1 00:00:00,520 --> 00:00:03,760 Speaker 1: This is Bloomberg Wall Street Week. We turn our attention 2 00:00:03,880 --> 00:00:08,360 Speaker 1: to the markets this week. USCPI never's reinforcing concerns about inflation, 3 00:00:08,480 --> 00:00:11,600 Speaker 1: the financial stories that cheap our work a really different 4 00:00:11,600 --> 00:00:14,560 Speaker 1: reaction to Mark. It's more indications of just how hot 5 00:00:14,600 --> 00:00:17,000 Speaker 1: the US economy really is. Through the eyes of the 6 00:00:17,000 --> 00:00:21,440 Speaker 1: most influential voices. Larry Summers, the former Treaty Secretary, Katherine Keening, 7 00:00:21,600 --> 00:00:24,120 Speaker 1: CEO of d N y mon Sam's l Sherman Pan, 8 00:00:24,280 --> 00:00:27,800 Speaker 1: founder of Equity Group Investment in Bloomberg wool Street Week 9 00:00:27,920 --> 00:00:31,920 Speaker 1: with David Weston from Bloomberg Radio picking up the pieces. 10 00:00:32,040 --> 00:00:36,520 Speaker 1: After a thunderstorm hit banks from Silicon Valley to Zurich, Congress, 11 00:00:36,600 --> 00:00:40,680 Speaker 1: Central banks and investors try to regain their bearings. This 12 00:00:40,800 --> 00:00:44,080 Speaker 1: is Bloomberg Wall Street Week. I'm David Weston. This week's 13 00:00:44,080 --> 00:00:47,000 Speaker 1: special contributor Larry Summers of Harvard on the effects of 14 00:00:47,040 --> 00:00:51,320 Speaker 1: a shaken banking system on the economy. Either the banking 15 00:00:51,440 --> 00:00:56,200 Speaker 1: crisis will pass without the incident, or we're gonna see 16 00:00:56,280 --> 00:01:00,800 Speaker 1: some kind of real downturn, We're sure. Sharman of Rockefeller 17 00:01:00,880 --> 00:01:03,680 Speaker 1: Capital on whether there's a price we will pay for 18 00:01:03,720 --> 00:01:07,040 Speaker 1: all of that government intervention it's that contradiction that we 19 00:01:07,160 --> 00:01:10,440 Speaker 1: can't seem to handle what we want and what's the outcome. 20 00:01:11,560 --> 00:01:15,240 Speaker 1: And former Treasury and CFTC official Tim Masset on whether 21 00:01:15,280 --> 00:01:17,959 Speaker 1: we should have seen it coming. At the end of 22 00:01:17,959 --> 00:01:34,600 Speaker 1: the day, this really was about bad bank management. The 23 00:01:34,680 --> 00:01:36,880 Speaker 1: month of March is supposed to come in like a 24 00:01:37,000 --> 00:01:39,880 Speaker 1: lion and out like a lamb. But this March entered 25 00:01:39,920 --> 00:01:42,560 Speaker 1: like a lamb and then was savaged by the lion 26 00:01:42,680 --> 00:01:46,240 Speaker 1: of serial banking crises. This was a week for starting 27 00:01:46,240 --> 00:01:49,400 Speaker 1: to sort through the wreckage, with what's left of SVB 28 00:01:49,720 --> 00:01:53,320 Speaker 1: sold to First Citizens Bank Shares. This is a fit 29 00:01:53,400 --> 00:01:55,600 Speaker 1: the bank sentence. I think it gets the right base 30 00:01:55,640 --> 00:01:57,760 Speaker 1: off the hook, gets the fdic of the hook. I 31 00:01:57,800 --> 00:02:00,440 Speaker 1: think everyone's happy with this deal. And Congress is honed 32 00:02:00,440 --> 00:02:03,800 Speaker 1: in on the SVP debacle, with ED Vice chair Michael 33 00:02:03,840 --> 00:02:06,600 Speaker 1: Barr saying there's a lot of blame to go around 34 00:02:06,840 --> 00:02:10,200 Speaker 1: anytime you have a bank failure like this. Bank management 35 00:02:10,200 --> 00:02:14,000 Speaker 1: clearly failed. Supervisors sailed in, our regular choice system failed. 36 00:02:14,160 --> 00:02:17,120 Speaker 1: Over In Zurich, UBS started the process of completing its 37 00:02:17,120 --> 00:02:21,040 Speaker 1: forced marriage to Credit Suis. UBS chair Calm Kellerher announced 38 00:02:21,040 --> 00:02:23,160 Speaker 1: that bankers from Credit Suis would have to be put 39 00:02:23,200 --> 00:02:26,000 Speaker 1: through what he called a cultural filter to make sure 40 00:02:26,040 --> 00:02:29,160 Speaker 1: they fit, and that Sergio Marte would return to take 41 00:02:29,200 --> 00:02:32,840 Speaker 1: over as CEO to make it all work. Integrating two 42 00:02:33,520 --> 00:02:38,119 Speaker 1: systemically important giant banks is really double trouble. And if 43 00:02:38,120 --> 00:02:41,840 Speaker 1: that weren't enough, France's two biggest banks faced what could 44 00:02:41,880 --> 00:02:44,040 Speaker 1: be over a billion dollars in fines as part of 45 00:02:44,040 --> 00:02:47,680 Speaker 1: a government investigation into possible tax fraud and money laundering. 46 00:02:47,960 --> 00:02:52,800 Speaker 1: French banks including BNP, Perry Baugh and Society GENERALIC face 47 00:02:52,960 --> 00:02:55,680 Speaker 1: collective finds of more than a billion euros as part 48 00:02:55,680 --> 00:02:59,840 Speaker 1: of an investigation into tax fraud and money laundering in China. 49 00:03:00,000 --> 00:03:02,680 Speaker 1: Ali Baba announced it would try to avoid the government's 50 00:03:02,720 --> 00:03:06,360 Speaker 1: hostility to big tech by getting smaller, specifically by breaking 51 00:03:06,440 --> 00:03:10,160 Speaker 1: itself into six separate parts. We do believe that if 52 00:03:10,160 --> 00:03:11,840 Speaker 1: you break the pieces up to some of the polits 53 00:03:11,840 --> 00:03:13,959 Speaker 1: a bigger than the whole. And It was another week 54 00:03:14,000 --> 00:03:17,440 Speaker 1: of job cut announcements, with McKenzie adding fourteen hundred and 55 00:03:17,560 --> 00:03:21,960 Speaker 1: Disney seven thousand, which notably included Ike promotter who sold 56 00:03:22,000 --> 00:03:25,560 Speaker 1: Marvel the bob Iger. Disney has begun the first round 57 00:03:25,680 --> 00:03:28,560 Speaker 1: of the seven thousand job cuts that it announced in 58 00:03:28,639 --> 00:03:31,720 Speaker 1: early February and memo that Bob I get the CEO 59 00:03:31,840 --> 00:03:34,480 Speaker 1: has sent to staff. And to top it all off, 60 00:03:34,560 --> 00:03:37,960 Speaker 1: on Thursday, Donald Trump became the first former president in 61 00:03:38,080 --> 00:03:41,000 Speaker 1: US history to be indicted with criminal charges filed in 62 00:03:41,080 --> 00:03:44,080 Speaker 1: Manhattan tied to hush money payments to adult film star 63 00:03:44,280 --> 00:03:48,080 Speaker 1: Stormy Daniels. Donald Trump becoming the first former US president 64 00:03:48,120 --> 00:03:50,920 Speaker 1: to be indicted, the arrangement coming as early as next Tuesday. 65 00:03:50,920 --> 00:03:55,640 Speaker 1: The specific charges, however, are still under sealed. For all 66 00:03:55,680 --> 00:03:58,200 Speaker 1: the drama of the week and the month for that matter, 67 00:03:58,320 --> 00:04:00,680 Speaker 1: the markets in the end pretty much took in stride. 68 00:04:00,760 --> 00:04:02,520 Speaker 1: The S and P five hundred wound up the week 69 00:04:02,600 --> 00:04:05,400 Speaker 1: up a solid three point five percent. The NAZAC was 70 00:04:05,480 --> 00:04:07,680 Speaker 1: up three point four percent, while the yield in the 71 00:04:07,760 --> 00:04:10,840 Speaker 1: ten year added ten basis points but still ended the 72 00:04:10,840 --> 00:04:13,320 Speaker 1: week below the three point five percent threshold at three 73 00:04:13,360 --> 00:04:15,800 Speaker 1: point four six. To take us through it all, we 74 00:04:15,800 --> 00:04:19,040 Speaker 1: welcome now Laurie Calvacina, she's RBC Capital Markets head of 75 00:04:19,160 --> 00:04:22,720 Speaker 1: US Equity Strategy, and Julian Salisbury he is Goldman Sachs 76 00:04:22,760 --> 00:04:25,760 Speaker 1: Asset and Wealth Management Chief Investment Officers. So welcome both 77 00:04:25,800 --> 00:04:27,279 Speaker 1: of you. It's great to have you let me start 78 00:04:27,279 --> 00:04:29,120 Speaker 1: with you on the equity side. At least, I was 79 00:04:29,160 --> 00:04:31,640 Speaker 1: a little surprised that the equities held up so well 80 00:04:31,680 --> 00:04:34,520 Speaker 1: considering all the turmoil. Look, I think there's this view 81 00:04:34,560 --> 00:04:36,520 Speaker 1: out there that equities are out to lunch and are 82 00:04:36,600 --> 00:04:38,040 Speaker 1: kind of asleep at the switch, and I don't think 83 00:04:38,040 --> 00:04:40,520 Speaker 1: that at all. I think the market reaction was pretty rational. 84 00:04:40,800 --> 00:04:42,280 Speaker 1: I think if you look at it from a top 85 00:04:42,360 --> 00:04:45,440 Speaker 1: down perspective, despite everything we've just gone through in the 86 00:04:45,480 --> 00:04:48,279 Speaker 1: month of March, if you look at economic forecasts, if 87 00:04:48,320 --> 00:04:51,120 Speaker 1: you look at earnings forecasts, they're still anticipating the damage 88 00:04:51,120 --> 00:04:53,440 Speaker 1: to be contained in twenty twenty three and twenty twenty 89 00:04:53,440 --> 00:04:55,240 Speaker 1: four to be a recovery year. And we know that 90 00:04:55,320 --> 00:04:57,480 Speaker 1: equity investors are ready to kind of move on from 91 00:04:57,480 --> 00:04:59,840 Speaker 1: twenty twenty three and look ahead. If you look at 92 00:04:59,839 --> 00:05:02,120 Speaker 1: it bottom up in terms of what's actually been doing 93 00:05:02,120 --> 00:05:05,880 Speaker 1: the heavy lifting, it's technology. I think investors are starting 94 00:05:05,920 --> 00:05:08,760 Speaker 1: to think about a sluggish growth environment going forward. Tech 95 00:05:08,839 --> 00:05:11,440 Speaker 1: normally works well then, but I think one thing we 96 00:05:11,560 --> 00:05:13,520 Speaker 1: know is that where whatever you thought the FED was 97 00:05:13,560 --> 00:05:16,720 Speaker 1: going to do prior to SVB, your expectations have been 98 00:05:16,720 --> 00:05:19,240 Speaker 1: pulled in. So I think markets are still trading the pause. 99 00:05:19,279 --> 00:05:22,800 Speaker 1: They're trading the ultimate return of cuts, and technology stocks 100 00:05:22,839 --> 00:05:24,960 Speaker 1: tend to be one of the best performing sectors after 101 00:05:25,000 --> 00:05:27,960 Speaker 1: both of those. So I think it's quite rational. So, Julian, 102 00:05:28,000 --> 00:05:29,840 Speaker 1: you manage an awful lot of assets, say gold and 103 00:05:29,880 --> 00:05:33,320 Speaker 1: sacks and equities, but going well beyond equities, what are 104 00:05:33,320 --> 00:05:35,880 Speaker 1: you seeing If in equities it seemed pretty solid through 105 00:05:35,880 --> 00:05:37,400 Speaker 1: other thing, what are you seeing in bonds? What are 106 00:05:37,400 --> 00:05:40,480 Speaker 1: you talking abou seeing alternative investments? Also on the equity side, 107 00:05:40,480 --> 00:05:42,080 Speaker 1: it is kind of extort. And if you look back 108 00:05:42,080 --> 00:05:44,279 Speaker 1: of the events of the last month, and here weel 109 00:05:44,320 --> 00:05:46,680 Speaker 1: we are ending the month up three or four percents. 110 00:05:46,720 --> 00:05:48,920 Speaker 1: If you know at the beginning of the month are 111 00:05:48,960 --> 00:05:51,040 Speaker 1: like the events that we're getting to unfold, I'm not 112 00:05:51,080 --> 00:05:53,360 Speaker 1: sure you would have predicted that. You know, what we're 113 00:05:53,400 --> 00:05:57,599 Speaker 1: seeing right now is on the alternative side, continued demand, 114 00:05:57,640 --> 00:05:59,960 Speaker 1: an interest in alternative asset classes, you know, given the vaul, 115 00:06:00,040 --> 00:06:02,960 Speaker 1: utility and uncertainty of the environment. So I would say 116 00:06:03,160 --> 00:06:06,440 Speaker 1: private credit, private real estate are still attracting a lot 117 00:06:06,480 --> 00:06:08,880 Speaker 1: of interest. Was still seeing sluggish in US in terms 118 00:06:08,880 --> 00:06:12,520 Speaker 1: of interest in private equity and growth equity. But the 119 00:06:12,839 --> 00:06:16,360 Speaker 1: more kind of yielding income producing assets are attracting people 120 00:06:16,440 --> 00:06:19,159 Speaker 1: because of the higher base rate environment, so the actual 121 00:06:19,279 --> 00:06:22,240 Speaker 1: nominal yields on these asset classes is interesting to investors. 122 00:06:22,480 --> 00:06:25,440 Speaker 1: So to the turmoil on the banks, Julian actually help 123 00:06:25,520 --> 00:06:27,839 Speaker 1: the bonds in the sense that people rushing into barns, 124 00:06:27,839 --> 00:06:29,320 Speaker 1: they wanted to buy more barns because they were so 125 00:06:29,440 --> 00:06:31,120 Speaker 1: uncertain of where we were going. I think there were 126 00:06:31,160 --> 00:06:34,520 Speaker 1: two things. First, the flight to quality generally, see saw 127 00:06:34,680 --> 00:06:37,720 Speaker 1: money moving out of weaker banks into stronger banks. From 128 00:06:37,960 --> 00:06:42,159 Speaker 1: from a deposit perspective, you'ress saw very significant fund flows 129 00:06:42,240 --> 00:06:44,480 Speaker 1: into money market funds. I mean we saw I think 130 00:06:44,520 --> 00:06:46,840 Speaker 1: there's a matter of public record fifty two billion dollars 131 00:06:46,880 --> 00:06:49,000 Speaker 1: of flows into our money market funds in a two 132 00:06:49,040 --> 00:06:53,720 Speaker 1: week period, just example of people looking to really move 133 00:06:53,800 --> 00:06:56,560 Speaker 1: their money out of again weaker banks into more diversified risk. 134 00:06:56,880 --> 00:07:01,560 Speaker 1: Also seeing people moving into bonds and other income producing assets. 135 00:07:02,760 --> 00:07:07,240 Speaker 1: And then I would say, you know, again like pushing 136 00:07:07,279 --> 00:07:10,160 Speaker 1: out a little bit of duration now and expectation that 137 00:07:10,560 --> 00:07:13,000 Speaker 1: wherever I agree with Laurie's point, whatever you thought the 138 00:07:13,040 --> 00:07:15,600 Speaker 1: path of rates was going to be, you know that 139 00:07:15,920 --> 00:07:19,000 Speaker 1: the peak grade and the time horizon in which rates 140 00:07:19,000 --> 00:07:21,080 Speaker 1: starts to roll over. Us probably come in because of 141 00:07:21,160 --> 00:07:25,280 Speaker 1: the dampening effect that this has happened having on the economy. So, Laurie, 142 00:07:25,320 --> 00:07:28,160 Speaker 1: if in fact, in the bond situation, people like this 143 00:07:28,480 --> 00:07:31,920 Speaker 1: safety relative safety of bonds. Is there an equivalent in equities? 144 00:07:31,960 --> 00:07:33,720 Speaker 1: Are you seeing because of some of the certain terminal 145 00:07:33,840 --> 00:07:36,600 Speaker 1: with the banks and still uncertain about the economy. Are 146 00:07:36,640 --> 00:07:39,320 Speaker 1: there's certain equities that people tend to go to when 147 00:07:39,360 --> 00:07:41,600 Speaker 1: they're a little unsure the future. There are and you know, 148 00:07:41,680 --> 00:07:45,000 Speaker 1: things like utilities, healthcare, consumer staples, you know, or tend 149 00:07:45,080 --> 00:07:47,120 Speaker 1: to be where people go big caps in general, so 150 00:07:47,200 --> 00:07:50,960 Speaker 1: we've seen small caps underperform, but technology stocks, interestingly, over 151 00:07:51,040 --> 00:07:52,760 Speaker 1: the last I would say like five or six years, 152 00:07:52,800 --> 00:07:55,520 Speaker 1: have become another safe haven. And we know that areas 153 00:07:55,600 --> 00:07:58,840 Speaker 1: like utilities, consumer staples have been highly overvalued because people 154 00:07:58,880 --> 00:08:00,760 Speaker 1: were really pushing into them last year when they were 155 00:08:00,800 --> 00:08:02,960 Speaker 1: moving out of tech, and so I actually think, you know, 156 00:08:03,040 --> 00:08:05,760 Speaker 1: it's interesting Tech had already been I think largely de 157 00:08:05,960 --> 00:08:08,920 Speaker 1: risked last year, so people feel comfortable now coming back 158 00:08:08,960 --> 00:08:10,840 Speaker 1: to it is more of a safety trade. July. One 159 00:08:10,840 --> 00:08:12,240 Speaker 1: of the things people talk about it is a possible 160 00:08:12,360 --> 00:08:15,239 Speaker 1: credit crunch. You react to actually what happened with the banks? 161 00:08:16,480 --> 00:08:19,720 Speaker 1: Are people providing for that? Are there ways to provide 162 00:08:19,760 --> 00:08:21,800 Speaker 1: for that? Or do you see a credit crunch around 163 00:08:21,800 --> 00:08:25,320 Speaker 1: the corner. Sure, Look, I think that the very acute 164 00:08:25,400 --> 00:08:27,240 Speaker 1: near term issue has been taken off the table. I 165 00:08:27,280 --> 00:08:30,120 Speaker 1: think the policy actions to stabilize the bank the liquidity 166 00:08:30,120 --> 00:08:33,559 Speaker 1: around the banking system has proven to be effective. But 167 00:08:33,679 --> 00:08:35,800 Speaker 1: I do think there are a few things that are 168 00:08:35,840 --> 00:08:38,880 Speaker 1: fairly certain for the sub two hundred and fifty billion 169 00:08:38,880 --> 00:08:41,240 Speaker 1: dollar banks that have been subject to less stringent capital 170 00:08:41,320 --> 00:08:45,079 Speaker 1: and liquidity or requirements, They're going to be required to 171 00:08:45,160 --> 00:08:47,199 Speaker 1: hold more capital, They're going to be required to hold 172 00:08:47,280 --> 00:08:50,719 Speaker 1: more liquidity, The cost of they're going to charge for 173 00:08:50,720 --> 00:08:53,720 Speaker 1: their borrowers is therefore going to go up. They're also 174 00:08:53,760 --> 00:08:55,920 Speaker 1: going to be subject to greater regulation. So I think 175 00:08:56,080 --> 00:08:59,400 Speaker 1: credit availability is going to become tighter. Whatever you thought 176 00:08:59,440 --> 00:09:01,400 Speaker 1: it was going to it's certainly going to become tighter 177 00:09:01,440 --> 00:09:04,320 Speaker 1: result of these actions, and that is going to impact 178 00:09:04,360 --> 00:09:07,600 Speaker 1: certain areas of the economy, particularly I think commercial real estate, 179 00:09:07,840 --> 00:09:10,400 Speaker 1: which was already feeling very very fragile, and this is 180 00:09:10,520 --> 00:09:14,040 Speaker 1: going to be, you know, just further add to the pain. Okay, 181 00:09:14,160 --> 00:09:16,960 Speaker 1: Junior Salisbury and Laurie Cavesino. We'll be staying with us 182 00:09:17,080 --> 00:09:18,960 Speaker 1: as we turn from where we are in the markets 183 00:09:18,960 --> 00:09:21,160 Speaker 1: to where we are headed in the markets, and that's 184 00:09:21,200 --> 00:09:49,400 Speaker 1: coming up next down Wall Street Week on Bloomberg. Yeah, yeah, 185 00:09:55,200 --> 00:09:59,400 Speaker 1: this is Bloomberg Wall Street Week with David Weston from 186 00:09:59,520 --> 00:10:09,520 Speaker 1: Bloomberg Radio. Some quarter, huh heck. The three months in 187 00:10:09,559 --> 00:10:12,760 Speaker 1: the financial world that ended tonight provided at least three 188 00:10:12,920 --> 00:10:16,679 Speaker 1: times the usual thrills and spills, So it wasn't just 189 00:10:16,800 --> 00:10:20,640 Speaker 1: a quarter. It was at least seventy five cents. And 190 00:10:20,800 --> 00:10:24,120 Speaker 1: what did it all mean? By almost anything? You wanted 191 00:10:24,200 --> 00:10:26,679 Speaker 1: it to me and provided you picked the right two bits. 192 00:10:28,040 --> 00:10:29,600 Speaker 1: That was a Lewis recogniser at the end of its 193 00:10:29,679 --> 00:10:32,920 Speaker 1: multuous march back in two thousand. Sounds a lot like today, frankly. 194 00:10:33,280 --> 00:10:35,520 Speaker 1: But then the number one movie in the country was 195 00:10:35,559 --> 00:10:39,240 Speaker 1: Aaron Brockovich starring Julia Roberts, and the number one song, well, 196 00:10:39,280 --> 00:10:42,480 Speaker 1: that was Say My Name by Destiny's Child. Still with 197 00:10:42,600 --> 00:10:45,720 Speaker 1: us or Julian Salisbury of Golden Sacks and Lory Cavesina 198 00:10:45,960 --> 00:10:48,640 Speaker 1: of RBC Capital Markets. So Julian, let's start with you here. 199 00:10:49,240 --> 00:10:52,199 Speaker 1: One of the things we've seen is apparently pulling back 200 00:10:52,280 --> 00:10:54,920 Speaker 1: by the banks in making loans. What does that mean 201 00:10:55,120 --> 00:10:58,960 Speaker 1: as an opportunity potential for private credit? Sure, I mean 202 00:10:59,280 --> 00:11:01,120 Speaker 1: one of the reasons the banks are being forced to 203 00:11:01,160 --> 00:11:04,120 Speaker 1: pull back right now, it's concerns around their own liquidity situation. 204 00:11:04,920 --> 00:11:08,439 Speaker 1: Liquidity kills banks, not solvency generally. You know, you look 205 00:11:08,440 --> 00:11:10,680 Speaker 1: at the private credit market. Somebody was asking me about 206 00:11:10,720 --> 00:11:12,599 Speaker 1: this the other day, you know, what's going on with 207 00:11:12,640 --> 00:11:14,600 Speaker 1: these shadow lenders, and I said, this wasn't a shadow 208 00:11:14,640 --> 00:11:18,120 Speaker 1: banking problem, this was a banking problem, classic asset liability 209 00:11:18,200 --> 00:11:21,839 Speaker 1: mismatch problem. The private credit market very differently. Generally, the 210 00:11:22,120 --> 00:11:24,959 Speaker 1: participants in that market have very long dated liabilities, so 211 00:11:25,040 --> 00:11:27,880 Speaker 1: they have the ability to be consistent and thoughtful about 212 00:11:27,880 --> 00:11:30,679 Speaker 1: the way they deploy capital. They're not subject to redemptions. 213 00:11:31,040 --> 00:11:34,960 Speaker 1: They can be a consistent relationship lender to private equity firms, 214 00:11:35,200 --> 00:11:37,600 Speaker 1: so when they see an opportunity where the markets step 215 00:11:37,640 --> 00:11:40,040 Speaker 1: back capital markets are closed, they can come in and 216 00:11:40,800 --> 00:11:44,559 Speaker 1: be a provider of choice and enable private equity transactions 217 00:11:44,559 --> 00:11:47,160 Speaker 1: to take place. So it's an attractive asset class. It's 218 00:11:47,200 --> 00:11:49,920 Speaker 1: defensive in nature, it's floating rate in nature, and at 219 00:11:49,960 --> 00:11:53,319 Speaker 1: a time like this, you can extract a particularly attractive 220 00:11:53,600 --> 00:11:57,040 Speaker 1: credit and illiquidity premium. Is there any transparency risk in 221 00:11:57,160 --> 00:11:59,480 Speaker 1: road markets those to say, in public markets you sort 222 00:11:59,520 --> 00:12:02,120 Speaker 1: of know where the value is. Private markets you're not 223 00:12:02,280 --> 00:12:04,720 Speaker 1: quite as sure. And right now we've seen some hidden 224 00:12:04,800 --> 00:12:08,240 Speaker 1: liabilities we didn't know we're out there. Look it's it's 225 00:12:08,280 --> 00:12:10,839 Speaker 1: a it's a great question, and I do think the 226 00:12:11,040 --> 00:12:13,520 Speaker 1: discipline of being held to account minute by minute in 227 00:12:13,559 --> 00:12:16,600 Speaker 1: the public markets is a great discipline, but there are 228 00:12:17,360 --> 00:12:19,439 Speaker 1: you know, there are also certain types of businesses that 229 00:12:19,559 --> 00:12:24,319 Speaker 1: benefit from growing and scaling outside the without being subject 230 00:12:24,440 --> 00:12:27,719 Speaker 1: to you know, the day to day scorecard. Essentially. You know, 231 00:12:27,800 --> 00:12:30,079 Speaker 1: certain types of businesses that don't aren't profitable for a 232 00:12:30,160 --> 00:12:32,760 Speaker 1: long period of time sometimes are better off being built 233 00:12:32,800 --> 00:12:37,360 Speaker 1: and compounded in in private market format. So look, it's 234 00:12:37,360 --> 00:12:39,080 Speaker 1: a it's a it's a great question. But I think 235 00:12:39,120 --> 00:12:41,880 Speaker 1: generally what you find is these are large sophisticated investors 236 00:12:41,960 --> 00:12:45,719 Speaker 1: managing this this these pools of money, and you know, 237 00:12:45,800 --> 00:12:48,240 Speaker 1: there's there's upsides to that as well, because you're not 238 00:12:48,400 --> 00:12:50,800 Speaker 1: forced out of the trade, you can carry the trade, 239 00:12:50,800 --> 00:12:52,840 Speaker 1: so you can take a long term view of value 240 00:12:53,200 --> 00:12:54,920 Speaker 1: rather than thinking what's going to happen over the next 241 00:12:54,960 --> 00:12:57,520 Speaker 1: one week, three months, or six months, Laurie, there's some 242 00:12:57,600 --> 00:12:59,880 Speaker 1: debate about whether we should call it's a bank in crisis. 243 00:13:00,000 --> 00:13:01,880 Speaker 1: So it was a crisis for Silicon Valley banks, and 244 00:13:01,960 --> 00:13:04,360 Speaker 1: that clear it's a crisis for the banking industry overall. 245 00:13:04,440 --> 00:13:06,520 Speaker 1: But it certainly was a lot of turmoil. I know 246 00:13:06,600 --> 00:13:09,040 Speaker 1: that you have specifically looked back in the past. It's 247 00:13:09,080 --> 00:13:13,480 Speaker 1: some similar crises or points of turmoil, and you actually 248 00:13:13,520 --> 00:13:15,480 Speaker 1: took a look at the NASTAC one hundred during some 249 00:13:15,520 --> 00:13:17,800 Speaker 1: of this take us through that we have a charter show. Yeah, 250 00:13:17,880 --> 00:13:20,000 Speaker 1: so you know, I'm a great student of history when 251 00:13:20,040 --> 00:13:22,160 Speaker 1: it comes to markets, and I think this is going 252 00:13:22,200 --> 00:13:23,719 Speaker 1: to end up having its own name. It's going to 253 00:13:23,720 --> 00:13:25,839 Speaker 1: be its own unique crisis. But to me, this is 254 00:13:25,920 --> 00:13:28,240 Speaker 1: more like World Com than it was like Barren Lehman. 255 00:13:28,679 --> 00:13:31,000 Speaker 1: And we took notice of the fact that the banks 256 00:13:31,040 --> 00:13:33,920 Speaker 1: were trying to stabilize recently, and so we went back 257 00:13:33,960 --> 00:13:36,520 Speaker 1: and essentially looked at kind of the problem industries in 258 00:13:36,679 --> 00:13:39,000 Speaker 1: both that two thousand and two thousand and three period 259 00:13:39,080 --> 00:13:41,079 Speaker 1: and the financial crisis, and what we found was that 260 00:13:41,240 --> 00:13:44,319 Speaker 1: after both Baron Lehman, you basically saw the banks continue 261 00:13:44,360 --> 00:13:46,880 Speaker 1: to act really really poorly. If you go back though 262 00:13:46,960 --> 00:13:49,440 Speaker 1: to the tech bubble period, we saw that after World 263 00:13:49,480 --> 00:13:52,760 Speaker 1: com NASTAC one hundred actually stabilized and kind of entered 264 00:13:52,800 --> 00:13:56,000 Speaker 1: this very long, lengthy bottoming process. So it wasn't quite 265 00:13:56,040 --> 00:13:58,520 Speaker 1: a clearing event, it was something close to it, but 266 00:13:58,679 --> 00:14:00,920 Speaker 1: it did sort of, you know, sort of cathartic in 267 00:14:01,000 --> 00:14:03,480 Speaker 1: a sense that you know, some of these excesses were 268 00:14:03,559 --> 00:14:05,439 Speaker 1: exposed and dealt with, and then the market you know, 269 00:14:05,520 --> 00:14:07,480 Speaker 1: took some time to heal, but ultimately was able to 270 00:14:07,559 --> 00:14:09,559 Speaker 1: move on. Thank you so very much. It's great to 271 00:14:09,600 --> 00:14:11,439 Speaker 1: have both of you with us, as Julian Salisbury of 272 00:14:11,520 --> 00:14:16,079 Speaker 1: Golden Sacks and Lory Calvacina of RBC Capital Markets. As 273 00:14:16,120 --> 00:14:18,360 Speaker 1: the month of March draws to a close, it looks 274 00:14:18,440 --> 00:14:21,520 Speaker 1: like maybe all of the uncertainty about the banking system 275 00:14:21,680 --> 00:14:24,520 Speaker 1: is starting to quiet down, helped in large part by 276 00:14:24,600 --> 00:14:27,360 Speaker 1: the US government stepping in once again, this time to 277 00:14:27,600 --> 00:14:31,800 Speaker 1: ensure deposits of people in Silicon Valley Bank. Racher Scharmer 278 00:14:31,800 --> 00:14:34,200 Speaker 1: has taken a look at exactly what that might have 279 00:14:34,520 --> 00:14:37,240 Speaker 1: for implications more broadly for the economy and welcome now. 280 00:14:37,360 --> 00:14:39,880 Speaker 1: Rascher Scharmer, of course, is the founder of Breakout Capital 281 00:14:39,960 --> 00:14:43,600 Speaker 1: Partners as well as chairman of Rockefeller International. Racher. Welcome 282 00:14:43,640 --> 00:14:45,400 Speaker 1: back to Wall Street. We great to have you here 283 00:14:46,000 --> 00:14:48,840 Speaker 1: once again. The government rides to the rescue here. That's 284 00:14:48,920 --> 00:14:51,640 Speaker 1: good news for the people being rescued. But what possible 285 00:14:51,720 --> 00:14:55,000 Speaker 1: ramifications might it have more broadly, Yeah, I think David, 286 00:14:55,040 --> 00:14:57,160 Speaker 1: this is a great time to step back and see 287 00:14:57,200 --> 00:15:00,040 Speaker 1: as to how Lord the bar has become now for 288 00:15:00,160 --> 00:15:03,840 Speaker 1: government intervention. Now, of course, the banking sector is always 289 00:15:03,880 --> 00:15:06,920 Speaker 1: a very sensitive sector because of the risk of a contagion. 290 00:15:07,360 --> 00:15:10,520 Speaker 1: But what strikes me here is that how far we 291 00:15:10,640 --> 00:15:14,800 Speaker 1: have come over the past few decades where you get 292 00:15:14,920 --> 00:15:18,480 Speaker 1: more and more stimulus, more and more government intervention, and 293 00:15:18,880 --> 00:15:22,800 Speaker 1: at the same time you have a slump in productivity growth. 294 00:15:22,880 --> 00:15:25,200 Speaker 1: And I think that this is the point that is 295 00:15:25,360 --> 00:15:29,560 Speaker 1: very underappreciated. At the surface, it seems as if the 296 00:15:29,960 --> 00:15:34,880 Speaker 1: economy has once again survived a crisis and here we are. 297 00:15:35,320 --> 00:15:37,960 Speaker 1: But I think what we forget that there's a price 298 00:15:38,080 --> 00:15:42,080 Speaker 1: we are paying for this, that because of this constant 299 00:15:42,200 --> 00:15:46,760 Speaker 1: government intervention, we're keeping alive a lot of zombie companies 300 00:15:47,240 --> 00:15:50,320 Speaker 1: in this country, and the number of startups in fact, 301 00:15:50,400 --> 00:15:55,200 Speaker 1: over time is going down. So why is this happening. 302 00:15:55,600 --> 00:15:58,040 Speaker 1: This is happening because we're keeping a lot of deadhood 303 00:15:58,360 --> 00:16:02,040 Speaker 1: in the system. The number of zombie companies in America 304 00:16:02,120 --> 00:16:04,880 Speaker 1: today is nearly twenty percent of all companies can be 305 00:16:05,000 --> 00:16:08,360 Speaker 1: classified as zombie companies. That number used to be barely 306 00:16:08,440 --> 00:16:12,080 Speaker 1: two percent in the nineteen eighties or so. So that 307 00:16:12,360 --> 00:16:14,800 Speaker 1: is the contradiction here, which is that we do not 308 00:16:15,040 --> 00:16:18,760 Speaker 1: want to any pain, and that's completely justified, and we 309 00:16:19,000 --> 00:16:22,480 Speaker 1: want the government to come to the rescue, but we 310 00:16:22,720 --> 00:16:25,400 Speaker 1: also don't like the economic outcome where we have low 311 00:16:25,480 --> 00:16:28,880 Speaker 1: economic growth, less and less and living standards, and that 312 00:16:29,120 --> 00:16:31,640 Speaker 1: I trace back to the fact if you have low productivity, 313 00:16:32,000 --> 00:16:34,120 Speaker 1: that's what you will get. And the low productivity is 314 00:16:34,160 --> 00:16:38,560 Speaker 1: the direct consequence I think of such expansive government intervention. 315 00:16:38,840 --> 00:16:40,680 Speaker 1: So we'll share, no question, we've had a lot more 316 00:16:40,760 --> 00:16:44,080 Speaker 1: government invention, no doubt about that. But there's another factor 317 00:16:44,080 --> 00:16:46,880 Speaker 1: as well. We've had very very low interest rates, which 318 00:16:46,920 --> 00:16:49,440 Speaker 1: has allowed some of those so called zombie companies, companies 319 00:16:49,440 --> 00:16:52,840 Speaker 1: that basically can't forward to service their own debt survive. 320 00:16:53,080 --> 00:16:56,120 Speaker 1: As the FED has moved to a higher interest rate regime, 321 00:16:56,560 --> 00:16:59,240 Speaker 1: might that help some on the front of zombie companies 322 00:16:59,280 --> 00:17:03,080 Speaker 1: the allocation accoun and therefore maybe ultimately productivity. It could be, 323 00:17:03,200 --> 00:17:06,639 Speaker 1: but so far there's basically evidence of fit. Look at 324 00:17:06,680 --> 00:17:09,320 Speaker 1: the default rates. You know, the default rates are so 325 00:17:09,520 --> 00:17:12,040 Speaker 1: low in the country today now, as you know that 326 00:17:12,200 --> 00:17:16,399 Speaker 1: in capitalism, having some default rates is a very essential 327 00:17:16,520 --> 00:17:18,760 Speaker 1: part of it. So this goes back to what sort 328 00:17:18,760 --> 00:17:20,800 Speaker 1: of system do we want? So the default rates in 329 00:17:20,880 --> 00:17:24,320 Speaker 1: the economy today are very low. Now, all this sounds 330 00:17:24,440 --> 00:17:27,320 Speaker 1: almost a bit masochistic, that do we want more pain? 331 00:17:27,520 --> 00:17:30,439 Speaker 1: Do we want more companies to go bust? Well, if 332 00:17:30,480 --> 00:17:33,399 Speaker 1: you want capitalism, that's what you should be prepared for, 333 00:17:34,000 --> 00:17:37,600 Speaker 1: because a capitalist economy should be a dynamic economy where 334 00:17:37,640 --> 00:17:41,000 Speaker 1: you have much greater company creation. You have a lot 335 00:17:41,040 --> 00:17:43,639 Speaker 1: of the deadwood that dies, and you don't have the 336 00:17:43,720 --> 00:17:47,440 Speaker 1: creation of too many monopolies or very large companies that 337 00:17:47,640 --> 00:17:50,399 Speaker 1: benefit also from very low interest rates as we know. 338 00:17:51,080 --> 00:17:53,560 Speaker 1: So I think that it's that contradiction that we can't 339 00:17:53,560 --> 00:17:56,760 Speaker 1: seem to handle what we want and what's the outcome 340 00:17:57,080 --> 00:17:59,119 Speaker 1: that we're getting, or sure, do you think there might 341 00:17:59,160 --> 00:18:00,760 Speaker 1: be a way to engineer in such a way that 342 00:18:00,840 --> 00:18:02,760 Speaker 1: you take away the worst of the pain and yet 343 00:18:02,800 --> 00:18:05,000 Speaker 1: you still have some discipline the market. And let's take 344 00:18:05,040 --> 00:18:07,800 Speaker 1: then example of Silicon Valley Bank. To be sure, all 345 00:18:07,880 --> 00:18:11,520 Speaker 1: their positors were guaranteed, they were made safe, but the 346 00:18:11,640 --> 00:18:14,080 Speaker 1: bondholders were wiped out, the shareholders were wiped out, the 347 00:18:14,119 --> 00:18:17,399 Speaker 1: management was wiped out. That's not exactly moral hazard, is it. 348 00:18:18,040 --> 00:18:21,520 Speaker 1: But as I said that, looking at each individual instance 349 00:18:21,720 --> 00:18:25,520 Speaker 1: almost seems justified. I'm looking at the cumulative effects here 350 00:18:25,640 --> 00:18:28,159 Speaker 1: that if you have so much government intervention which is 351 00:18:28,240 --> 00:18:32,359 Speaker 1: constantly at hand, then what are the consequences of that? 352 00:18:32,560 --> 00:18:35,720 Speaker 1: So each individual instance it's very hard to argue against 353 00:18:35,960 --> 00:18:37,800 Speaker 1: because no one likes to see that kind of pain. 354 00:18:38,280 --> 00:18:39,879 Speaker 1: But what is it that we have seen. We are 355 00:18:39,920 --> 00:18:45,399 Speaker 1: seeing the size of government stimulus over time having increased massively. 356 00:18:45,920 --> 00:18:48,520 Speaker 1: If you look at each economic downturn, we have seen 357 00:18:48,600 --> 00:18:51,720 Speaker 1: the size of monetary stimulus increase a lot, as we've 358 00:18:51,760 --> 00:18:55,040 Speaker 1: seen every economic downturn, and we've seen lesser and lesser 359 00:18:55,160 --> 00:18:59,400 Speaker 1: defaults because often the government's intervening also in a non 360 00:18:59,520 --> 00:19:02,000 Speaker 1: monetary the non fiscity weed like this sort of did 361 00:19:02,080 --> 00:19:04,840 Speaker 1: just now such a pleasure heavy with this is very illuminating, 362 00:19:04,840 --> 00:19:06,840 Speaker 1: thank you, that's for sure. Charmant he is chairman of 363 00:19:07,080 --> 00:19:11,680 Speaker 1: Rockefeller International. Coming up. We wrap up the week with 364 00:19:11,720 --> 00:19:14,639 Speaker 1: our special contributor, Larry Summers of Harvard. That's next on 365 00:19:14,800 --> 00:19:26,040 Speaker 1: Wall Street Week on Luberg. This is Wall Street Week. 366 00:19:26,040 --> 00:19:27,800 Speaker 1: I'm David Weston. I don't like to say we're back 367 00:19:27,800 --> 00:19:30,399 Speaker 1: with our very special contribute. He's Larry Summers of Harvard. 368 00:19:30,440 --> 00:19:33,560 Speaker 1: So Larry, let's talk about inflation. We got those core 369 00:19:33,680 --> 00:19:35,840 Speaker 1: PC and other PC numbers. Then this week we know 370 00:19:35,960 --> 00:19:37,920 Speaker 1: the Fed pays attention to them. They were a little 371 00:19:37,960 --> 00:19:40,600 Speaker 1: bit better than they had been. Yeah, they were. I 372 00:19:40,720 --> 00:19:43,639 Speaker 1: don't think one should make too much of that. I 373 00:19:43,800 --> 00:19:51,200 Speaker 1: think we are still a substantially unsustainable inflation country unless 374 00:19:51,320 --> 00:19:55,920 Speaker 1: the economy turns down fairly hard in response to the 375 00:19:56,040 --> 00:20:01,040 Speaker 1: credit issues raised by the banking system, and we don't 376 00:20:01,080 --> 00:20:04,560 Speaker 1: know yet whether that's going to happen. So, in a sense, 377 00:20:04,720 --> 00:20:09,520 Speaker 1: the outcomes here are a bit bifurcated. Either the banking 378 00:20:09,640 --> 00:20:15,360 Speaker 1: crisis will pass without incident and without large impact on credit, 379 00:20:16,000 --> 00:20:19,880 Speaker 1: and which case we really do have serious inflation issues 380 00:20:20,320 --> 00:20:22,640 Speaker 1: and the Fed will have to tighten much more than 381 00:20:22,800 --> 00:20:26,399 Speaker 1: is priced in, or we're going to see some kind 382 00:20:26,600 --> 00:20:35,080 Speaker 1: of real downturn here. And I think both are plausible. Outcomes, 383 00:20:35,200 --> 00:20:39,359 Speaker 1: and I recognize that there's a chance we'll skate through 384 00:20:40,040 --> 00:20:43,600 Speaker 1: right in between, but I'd have to say that seems 385 00:20:43,760 --> 00:20:50,320 Speaker 1: very much odds off to me. Soft landings are very hard, 386 00:20:51,040 --> 00:20:53,520 Speaker 1: even in the best environment. So I think I heard 387 00:20:53,520 --> 00:20:55,040 Speaker 1: in your answer We're gonna have to wait to see 388 00:20:55,160 --> 00:20:58,040 Speaker 1: what the aftermath of the banking kerfuffle has been here, 389 00:20:58,240 --> 00:21:00,080 Speaker 1: but gives us a sense of what you're expecting, and 390 00:21:00,200 --> 00:21:02,480 Speaker 1: more important, what you're looking for. When will we know 391 00:21:02,640 --> 00:21:06,760 Speaker 1: where there's a credit crunch. The lesson of financial crisis, 392 00:21:06,880 --> 00:21:11,680 Speaker 1: if you study their history closely, is that it's not 393 00:21:11,880 --> 00:21:17,760 Speaker 1: just all one big downturn. It was six months from 394 00:21:18,520 --> 00:21:23,000 Speaker 1: Bear to Leahman. Even the week in which the Leaman 395 00:21:23,080 --> 00:21:27,160 Speaker 1: events happened, the stock market went up and the FED 396 00:21:27,280 --> 00:21:31,680 Speaker 1: did not cut rates, and the FED statement that week 397 00:21:31,920 --> 00:21:37,840 Speaker 1: was heavily about inflation. So I think it's too early 398 00:21:38,440 --> 00:21:42,640 Speaker 1: to give any kind of all clear sign. I think 399 00:21:43,080 --> 00:21:47,080 Speaker 1: eventually we I think we've gotten to a point where 400 00:21:47,440 --> 00:21:51,760 Speaker 1: I would say it's unlikely that there will be more 401 00:21:52,040 --> 00:21:57,960 Speaker 1: panicked weekends with bank runs. Not impossible by any means, 402 00:21:58,119 --> 00:22:01,760 Speaker 1: but I'd say that's certainly less than a well under 403 00:22:01,800 --> 00:22:05,960 Speaker 1: a fifty percent chance but whether you're going to see 404 00:22:06,080 --> 00:22:10,640 Speaker 1: some other kind of accidents, whether you're going to see 405 00:22:10,720 --> 00:22:19,320 Speaker 1: a substantial restriction in credit, that's not very clear. When 406 00:22:19,400 --> 00:22:23,479 Speaker 1: you have a series of earthquake tremors. One certainly hearing 407 00:22:24,160 --> 00:22:32,119 Speaker 1: many anecdotes around constriction of credit. And the question really 408 00:22:32,359 --> 00:22:36,320 Speaker 1: is is that going to go nonlinear where constriction of 409 00:22:36,400 --> 00:22:40,600 Speaker 1: credit leads to declining asset prices, leads to non performance 410 00:22:40,680 --> 00:22:46,359 Speaker 1: of loans, leads to more credit constriction. And I don't 411 00:22:46,400 --> 00:22:50,640 Speaker 1: think we know yet whether it's going to go nonlinear, 412 00:22:50,760 --> 00:22:52,680 Speaker 1: and I think we're going to be much of the 413 00:22:52,760 --> 00:22:57,720 Speaker 1: way through the summer before I would feel comfortable being 414 00:22:57,880 --> 00:23:04,439 Speaker 1: confident that it wasn't going to go nonlinear. Laurien, One 415 00:23:04,520 --> 00:23:06,520 Speaker 1: thing we do know at this point is that the 416 00:23:06,600 --> 00:23:08,520 Speaker 1: FDIC is on the hook for a lot of money 417 00:23:08,560 --> 00:23:11,960 Speaker 1: for guaranteeing all those deposits in the billions of dollars here, 418 00:23:12,080 --> 00:23:14,480 Speaker 1: What do you make of the financial aspect of this, 419 00:23:14,720 --> 00:23:16,879 Speaker 1: what the ft is putting up as opposed to what 420 00:23:17,080 --> 00:23:20,480 Speaker 1: some of the banks are benefiting from. I'm surprised by 421 00:23:21,280 --> 00:23:24,800 Speaker 1: how much the FDIC has had to spend on these 422 00:23:24,920 --> 00:23:30,800 Speaker 1: resolutions relative to the things that were being said earlier. 423 00:23:31,359 --> 00:23:35,879 Speaker 1: They were hoping to sell SVB as a whole entity, 424 00:23:36,440 --> 00:23:38,639 Speaker 1: and then in order to get somebody to buy it, 425 00:23:39,160 --> 00:23:41,320 Speaker 1: they had to chip in a set of stuff that 426 00:23:41,520 --> 00:23:46,560 Speaker 1: was cumulatively worth twenty billion dollars. The arithmetic a similar 427 00:23:46,640 --> 00:23:52,560 Speaker 1: relative to the scale of the bank at Signature Bank. 428 00:23:53,160 --> 00:23:56,320 Speaker 1: There are a lot of questions about those transactions. I'm 429 00:23:56,400 --> 00:24:01,880 Speaker 1: still confused about why the holding company at of SVP 430 00:24:02,960 --> 00:24:10,440 Speaker 1: is still being valued in a meaningful way, and I'm 431 00:24:10,880 --> 00:24:14,800 Speaker 1: will want to see assurance that no executive there is 432 00:24:14,920 --> 00:24:23,160 Speaker 1: getting deferred compensation. But these were studyingly expensive transactions. Ultimately, 433 00:24:24,080 --> 00:24:27,760 Speaker 1: everybody's gonna say it's not coming back to taxpayers, but 434 00:24:28,440 --> 00:24:33,520 Speaker 1: banks are taxpayers on behalf of people, their depositors, their customers, 435 00:24:33,640 --> 00:24:38,320 Speaker 1: there people they lend to. And the twenty three billion 436 00:24:38,400 --> 00:24:43,560 Speaker 1: dollars the FDIC has spent is one hundred bucks per 437 00:24:43,640 --> 00:24:49,680 Speaker 1: adult American and that's a fair amount. So I wonder 438 00:24:49,800 --> 00:24:54,320 Speaker 1: if we can't be looking at the procedures that they're 439 00:24:54,560 --> 00:24:58,560 Speaker 1: using and finding ways to do better. And it looks 440 00:24:58,560 --> 00:25:00,480 Speaker 1: like some of these deals were pretty attracted given what 441 00:25:00,560 --> 00:25:03,680 Speaker 1: happened to the shares of some of the acquiring banks, right, Yeah, 442 00:25:03,720 --> 00:25:07,480 Speaker 1: And I think that, yeah, that's right, David. There are 443 00:25:07,520 --> 00:25:11,680 Speaker 1: two parts of it. There are what seemed like huge 444 00:25:11,840 --> 00:25:15,000 Speaker 1: games that the banks that were lucky enough to get 445 00:25:15,119 --> 00:25:22,160 Speaker 1: into this got over fifty percent for the acquirer of SVB, 446 00:25:22,920 --> 00:25:28,240 Speaker 1: close to forty percent for the acquirer of signature. So 447 00:25:28,760 --> 00:25:31,960 Speaker 1: there's that piece of it that they may have overpaid. 448 00:25:32,520 --> 00:25:35,399 Speaker 1: There's also just a question of why it was necessary 449 00:25:35,560 --> 00:25:38,800 Speaker 1: to pay so much. Learn a very different subject, we 450 00:25:38,960 --> 00:25:41,280 Speaker 1: had for the first time in history of former US 451 00:25:41,320 --> 00:25:45,960 Speaker 1: president indicted this week, Donald Trump was indicted for certain allegations. 452 00:25:46,000 --> 00:25:48,160 Speaker 1: We're not even sure about what they all are yet, 453 00:25:48,680 --> 00:25:51,160 Speaker 1: rising out of a hush payment that he was made. 454 00:25:51,640 --> 00:25:55,000 Speaker 1: I really wonder about the connection of our justice system 455 00:25:55,119 --> 00:25:57,600 Speaker 1: with politics. You have talked on this program before about 456 00:25:57,600 --> 00:26:00,359 Speaker 1: what's been going overund Israel. What are the risks in 457 00:26:00,480 --> 00:26:02,639 Speaker 1: Israel here in the United States that we politicize our 458 00:26:02,680 --> 00:26:08,720 Speaker 1: clerl justice system, David, Everyone, even former presidents of the 459 00:26:08,840 --> 00:26:15,280 Speaker 1: United States, is entitled to a presumption of innocence. God knows. 460 00:26:15,400 --> 00:26:22,800 Speaker 1: I don't know the facts of those matters. What I 461 00:26:22,880 --> 00:26:27,119 Speaker 1: think we saw in Israel was that when there was 462 00:26:27,240 --> 00:26:35,639 Speaker 1: a sense of the intertwining of politics and the basic 463 00:26:35,880 --> 00:26:40,200 Speaker 1: rule of law, and the judicial function that had, in 464 00:26:40,280 --> 00:26:45,080 Speaker 1: addition to all the other consequences, really quite problematic of 465 00:26:45,520 --> 00:26:50,800 Speaker 1: financial and economic consequences. And so I hope all the 466 00:26:50,960 --> 00:26:56,080 Speaker 1: actors in this, both President Trump and those who feel 467 00:26:56,200 --> 00:27:02,879 Speaker 1: loyalty to him and those involved in carrying out this prosecution, 468 00:27:03,560 --> 00:27:08,480 Speaker 1: we'll be doing their very best to keep politics out 469 00:27:08,560 --> 00:27:13,680 Speaker 1: of it, to act in ways that will provide reassurance 470 00:27:13,920 --> 00:27:19,000 Speaker 1: that it is the rule of law that's being elevated 471 00:27:19,720 --> 00:27:27,080 Speaker 1: rather than the political side, because ultimately the ability to 472 00:27:27,200 --> 00:27:33,440 Speaker 1: have a viable market economy rests on their being confidence 473 00:27:34,320 --> 00:27:37,239 Speaker 1: in the judiciary. And finally, we're gonna try something new 474 00:27:37,400 --> 00:27:39,880 Speaker 1: here that you suggested is sort of a quick round, 475 00:27:40,000 --> 00:27:42,720 Speaker 1: lightning round of some issues and people and whether you 476 00:27:42,800 --> 00:27:44,960 Speaker 1: are long or short on them. Let's start, first of 477 00:27:44,960 --> 00:27:47,399 Speaker 1: all with foreign direct investment in China. We had the 478 00:27:47,440 --> 00:27:49,960 Speaker 1: premiere over there leeching this week. Really make a case 479 00:27:50,040 --> 00:27:52,359 Speaker 1: for why there should be more foreign investment in China, 480 00:27:52,640 --> 00:27:58,240 Speaker 1: long or short. Short deeds, not words are most important, 481 00:27:58,400 --> 00:28:03,080 Speaker 1: and I think they're just enormous uncertainties about everything Chinese 482 00:28:03,240 --> 00:28:10,119 Speaker 1: and about the Western response, and that's gonna chill investments substantially. Larry, 483 00:28:10,240 --> 00:28:13,320 Speaker 1: you brought chat GPT to wall three week and now 484 00:28:13,400 --> 00:28:16,359 Speaker 1: we have something like eleven hundred tech people who are 485 00:28:16,400 --> 00:28:19,440 Speaker 1: writing another thing. Let's hold off on this chat GPT four. 486 00:28:19,680 --> 00:28:21,240 Speaker 1: Let's make sure we know what we're doing before we 487 00:28:21,359 --> 00:28:24,879 Speaker 1: keep moving forward. You long or short today on chat GPT, 488 00:28:25,680 --> 00:28:31,720 Speaker 1: I'm long. It's continued development. One of the important developments 489 00:28:31,840 --> 00:28:38,760 Speaker 1: in the last several weeks has been the engineering of 490 00:28:38,840 --> 00:28:42,160 Speaker 1: the technology so that it can be used on much 491 00:28:42,240 --> 00:28:46,360 Speaker 1: smaller computers. And that means the genie is out of 492 00:28:46,440 --> 00:28:50,200 Speaker 1: the bottle. They're gonna be all kinds of people doing 493 00:28:50,840 --> 00:28:56,800 Speaker 1: all kinds of things. And I think this is going 494 00:28:56,880 --> 00:29:01,360 Speaker 1: to be a story. Like other technologies. Stories may take 495 00:29:01,800 --> 00:29:04,760 Speaker 1: longer to think, longer to happen than you think it will, 496 00:29:05,280 --> 00:29:08,800 Speaker 1: but ultimately it will happen faster and more pervasively than 497 00:29:08,880 --> 00:29:11,160 Speaker 1: you thought it could. And final, Larry, we've talked about 498 00:29:11,160 --> 00:29:13,560 Speaker 1: golf affairment. I know you're an avid golfer. We've got 499 00:29:13,600 --> 00:29:16,960 Speaker 1: the Masters coming up next week. We've got two favorites 500 00:29:17,040 --> 00:29:18,680 Speaker 1: right now, accorded to the betting ads, they are Scottie 501 00:29:18,680 --> 00:29:22,440 Speaker 1: Scheffler and Rory McElroy. Are you long or short? Rory McElroy, 502 00:29:22,920 --> 00:29:27,920 Speaker 1: I'd be long. Rory think he's overdue, and I think 503 00:29:27,960 --> 00:29:30,280 Speaker 1: this may well be his moment. Okay, Larry, thank you 504 00:29:30,400 --> 00:29:32,920 Speaker 1: so very much. That's our special contributor here on Walstere Week. 505 00:29:32,920 --> 00:29:36,760 Speaker 1: He's Larry Summers of Harvard. This is Wall Street Week 506 00:29:36,920 --> 00:29:48,600 Speaker 1: on Bloomberg. Finally, one more thought. Michael Kinsley famously said 507 00:29:48,640 --> 00:29:51,040 Speaker 1: that a gaff is when a politician tells the truth, 508 00:29:51,320 --> 00:29:54,600 Speaker 1: some obvious truth he isn't supposed to say. To reach 509 00:29:54,680 --> 00:29:56,760 Speaker 1: the level of the true gaff, it isn't enough that 510 00:29:56,840 --> 00:29:59,720 Speaker 1: a politician puts himself in an embarrassing situation and can't 511 00:30:00,120 --> 00:30:02,600 Speaker 1: climb out of it. That happens all the time. Just 512 00:30:02,800 --> 00:30:06,440 Speaker 1: last week, President Biden mistakenly he mistook Canada for China 513 00:30:06,720 --> 00:30:09,880 Speaker 1: and got roundly criticized for it. I applaud China for 514 00:30:09,960 --> 00:30:15,800 Speaker 1: stepping out, assuming I applauded Canada. But let's be honest, 515 00:30:15,800 --> 00:30:19,000 Speaker 1: we all knew what he meant. Nor is it really 516 00:30:19,120 --> 00:30:21,560 Speaker 1: a gaff when a leader simply forgets how to spell, 517 00:30:21,920 --> 00:30:24,480 Speaker 1: as then Vice President Quaile did when he insisted a 518 00:30:24,560 --> 00:30:27,160 Speaker 1: sixth grader at a spelling bee had to add an 519 00:30:27,240 --> 00:30:36,280 Speaker 1: e onto the end of potato. And of course we've 520 00:30:36,360 --> 00:30:39,120 Speaker 1: all watched former President Trump reached to make a point 521 00:30:39,240 --> 00:30:42,000 Speaker 1: and found that his reach may have exceeded his grasp, 522 00:30:42,400 --> 00:30:45,320 Speaker 1: as when he praised the Continental Army of seventeen seventy 523 00:30:45,360 --> 00:30:50,000 Speaker 1: five for seizing airports. Our army manned the airport, it 524 00:30:50,280 --> 00:30:54,520 Speaker 1: ran the ramparts, it took over the airports, It did 525 00:30:54,600 --> 00:30:59,160 Speaker 1: everything it had to do. And at Fort McKendry under 526 00:30:59,200 --> 00:31:03,560 Speaker 1: the rockets Glare, it had nothing but victory. But none 527 00:31:03,600 --> 00:31:06,640 Speaker 1: of these can be considered a true gaff. Numb pointed 528 00:31:06,640 --> 00:31:09,200 Speaker 1: at some basic truth that no one wanted to say. 529 00:31:10,000 --> 00:31:12,360 Speaker 1: This week, we saw the results of a true gaff 530 00:31:12,520 --> 00:31:15,200 Speaker 1: in the banking world when Credit Suis was in the 531 00:31:15,360 --> 00:31:18,720 Speaker 1: cross heres. Earlier this month, Bloomberg's Manners Cranny asked the 532 00:31:18,800 --> 00:31:21,600 Speaker 1: head of one of its major shareholders, the Saudi National Bank, 533 00:31:21,840 --> 00:31:24,960 Speaker 1: whether it might double down on its investment, and his 534 00:31:25,120 --> 00:31:29,680 Speaker 1: response was refreshingly clear and emphatic. The answer is absolutely 535 00:31:29,840 --> 00:31:33,960 Speaker 1: odd for many reasons, outside the simplest reason, which is 536 00:31:34,360 --> 00:31:38,880 Speaker 1: regulatory and statutory. We now own nine point eight percent 537 00:31:38,920 --> 00:31:40,960 Speaker 1: of the bank. If we go abuff ten percent, all 538 00:31:41,040 --> 00:31:43,800 Speaker 1: kinds of new rules kick in, whether it be by 539 00:31:43,840 --> 00:31:46,800 Speaker 1: our regulator or the European regulator or this was the 540 00:31:46,880 --> 00:31:49,600 Speaker 1: regulator and we're not inclined to get into a new 541 00:31:49,640 --> 00:31:53,440 Speaker 1: regulatory regime. But sadly speaking the truth, clearly and directly 542 00:31:53,560 --> 00:31:56,800 Speaker 1: is not always a defense. This week, SMB chairman amar 543 00:31:56,920 --> 00:32:02,240 Speaker 1: abdulwa Al Gudari stepped down, reportedly for personal reasons, but 544 00:32:02,360 --> 00:32:06,440 Speaker 1: just in terms of credibility and communication and guidance, they 545 00:32:06,520 --> 00:32:08,320 Speaker 1: felt they had to do this movie. They didn't explain 546 00:32:08,360 --> 00:32:10,760 Speaker 1: why they replaced them as chairman, but it goes without 547 00:32:10,800 --> 00:32:13,440 Speaker 1: saying that much of the recent terminal probably has something 548 00:32:13,520 --> 00:32:16,640 Speaker 1: to do with it. Score one for never answering a 549 00:32:16,760 --> 00:32:20,040 Speaker 1: reporter's question directly. That does it For this episode of 550 00:32:20,080 --> 00:32:22,840 Speaker 1: Wall Street Week, I'm David Weston. This is Bloomberg. See 551 00:32:22,840 --> 00:32:23,440 Speaker 1: you next week.