 00:11:32,720 --> 00:11:34,920 Speaker 1: We still have three million fewer workers. Joy. And you 226 00:11:34,960 --> 00:11:38,240 Speaker 1: talk about pressure on prices, what about pressure on portfolio managers? 227 00:11:38,480 --> 00:11:40,360 Speaker 1: Because in a world where you've got to or three 228 00:11:40,360 --> 00:11:42,960 Speaker 1: present inflation, a five percent return every year on your 229 00:11:42,960 --> 00:11:45,480 Speaker 1: portfolio looks pretty good. In a world of seven present inflation, 230 00:11:45,600 --> 00:11:48,040 Speaker 1: it doesn't look so good. Do you have investors basically saying, 231 00:11:48,120 --> 00:11:51,360 Speaker 1: wait a second, how can I keep up with this inflation? Yeah? 232 00:11:51,360 --> 00:11:53,840 Speaker 1: That's obviously more of a problem for those heavily exposed 233 00:11:53,880 --> 00:11:56,480 Speaker 1: to fixed income, right, and that's where there's gonna be 234 00:11:56,480 --> 00:11:59,040 Speaker 1: a real challenge in keeping up. But you know, when 235 00:11:59,040 --> 00:12:02,560 Speaker 1: you think about inflation and stock prices, you recognize that 236 00:12:02,640 --> 00:12:06,800 Speaker 1: the source of inflation is coming from companies raising prices. 237 00:12:07,240 --> 00:12:09,480 Speaker 1: They raise prices, that means their revenue goes up, that 238 00:12:09,480 --> 00:12:13,360 Speaker 1: means their earnings go up, and you know, commensurately, stock 239 00:12:13,400 --> 00:12:15,400 Speaker 1: prices tend to follow that. So there's a lot of 240 00:12:15,400 --> 00:12:19,520 Speaker 1: protection in stock prices for inflation. Plus you can always 241 00:12:19,559 --> 00:12:22,920 Speaker 1: direct your portfolio more towards the sort of companies that 242 00:12:22,960 --> 00:12:25,960 Speaker 1: do better when inflation and instrates are higher. That could 243 00:12:26,000 --> 00:12:27,959 Speaker 1: be banks, that could be real estate companies, that could 244 00:12:27,960 --> 00:12:30,880 Speaker 1: be energy companies. So there are ways to build protection 245 00:12:30,960 --> 00:12:33,080 Speaker 1: and we've been doing that for clients for for actually 246 00:12:33,160 --> 00:12:35,120 Speaker 1: quite a while now. So which stocks do you like 247 00:12:35,280 --> 00:12:39,040 Speaker 1: right now? Well, it depends on the sort of clients. 248 00:12:39,080 --> 00:12:41,480 Speaker 1: So for the sort of more conservative client, we're looking 249 00:12:41,520 --> 00:12:44,360 Speaker 1: for stocks that will deliver some dividend yield, for example, 250 00:12:44,720 --> 00:12:47,880 Speaker 1: but it also can appreciate. So in the tech world, 251 00:12:47,920 --> 00:12:51,679 Speaker 1: a company like Qualcom or Cisco for a safer play 252 00:12:51,679 --> 00:12:53,840 Speaker 1: of Philip Morris that has a very high dividend yield. 253 00:12:53,840 --> 00:12:56,360 Speaker 1: Than in the energy world, we like Chevron, we like 254 00:12:56,480 --> 00:12:59,040 Speaker 1: Kinder Morgan. You know, the energy demand is going to 255 00:12:59,120 --> 00:13:03,800 Speaker 1: continue to be strong because we do think the recovery continues. Plus, 256 00:13:03,840 --> 00:13:05,559 Speaker 1: by the way, that adds a little bit of insurance 257 00:13:05,920 --> 00:13:09,960 Speaker 1: against this uh, this Ukraine Russia situation. So Catherine, take 258 00:13:10,000 --> 00:13:11,200 Speaker 1: a look at the rest of the year. As you 259 00:13:11,240 --> 00:13:13,240 Speaker 1: look out, we can't know for sure what do you 260 00:13:13,240 --> 00:13:16,040 Speaker 1: anticipate And for the rest of it's been a rough 261 00:13:16,080 --> 00:13:17,720 Speaker 1: start to the year. I think it's fair to say 262 00:13:17,880 --> 00:13:21,640 Speaker 1: I think I would say that we anticipated coming back 263 00:13:21,679 --> 00:13:23,880 Speaker 1: to a new normal. And what do I mean by that. 264 00:13:24,360 --> 00:13:27,120 Speaker 1: I mean that we will still have economic growth, but 265 00:13:27,160 --> 00:13:29,520 Speaker 1: it will be lower than it was right maybe four 266 00:13:29,600 --> 00:13:32,920 Speaker 1: percent this year in the US, we continue to think 267 00:13:32,960 --> 00:13:35,800 Speaker 1: that stocks can do well, but it will be lower 268 00:13:35,840 --> 00:13:38,040 Speaker 1: than they were doing the last three years, actually when 269 00:13:38,040 --> 00:13:41,840 Speaker 1: the SMP five almost doubled. Um. We think that we 270 00:13:41,880 --> 00:13:44,640 Speaker 1: will have inflation, but we think we will transition to 271 00:13:44,720 --> 00:13:48,559 Speaker 1: a lower inflation rate. And in fact, the end point 272 00:13:48,559 --> 00:13:51,000 Speaker 1: of inflation really matters because if you if you have 273 00:13:51,040 --> 00:13:54,400 Speaker 1: inflation between three and four percent, you know over time 274 00:13:54,720 --> 00:13:56,959 Speaker 1: markets can do very well. That's what That's what it's 275 00:13:57,000 --> 00:13:59,720 Speaker 1: been for most of our careers. So the endpoint for 276 00:13:59,800 --> 00:14:02,679 Speaker 1: an lation really matters. Thank you so very much to 277 00:14:02,840 --> 00:14:05,640 Speaker 1: Katherine Keating of CEO of b n y Moan Wealth 278 00:14:05,679 --> 00:14:09,120 Speaker 1: Management and Joanne Pheenie and she's portfolio manager at Adviser's 279 00:14:09,320 --> 00:14:11,520 Speaker 1: Capital Management. Thank you so much for being with Wall 280 00:14:11,559 --> 00:14:18,439 Speaker 1: Street Week today. Coming up, retail sales are back up, 281 00:14:18,840 --> 00:14:21,360 Speaker 1: but how long will it last? And what's the next 282 00:14:21,440 --> 00:14:25,720 Speaker 1: new thing in retail? We ask retail guru Mickey Drexler. 283 00:14:26,560 --> 00:14:31,640 Speaker 1: I think so is the enemy of any retail. This 284 00:14:31,760 --> 00:14:36,920 Speaker 1: is Wall Street Week on Bloomberg. This is Bloomberg Wall 285 00:14:36,960 --> 00:14:42,520 Speaker 1: Street Week with David Weston from Bloomberg Radio. Everything seems 286 00:14:42,520 --> 00:14:46,200 Speaker 1: like it's going up. I still worry about prices increasing, 287 00:14:46,520 --> 00:14:49,280 Speaker 1: consumers spending. When it comes to the U. S. Economy, 288 00:14:49,320 --> 00:14:51,760 Speaker 1: it's one of the main indicators of how we're doing. 289 00:14:52,160 --> 00:14:54,760 Speaker 1: So after retail sales trailed off at the end of 290 00:14:54,840 --> 00:14:58,000 Speaker 1: last year, we breathed a collective sigh of relief when 291 00:14:58,040 --> 00:15:02,320 Speaker 1: they bounced back strongly up three point five percent in January, 292 00:15:02,360 --> 00:15:05,200 Speaker 1: although some of that was really from inflation an a 293 00:15:05,200 --> 00:15:08,120 Speaker 1: phenomenal basis. I say that very deliberately, of course, because 294 00:15:08,120 --> 00:15:11,360 Speaker 1: we saw also inflation spike in the month of January, 295 00:15:11,400 --> 00:15:14,800 Speaker 1: so we're not used to seeing these inflation and additional 296 00:15:14,880 --> 00:15:18,560 Speaker 1: juiced sales in retail sales. And the rest of two 297 00:15:18,640 --> 00:15:21,840 Speaker 1: maybe a challenging one for retailers as money from that 298 00:15:22,040 --> 00:15:27,400 Speaker 1: child tax credit expires. We are concerned that the expiration 299 00:15:27,400 --> 00:15:30,160 Speaker 1: of the child tax credit leaves millions of families without 300 00:15:30,240 --> 00:15:33,360 Speaker 1: that added source of income that they really need to 301 00:15:33,360 --> 00:15:35,720 Speaker 1: be able to support their families. Of course, it's not 302 00:15:35,760 --> 00:15:38,480 Speaker 1: only about how much we shop, but also about how 303 00:15:38,520 --> 00:15:41,800 Speaker 1: we shop with brick and mortar stores taking the biggest 304 00:15:41,840 --> 00:15:44,680 Speaker 1: hit in commercial real estate from the pandemic. And I 305 00:15:44,680 --> 00:15:48,240 Speaker 1: think there will be some conversions UM where possible away 306 00:15:48,280 --> 00:15:51,480 Speaker 1: from uses that are not slighted by one in more 307 00:15:51,560 --> 00:15:56,160 Speaker 1: retail being the top one even as online sales grew dramatically. 308 00:15:59,080 --> 00:16:00,920 Speaker 1: And when it comes to roots, OH, there's really only 309 00:16:01,000 --> 00:16:02,960 Speaker 1: one person we want to talk to, and that is 310 00:16:03,000 --> 00:16:05,960 Speaker 1: Mickey Drexler. He founded made Well an old Navy, He 311 00:16:06,120 --> 00:16:08,520 Speaker 1: ran the Gap and J Crew and built them into 312 00:16:08,600 --> 00:16:11,040 Speaker 1: behemus in the retail industry. And we're delighted to have 313 00:16:11,080 --> 00:16:12,880 Speaker 1: him on Wall Street Week now. Mickey, thank you so 314 00:16:12,960 --> 00:16:15,680 Speaker 1: much for joining us. Let's start with this pandemic. How 315 00:16:15,720 --> 00:16:19,400 Speaker 1: did it change the retail business? Well, I think it 316 00:16:19,560 --> 00:16:23,840 Speaker 1: changed it pretty dramatically. I also think the changes were 317 00:16:23,960 --> 00:16:28,400 Speaker 1: passed two way too many stores in America, which is 318 00:16:28,400 --> 00:16:34,040 Speaker 1: no secret overstowed UH. Certainly healthy online business around UH. 319 00:16:34,080 --> 00:16:37,480 Speaker 1: And I think it changed also, And I don't think 320 00:16:37,520 --> 00:16:41,600 Speaker 1: it's the pandemic that there's so many companies now UH 321 00:16:41,880 --> 00:16:46,680 Speaker 1: taking UH paying a lot of attention to statistics, I 322 00:16:46,760 --> 00:16:52,440 Speaker 1: think more than UH, more than merchandise. Lastly, I find 323 00:16:52,480 --> 00:16:56,440 Speaker 1: it difficult UH that many companies in my industry, at 324 00:16:56,480 --> 00:17:00,560 Speaker 1: least for them, are not going into an office every 325 00:17:00,640 --> 00:17:05,560 Speaker 1: day when it's critically important to see and touch merchandise. 326 00:17:06,280 --> 00:17:08,040 Speaker 1: But I think it's changed it that way. I think 327 00:17:08,240 --> 00:17:12,880 Speaker 1: clearly changed the way people addressed for the last year 328 00:17:12,960 --> 00:17:17,040 Speaker 1: or two, and this changes, dramatic change is always going on. 329 00:17:17,720 --> 00:17:19,720 Speaker 1: For a year, we've been up against what I called 330 00:17:19,760 --> 00:17:25,360 Speaker 1: a snowstorm easy year one, up against really bad numbers, 331 00:17:26,160 --> 00:17:30,320 Speaker 1: and I felt that starting this month February, that it 332 00:17:30,359 --> 00:17:34,840 Speaker 1: would get tougher again because the numbers aren't easy. People 333 00:17:34,880 --> 00:17:38,400 Speaker 1: all had pretty good years, actually surprisingly good, but they 334 00:17:38,400 --> 00:17:41,439 Speaker 1: really weren't that surprising if you figure what they were 335 00:17:41,560 --> 00:17:45,360 Speaker 1: up against. Uh the money stopped flowing from the government. 336 00:17:46,119 --> 00:17:50,440 Speaker 1: UH more difficult figures. And at the end of the day, 337 00:17:50,480 --> 00:17:53,480 Speaker 1: for me and always has been, I think the merchandise 338 00:17:53,600 --> 00:17:57,159 Speaker 1: matters the most. Business. What I hear, because you know, 339 00:17:57,359 --> 00:18:00,159 Speaker 1: I'm a small part of it, what I hear is 340 00:18:00,240 --> 00:18:04,399 Speaker 1: quite challenging and difficult. In February, and perhaps part of 341 00:18:04,840 --> 00:18:11,399 Speaker 1: January supply chain issues. Price of cotton has gone up, 342 00:18:11,640 --> 00:18:16,520 Speaker 1: I think about UH freight, so it's caused a lot 343 00:18:16,560 --> 00:18:20,440 Speaker 1: of inflation in our out business, and I think obviously 344 00:18:20,720 --> 00:18:24,320 Speaker 1: in the retail business, so it's not easier. I think 345 00:18:24,320 --> 00:18:27,840 Speaker 1: we're headed for much more difficult times. But by nature 346 00:18:28,000 --> 00:18:31,480 Speaker 1: I'm always pessimistic. Making Let me pick up on one 347 00:18:31,480 --> 00:18:34,119 Speaker 1: thing you've been talking about, and that is seeing and 348 00:18:34,160 --> 00:18:36,600 Speaker 1: feeling the merchandise. I know you, I know the kind 349 00:18:36,600 --> 00:18:38,760 Speaker 1: of retailer you are. You would walk around your stores 350 00:18:38,800 --> 00:18:41,240 Speaker 1: and get a real sense of the merchandise and the 351 00:18:41,240 --> 00:18:44,320 Speaker 1: interaction with people. How does that survive in an online 352 00:18:44,440 --> 00:18:47,760 Speaker 1: AI world where artificial intelligence, they're big data things like that, 353 00:18:47,960 --> 00:18:50,920 Speaker 1: or is that a thing in the past. If it 354 00:18:51,119 --> 00:18:54,840 Speaker 1: is the companies, I think, look, it's it's about product. 355 00:18:55,200 --> 00:18:58,399 Speaker 1: It's the only thing I know. Our business is extremely 356 00:18:58,560 --> 00:19:01,639 Speaker 1: song because you know we're small. But I sit with 357 00:19:01,680 --> 00:19:04,480 Speaker 1: the merchants every day. I sit with design, not because 358 00:19:04,520 --> 00:19:06,680 Speaker 1: I'm the one with all the answers, because I've been 359 00:19:06,680 --> 00:19:08,560 Speaker 1: there and done it. I've seen the movie a lot, 360 00:19:08,880 --> 00:19:11,840 Speaker 1: and I've made every mistake in the book. The very 361 00:19:11,880 --> 00:19:13,920 Speaker 1: young people kind of think when I make a mistake, 362 00:19:14,160 --> 00:19:16,480 Speaker 1: they like to repeat that I made a mistake. I like. 363 00:19:17,320 --> 00:19:21,320 Speaker 1: But in retail, predicting what's going to sell is a 364 00:19:21,359 --> 00:19:23,359 Speaker 1: really important part of it. And the other thing is 365 00:19:23,960 --> 00:19:26,720 Speaker 1: knowing what's kind of a day and day have. This 366 00:19:26,920 --> 00:19:30,280 Speaker 1: is year to year, but I think, uh, you can't 367 00:19:30,359 --> 00:19:34,760 Speaker 1: be there in my opinion, without being and watching the 368 00:19:34,800 --> 00:19:39,680 Speaker 1: goods and business spontaneity, a creativity that happens. I met 369 00:19:39,680 --> 00:19:41,640 Speaker 1: a woman the other day who works in a company 370 00:19:41,680 --> 00:19:45,920 Speaker 1: fifteen people, uh, no office at all, and I said, 371 00:19:45,960 --> 00:19:48,239 Speaker 1: how can you run a retail business where you're not 372 00:19:48,680 --> 00:19:52,880 Speaker 1: uh looking and communicating? It's not just merchandise. I think, 373 00:19:52,880 --> 00:19:55,919 Speaker 1: I don't know the finances of your world, but I 374 00:19:55,960 --> 00:20:00,600 Speaker 1: know in my world, Uh, the creativity flows regularly. You 375 00:20:00,600 --> 00:20:04,000 Speaker 1: can get an idea anywhere, any place, at any time 376 00:20:04,400 --> 00:20:07,959 Speaker 1: based on what excites you, simulates you, or gives you 377 00:20:08,080 --> 00:20:11,359 Speaker 1: a bigger imagination. It's really great to have you with this, Mickey, 378 00:20:11,400 --> 00:20:13,280 Speaker 1: But as I say, the one man we always want 379 00:20:13,280 --> 00:20:18,119 Speaker 1: to hear from on retail that is Mickey Drexler. Coming up, 380 00:20:18,160 --> 00:20:20,600 Speaker 1: we wrap up the week with our special contributor Larry 381 00:20:20,680 --> 00:20:26,200 Speaker 1: Summers of Harvard. This is Wall Street Week on Bloomberg. 382 00:20:31,119 --> 00:20:35,120 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 383 00:20:35,240 --> 00:20:38,119 Speaker 1: Bloomberg Radio. This is Wall Street Week. I'm David Weston, 384 00:20:38,200 --> 00:20:40,640 Speaker 1: and we're joined once again by our very special contributor 385 00:20:40,720 --> 00:20:43,640 Speaker 1: Larry Summers of Harvard. Larry, one of the things we've 386 00:20:43,680 --> 00:20:47,840 Speaker 1: talked about is inflation, but very specifically, are the supply 387 00:20:47,920 --> 00:20:50,000 Speaker 1: chain problems we're all seeing are they a cause of 388 00:20:50,040 --> 00:20:52,760 Speaker 1: the effect. A friend of Yours Mind and the Program, 389 00:20:52,880 --> 00:20:54,760 Speaker 1: Steve Rattner had a column New York Times to Day 390 00:20:54,880 --> 00:20:58,360 Speaker 1: basically saying supply chain is a symptom, it's not the disease. 391 00:20:58,400 --> 00:21:00,440 Speaker 1: What did you make of it? I think Steve broadly 392 00:21:00,520 --> 00:21:05,560 Speaker 1: right in distilling what serious economists believe. First of all, 393 00:21:06,080 --> 00:21:09,240 Speaker 1: the most of the goods where there's a bottleneck are 394 00:21:09,280 --> 00:21:14,400 Speaker 1: having abnormally large quantity, not abnormally small quantity. So obviously 395 00:21:14,440 --> 00:21:16,679 Speaker 1: if you have a big increase in demand, you're going 396 00:21:16,760 --> 00:21:21,080 Speaker 1: to encounter capacity limits. Second, what the supply chain people 397 00:21:21,240 --> 00:21:25,000 Speaker 1: ignore is that if more money is being spent, for example, 398 00:21:25,040 --> 00:21:28,920 Speaker 1: on used cars, yes, that's associated with higher used car prices, 399 00:21:29,000 --> 00:21:31,560 Speaker 1: but it means less money is being spent on other things, 400 00:21:31,840 --> 00:21:37,280 Speaker 1: and so it means less inflation in uh those sectors. 401 00:21:37,320 --> 00:21:41,200 Speaker 1: So while it's a widespread view, I think the interpretation 402 00:21:41,520 --> 00:21:46,480 Speaker 1: of inflation largely around supply chains is mostly a confusion 403 00:21:47,040 --> 00:21:50,720 Speaker 1: and mostly an evasion of what I predicted a year 404 00:21:50,720 --> 00:21:54,320 Speaker 1: ago that if we overflowed the bathtub, we're gonna get 405 00:21:54,320 --> 00:21:58,960 Speaker 1: an overflow as the economy overheated. Larry, one of the 406 00:21:58,960 --> 00:22:01,000 Speaker 1: things that we're hearing out of the Capitol Hill this 407 00:22:01,040 --> 00:22:03,680 Speaker 1: week is maybe it's not just all the FED that 408 00:22:03,720 --> 00:22:06,520 Speaker 1: can address the question of inflation. Maybe we should leave 409 00:22:07,000 --> 00:22:09,560 Speaker 1: alleviate some of the pressure on consumers by having a 410 00:22:09,680 --> 00:22:12,240 Speaker 1: hattus on the gas tax, the federal gas tax. What 411 00:22:12,280 --> 00:22:13,800 Speaker 1: do you think about things like that of limiting the 412 00:22:13,840 --> 00:22:16,960 Speaker 1: cost to consumers. I think we are plumbing the depths 413 00:22:17,080 --> 00:22:21,080 Speaker 1: of new bad ideas UH with that one. First of all, 414 00:22:21,119 --> 00:22:23,639 Speaker 1: guess prices are gonna fluctuate all over the place, so 415 00:22:23,720 --> 00:22:28,040 Speaker 1: nobody may see anything very substantial out of it. Second 416 00:22:28,119 --> 00:22:30,679 Speaker 1: of all, lower prices for gasoline will tend to be 417 00:22:30,760 --> 00:22:34,040 Speaker 1: offset by higher prices for other things as consumers have 418 00:22:34,480 --> 00:22:37,960 Speaker 1: higher incomes that are able to shift spending UH to 419 00:22:38,400 --> 00:22:42,680 Speaker 1: other spheres. Third, it runs exactly in the opposite direction 420 00:22:43,160 --> 00:22:45,119 Speaker 1: of all the things we're trying to do in the 421 00:22:45,240 --> 00:22:49,280 Speaker 1: environmental area. And fourth, you may get some if you 422 00:22:49,359 --> 00:22:52,800 Speaker 1: did get some little bit of deflationary shock when you 423 00:22:53,000 --> 00:22:55,920 Speaker 1: put the gas tax holiday into place, you're gonna get 424 00:22:55,960 --> 00:23:01,920 Speaker 1: some offsetting inflationary shock. When you move the gas tax, 425 00:23:02,240 --> 00:23:05,119 Speaker 1: it goes in exactly the opposite direction of paying for 426 00:23:05,160 --> 00:23:10,320 Speaker 1: more infrastructure, which everybody thinks, uh, we need. Look, I 427 00:23:10,359 --> 00:23:14,200 Speaker 1: think there needs to be a lesson learned about gimmicks 428 00:23:14,240 --> 00:23:18,000 Speaker 1: that pull well, they're like sugar highs. They make you 429 00:23:18,080 --> 00:23:23,240 Speaker 1: feel good, but they really often don't redown to anybody's 430 00:23:23,359 --> 00:23:28,080 Speaker 1: anybody's substantial political benefit. What's remarkable is that all those 431 00:23:28,320 --> 00:23:33,040 Speaker 1: much discussed tax credits, the two thousand dollar checks that 432 00:23:33,080 --> 00:23:38,120 Speaker 1: we're getting mailed to everybody, did substantial economic damage and 433 00:23:38,240 --> 00:23:42,120 Speaker 1: nobody remembers them, so they didn't even deliver the political benefit. 434 00:23:42,480 --> 00:23:45,600 Speaker 1: So I hope we can step back and think about 435 00:23:45,680 --> 00:23:50,200 Speaker 1: doing the right thing and move a bit away from 436 00:23:50,240 --> 00:23:53,080 Speaker 1: trendy gimmicks. As you have pointed out more than once, 437 00:23:53,520 --> 00:23:55,919 Speaker 1: we have a mismatch between supply and demand, not just 438 00:23:55,960 --> 00:23:58,800 Speaker 1: in goods but also in labor. Right now, you've just 439 00:23:58,920 --> 00:24:01,240 Speaker 1: co authored a piece that I saw this week really 440 00:24:01,280 --> 00:24:03,960 Speaker 1: analyzing what the cause of that work is. It's really 441 00:24:04,000 --> 00:24:07,040 Speaker 1: again a supply problem or demand problem. What did you conclude? 442 00:24:07,200 --> 00:24:12,320 Speaker 1: I think it's more of a demand problem. Look, David, 443 00:24:12,440 --> 00:24:17,760 Speaker 1: we have by a wide margin the highest ratio of 444 00:24:18,119 --> 00:24:22,359 Speaker 1: vacancies jobs that need to be filled too unemployed people 445 00:24:22,520 --> 00:24:26,639 Speaker 1: that we've ever had. It can't be surprising in the 446 00:24:26,680 --> 00:24:31,639 Speaker 1: face of that that we're seeing very large nominal wage increases. 447 00:24:32,400 --> 00:24:36,600 Speaker 1: And if you talk to businesses, they almost all feel 448 00:24:36,680 --> 00:24:40,200 Speaker 1: that they can pass those wages on in the form 449 00:24:40,240 --> 00:24:44,720 Speaker 1: of higher prices. And so that is the roots of 450 00:24:44,760 --> 00:24:50,840 Speaker 1: our inflation UH problem. Many people say that it's not entrenched, 451 00:24:50,840 --> 00:24:54,960 Speaker 1: there's no sign of a wage price spiral, not yet. 452 00:24:55,680 --> 00:24:58,800 Speaker 1: I don't know what would be a sign of an 453 00:24:58,800 --> 00:25:03,440 Speaker 1: incipient wage ace spiral. If an employment cost index approaching 454 00:25:03,480 --> 00:25:08,360 Speaker 1: six and uh CPI inflation rate in excess of seven 455 00:25:09,480 --> 00:25:14,560 Speaker 1: wasn't UH signs of a possible incipient waves price spiral. 456 00:25:14,880 --> 00:25:18,680 Speaker 1: So I think we've made a substantial problem of for ourselves. 457 00:25:19,119 --> 00:25:21,640 Speaker 1: And I think if we don't recognize that it's at 458 00:25:21,760 --> 00:25:27,199 Speaker 1: root a demand problem and we don't adjust UH monetary 459 00:25:27,280 --> 00:25:30,760 Speaker 1: policy in a substantial way, it's only going to become 460 00:25:30,800 --> 00:25:34,640 Speaker 1: a more serious problem. Letry going international here for a moment. 461 00:25:34,800 --> 00:25:37,560 Speaker 1: We now are going to have the Olympics conclude the 462 00:25:37,560 --> 00:25:42,040 Speaker 1: Winter Olympics. Overvisioning this coming weekend. UH. You were on 463 00:25:42,119 --> 00:25:44,520 Speaker 1: a panel I saw Institute of Politics up at Harvard 464 00:25:44,720 --> 00:25:48,480 Speaker 1: talking about China and how China is positioned right now globally, 465 00:25:48,800 --> 00:25:52,000 Speaker 1: suggesting maybe it's not quite as powerful as sometimes some 466 00:25:52,040 --> 00:25:54,560 Speaker 1: of us sometimes think. I think that's right. I think 467 00:25:54,600 --> 00:25:58,879 Speaker 1: we in the United States need to remember how wrong 468 00:25:59,000 --> 00:26:01,840 Speaker 1: we were in our active view of Russia in nineteen 469 00:26:01,920 --> 00:26:05,160 Speaker 1: sixty and how wrong we were in our collective view 470 00:26:05,960 --> 00:26:11,879 Speaker 1: of Japan in the early nineteen nineties, and consider the 471 00:26:11,960 --> 00:26:19,240 Speaker 1: possibility that we may be underestimating uh China's challenges now, 472 00:26:19,880 --> 00:26:24,880 Speaker 1: and we need to be particularly careful about being overly 473 00:26:25,640 --> 00:26:31,680 Speaker 1: uh provocative to them. Our provocations with respect to Russia 474 00:26:31,800 --> 00:26:38,359 Speaker 1: after nineteen sixty contributed UH, many historians believe to the 475 00:26:38,400 --> 00:26:42,159 Speaker 1: Cuban missile crisis, and so yes, we need to stand 476 00:26:42,240 --> 00:26:46,280 Speaker 1: up for our interests visa the China. But I think 477 00:26:46,280 --> 00:26:51,280 Speaker 1: we need to be quite careful, uh to avoid a 478 00:26:51,440 --> 00:26:57,919 Speaker 1: kind of strategic narcissism and truculence in the approach that 479 00:26:57,960 --> 00:27:00,520 Speaker 1: we take. Much of the news is we cause you know, 480 00:27:00,640 --> 00:27:04,159 Speaker 1: Lawry was occupied with the crisis over Ukraine between Russia 481 00:27:04,160 --> 00:27:05,800 Speaker 1: on the one hand, in the United States and NATO 482 00:27:05,840 --> 00:27:08,560 Speaker 1: Allis on the other. I noticed, for example, the President 483 00:27:08,640 --> 00:27:11,520 Speaker 1: she appeared with President Putin at the beginning of the Olympics. 484 00:27:11,680 --> 00:27:14,440 Speaker 1: What did you make of this geopolitical crisis and how 485 00:27:14,520 --> 00:27:17,320 Speaker 1: it fits into the world more broadly, and how long 486 00:27:17,440 --> 00:27:19,800 Speaker 1: lasting do you think the effects might be. Let me say, 487 00:27:19,920 --> 00:27:24,960 Speaker 1: David Uh that I'm not an expert on everything geopolitical, 488 00:27:25,520 --> 00:27:28,520 Speaker 1: but it seems to me that, as one who's been 489 00:27:28,520 --> 00:27:32,360 Speaker 1: critical in a number of areas, this has been handled 490 00:27:32,400 --> 00:27:37,440 Speaker 1: extremely well UH by the US administration. That doesn't mean 491 00:27:37,480 --> 00:27:40,719 Speaker 1: the ultimate outcome is going to be successful and then 492 00:27:40,760 --> 00:27:43,920 Speaker 1: an invasion is going to be forestalled, but I think 493 00:27:43,960 --> 00:27:47,600 Speaker 1: they've played the hand that they had in a very 494 00:27:47,680 --> 00:27:52,040 Speaker 1: skillful in a in a very skillful way. I think 495 00:27:52,080 --> 00:27:56,359 Speaker 1: this is a big deal. Not because Ukraine is economically powerful, 496 00:27:56,800 --> 00:28:01,040 Speaker 1: it isn't not even because Russia is economically powerful, It's 497 00:28:01,119 --> 00:28:06,200 Speaker 1: not that powerful. But I think the question of whether 498 00:28:06,920 --> 00:28:11,800 Speaker 1: there's some element of rule of international law and countries 499 00:28:11,920 --> 00:28:16,359 Speaker 1: can't invade other countries with impunity is an issue that 500 00:28:16,560 --> 00:28:21,320 Speaker 1: is very much here, and I think if this degrades, 501 00:28:22,119 --> 00:28:28,000 Speaker 1: that will have costs for everybody, sends of certainty, which 502 00:28:28,040 --> 00:28:33,200 Speaker 1: among other things, will affect the level of UH market valuations. Yeah, 503 00:28:33,200 --> 00:28:35,679 Speaker 1: which Nixon go to China was specifically supposed to undo, 504 00:28:35,880 --> 00:28:38,520 Speaker 1: is maybe undoing Henry Kissinger's work. Larry, thank you so 505 00:28:38,640 --> 00:28:41,600 Speaker 1: very much. That was very helpful. That's Larry Summers of Harvard, 506 00:28:41,600 --> 00:28:45,280 Speaker 1: our very special contributor here on Wall Street Week. Finally, 507 00:28:45,400 --> 00:28:49,640 Speaker 1: one more thought banking in the metaverse. Having troubles in 508 00:28:49,680 --> 00:28:52,080 Speaker 1: the world as we know it, worried about higher rates 509 00:28:52,160 --> 00:28:56,240 Speaker 1: or a possible recession, or tanks coming across the Ukraine border. Well, 510 00:28:56,400 --> 00:28:59,080 Speaker 1: maybe tech has the answer for you, and for all 511 00:28:59,080 --> 00:29:01,280 Speaker 1: of us for that matter. At this point, we've all 512 00:29:01,360 --> 00:29:05,040 Speaker 1: heard about the metaverse. That term taken from a sci 513 00:29:05,080 --> 00:29:07,640 Speaker 1: fi book from thirty years ago and appropriated by none 514 00:29:07,680 --> 00:29:12,560 Speaker 1: other than Mark Zuckerberg, who used it to rename Facebook Meta. 515 00:29:12,680 --> 00:29:14,120 Speaker 1: And this is what he had to say about it 516 00:29:14,120 --> 00:29:16,800 Speaker 1: when he made that announcement. It is time for us 517 00:29:17,160 --> 00:29:21,800 Speaker 1: to adopt a new company brand to encompass everything that 518 00:29:21,880 --> 00:29:26,400 Speaker 1: we do. Our company is now meta. This week, Mr 519 00:29:26,480 --> 00:29:29,200 Speaker 1: Zuckerberg took it a step further in a memo to 520 00:29:29,280 --> 00:29:32,280 Speaker 1: his staff, updating the company's values and what he called 521 00:29:32,440 --> 00:29:37,400 Speaker 1: its cultural operating system, summing it up as focused on meta, 522 00:29:37,800 --> 00:29:42,600 Speaker 1: meta mates and me. So Facebookers are now meta mats, 523 00:29:43,000 --> 00:29:45,360 Speaker 1: which reminds me, at least if when Disney bought ABC 524 00:29:45,440 --> 00:29:48,120 Speaker 1: and the company started addressing people like Peter Jennings and 525 00:29:48,160 --> 00:29:52,040 Speaker 1: Ted Couple as castmates and employee emails. Well, let's hope 526 00:29:52,280 --> 00:29:55,040 Speaker 1: that people at Meta embrace their new title with more 527 00:29:55,120 --> 00:29:57,360 Speaker 1: enthusiasm than some of the folks at ABC News did 528 00:29:57,680 --> 00:29:59,800 Speaker 1: back in the day. But it's not just met at 529 00:30:00,040 --> 00:30:04,000 Speaker 1: a Facebook that's embracing the metaverse. When Disney CEO Bob 530 00:30:04,120 --> 00:30:07,200 Speaker 1: Chapeck talked about his earnings just last week, he called 531 00:30:07,240 --> 00:30:11,160 Speaker 1: the metaverse a quote third dimension of storytelling. I think 532 00:30:11,160 --> 00:30:13,480 Speaker 1: it's a great opportunity for us. I think it's the 533 00:30:13,560 --> 00:30:16,440 Speaker 1: next great horizon for Disney. I think it's the next 534 00:30:16,440 --> 00:30:20,240 Speaker 1: great horizon and entertainment. And don't forget toys in this metaverse. 535 00:30:20,400 --> 00:30:24,280 Speaker 1: The CEO of Mattel certainly hasn't the metaverse n F 536 00:30:24,400 --> 00:30:28,880 Speaker 1: the s and other digital opportunities. Digital experiences will give 537 00:30:28,960 --> 00:30:32,680 Speaker 1: us an opportunity to engage with consumers and create another 538 00:30:32,800 --> 00:30:36,640 Speaker 1: opportunity for us to commercialize our brands and franchises in 539 00:30:36,720 --> 00:30:39,640 Speaker 1: other ways. To be sure, not everyone is sure what 540 00:30:39,720 --> 00:30:43,400 Speaker 1: exactly the metaverse is or whether it truly will change 541 00:30:43,440 --> 00:30:47,800 Speaker 1: the world. Here's Eileen Lee of Cowboy Ventures. I think 542 00:30:47,840 --> 00:30:50,880 Speaker 1: the metaverse is just like, what does that mean? Really? 543 00:30:52,760 --> 00:30:55,440 Speaker 1: It's if you mean the metaverse, like, are we all 544 00:30:55,480 --> 00:30:57,400 Speaker 1: going to be wearing the Arts headsets and staying in 545 00:30:57,440 --> 00:31:01,080 Speaker 1: our houses all the time? I think that's, you know, 546 00:31:01,360 --> 00:31:03,760 Speaker 1: if we're lucky enough to emerge from our caves after 547 00:31:03,800 --> 00:31:06,480 Speaker 1: this pandemic. I think at least for the next three 548 00:31:06,520 --> 00:31:08,160 Speaker 1: to five years, people are going to be more excited 549 00:31:08,200 --> 00:31:10,640 Speaker 1: to engage in real life than ever before. But if 550 00:31:10,640 --> 00:31:14,360 Speaker 1: we needed final confirmation that this metaverse thing is going mainstream, 551 00:31:14,400 --> 00:31:17,040 Speaker 1: it came this week from the Big Banks with JP 552 00:31:17,120 --> 00:31:19,840 Speaker 1: Morgan leading the way. The way that is into Onyx 553 00:31:19,840 --> 00:31:23,360 Speaker 1: that's its name for its metaverse lounge, complete of course, 554 00:31:23,400 --> 00:31:27,120 Speaker 1: with a JPEG image of CEO Jamie Diamond, and accompanied 555 00:31:27,120 --> 00:31:30,040 Speaker 1: by an eighteen page paper on why the metaverse is 556 00:31:30,080 --> 00:31:34,720 Speaker 1: a one trillion dollar Yes, I said, one trillion dollar opportunity. Now, 557 00:31:34,760 --> 00:31:37,360 Speaker 1: if you want to get into the JP Morgan Meta Lounge, 558 00:31:37,480 --> 00:31:39,400 Speaker 1: all you need to do is go to the Central 559 00:31:39,480 --> 00:31:42,920 Speaker 1: Lands Meta Juku Mall, put that in your GPS and 560 00:31:42,920 --> 00:31:45,720 Speaker 1: see what happens. That does it. For this episode of 561 00:31:45,720 --> 00:31:48,600 Speaker 1: Wall Street Week, I'm David Weston and this is Bloomberg. 562 00:31:48,720 --> 00:31:49,520 Speaker 1: See you next week.