Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes.
Speaker 1: The economy is in the process of rebounding. Will the
Speaker 1: utter Reserve have its own digital currency? The financial stories
Speaker 1: that cheap hard work. Many people think the eels are
Speaker 1: just going to keep marching up. We have more spending
Speaker 1: coming out of Congress. One of the big questions I
Speaker 1: think on investor's minds inflation through the eyes of the
Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary
Speaker 1: Bryan Wynhan a backup America, Will Smart, CEO of Charlie Sharp.
Speaker 1: Bloomberg wool Street Week with David Weston from Bloomberg Radio.
Speaker 1: Now you see it, now you don't. Concerns about inflation
Speaker 1: and tightening went up in a proof of smoke this week,
Speaker 1: and all it took was a few more words from
Speaker 1: Fed chair J. Powell. This is Bloomberg Wall Street Week.
Speaker 1: I'm David Weston. Whatever the market saw this week, they
Speaker 1: certainly liked it, as equities were up across the board,
Speaker 1: the SMP ending the week at another record high, joining
Speaker 1: the Dow Jones and the NASTAC and rising more than
Speaker 1: two percent, while the ten year Treasury added nine basis points,
Speaker 1: and the yield curve overall steeping about ten basis points.
Speaker 1: To give us a sense of how investors see this
Speaker 1: round trip with the market to the last two weeks.
Speaker 1: Welcome now Barbara and Bernard. She is founder of Windcrest
Speaker 1: Capital and Chris Alman, Calcar's chief investment officer. Welcome to
Speaker 1: both of you to Wall Street Week. So Barbara and
Speaker 1: let me start with you first. We had sort of
Speaker 1: two versions from what at least what the market saw
Speaker 1: and what's going on. One is we gotta be worried
Speaker 1: on inflation. It may be sticking around. The other is,
Speaker 1: don't worry about it. It's a long way off. It's
Speaker 1: not the bigger problem. Which was right, I categorize this
Speaker 1: market is all great and no fear, and that's exactly
Speaker 1: what you saw this week. You know, if I Finance
Speaker 1: were taught the love of seventy two, which essentially means
Speaker 1: if you're annulyzing your returns at seven percent a year,
Speaker 1: you're going to double your money every ten years. The
Speaker 1: pp I clopped six point two. That's really meaningful because
Speaker 1: by that same math, you're losing half of your purchasing
Speaker 1: power every eleven point two years, and this is what
Speaker 1: the market really needs to be focused on. Inflation is
Speaker 1: here to stay. It's not transitory. How will try to
Speaker 1: paint it, is this inflation rat going through the anaconda.
Speaker 1: We all see the bulge in it's moving, don't worry
Speaker 1: about it. I disagree because of the way inflation is calculated.
Speaker 1: It's a year on year number. So sure, cars being
Speaker 1: up thirty five, used cars being up thirty this year
Speaker 1: maybe part of a reopening trade. Lumber being up maybe
Speaker 1: part of a reopening trade, and people going back and stop,
Speaker 1: you know, working on their porches. Maybe why lumbers falling.
Speaker 1: But things like wages, wage, that's sticky, that's not falling.
Speaker 1: And so even if you had zero percent inflation next year,
Speaker 1: that's still a six point increase in the cost of goods,
Speaker 1: So that, in my opinion, is permanent. Um. The other
Speaker 1: thing I would say is that Al kept talking about
Speaker 1: an inclusive and equitable recovery, and what you've gone from
Speaker 1: is an administration that was obsessed with wealth creation to
Speaker 1: one that's really obsessed with wealth redistribution that is inflationary
Speaker 1: as well. And you also look at the Biden administration,
Speaker 1: they're quite focused on decarbonization that is going to take
Speaker 1: a sustained investment, and investment is inflationary. So for multiple reasons,
Speaker 1: I think inflation is here to stay. I think it's
Speaker 1: being underappreciated um and it's something we really need to
Speaker 1: focus on. So Chris Alwin, give us your perspective. You
Speaker 1: are all long term investor. You have a lot of
Speaker 1: money to invest, you also have a lot of obligations
Speaker 1: in the out years. At this point, are you adjusting
Speaker 1: your investment calculus because of the prospect of increased inflation?
Speaker 1: We are, And I agree with Barbara Anna. I think
Speaker 1: that inflation is here to stay, and I think that
Speaker 1: it's subtle and creeping. In the way the government measures
Speaker 1: c p I is not effective at all. But if
Speaker 1: you ask the average person, they're feeling it. They see
Speaker 1: it in prices they're paying, and as she pointed out,
Speaker 1: it's going to be a wage pull as well as
Speaker 1: a price push on inflation. So I'm not sure when
Speaker 1: CPI will really pick it up, but I know we
Speaker 1: feel it and it showing up in lots of different places.
Speaker 1: So as a long term pension plan, as you put
Speaker 1: David with a thirty year horizon, inflation is the real threat.
Speaker 1: So we're actually increasing our inflation sensitive assets, which is
Speaker 1: a whole basket of different things, uh, and increasing it
Speaker 1: pretty steadily over time. We really wanted to be a
Speaker 1: larger percentage of our portfolio. So Barbara, and let me
Speaker 1: ask you about something that was a little bit a
Speaker 1: debate this week on Bloomberg between Severda supermani and of
Speaker 1: Bank of America and Jonathan Golub from the Credit Suite
Speaker 1: about whether an investor should take ano account the ability
Speaker 1: of a company to pass on increased costs to customers.
Speaker 1: Is that doable because some people think it is something
Speaker 1: that is that one way to try to compensate for inflation.
Speaker 1: We're expecting absolutely. I mean, I think you want to
Speaker 1: invest in companies with a high inflation pass through, right.
Speaker 1: If you look at something like Amazon, it's nothing more
Speaker 1: than a price comparison website. If you're selling white goods
Speaker 1: through a price comparison website, it's really hard to pass
Speaker 1: through those costs. You know. You also had Worldpool this
Speaker 1: this this week say they were trying to increase costs,
Speaker 1: but it's you know, it's a crisis. Steals up substantially,
Speaker 1: It's gonna hit margins. So I don't want to be
Speaker 1: in those companies. I want to be in companies with
Speaker 1: a very high inflation passed through rate. Chris, let me
Speaker 1: ask a slightly different question. Another thing that happened this
Speaker 1: week was infrastructure. I mean, it's not there yet, but
Speaker 1: certainly the President announced bipartisan agreement. It looks more likely
Speaker 1: than it did last week. I think it's fair to
Speaker 1: say that, Uh, to what extent does that affect an
Speaker 1: investor's perspective of infect we get a substantial investment infrastructure,
Speaker 1: What does that mean for the long term growth of
Speaker 1: the economy. Well, David, I remember you and I talking
Speaker 1: about inflate infrastructure a couple of years ago. You watch
Speaker 1: Washington much closer than I do. So, yes, we got closer.
Speaker 1: I'll believe it when I see it. But longer term,
Speaker 1: I think it is an interesting area. UM. You know,
Speaker 1: we really do think that that internet services an infrastructure
Speaker 1: type of investment. Broadband UH and the charging stations. That's reality,
Speaker 1: that that's going to be an investment opportunity. UH. The
Speaker 1: government needs to step in and be in the first
Speaker 1: lost position. But I think you'll see private capital flow.
Speaker 1: There's a ton of capital not just in the USA
Speaker 1: but around the world. It's very interested in long, stable
Speaker 1: returns from an infrastructure play. And they love the USA
Speaker 1: because we have a rule of law. We have very
Speaker 1: clean rules and contracts. But they've got to see an
Speaker 1: opportunity where they can make a steady return out of it.
Speaker 1: So the USA always has that challenge in infrastructure and
Speaker 1: just full bonds are always the cheapest form of cost
Speaker 1: of capital to build something, but let's face it, they're
Speaker 1: not good at maintaining it. So if you want to
Speaker 1: build something and maintain it, you've got to have some
Speaker 1: private capital in there. And that's going to be the
Speaker 1: challenge with this bill is figuring out with all this
Speaker 1: federal money coming in, how does private capital fit in
Speaker 1: that capital stack. Okay, our panel of Chris Element of
Speaker 1: Kelster's and Barbara and Bernard of Windcrest Capital will be
Speaker 1: staying with us as we turn to the E s
Speaker 1: G investing and how it could change our world. This
Speaker 1: is Wall Street Week on Bloomberg. This is Bloomberg Wall
Speaker 1: Street Week with David Weston from Bloomberg Radio. E s
Speaker 1: G Environmental, Social and Governance Investing. He's gonna a lot
Speaker 1: of talk these days, and lately it's getting some action
Speaker 1: as well, with the Engine Number one Dissidents Shareholder group
Speaker 1: up ending the x ON Mobile board and this week
Speaker 1: launching an e t F to take that campaign into
Speaker 1: other boardrooms as well. Chris Alement of Callister's and Barbara
Speaker 1: and Bernard of Windcrest Capital are still with us. So Chris,
Speaker 1: I want to start with you because you had a
Speaker 1: little something to do with this with Engine number one.
Speaker 1: Give us your sense of why you back these dissidents
Speaker 1: and what effect you think it's going to have on
Speaker 1: ex On. David, we have been having engagement and dialogue
Speaker 1: with the integrated oil companies for several years now because
Speaker 1: we're really concerned about the future and then and it's
Speaker 1: going to be a lower carbon and these companies have
Speaker 1: to change and adjust. XL Mobibile has just been calcil Trent.
Speaker 1: They have just ignored shareholders for several years. New York
Speaker 1: Common May to run at them um New York City
Speaker 1: Calipers and they just rebuffed everybody. We felt that it's
Speaker 1: time to change at the top. When Engine went approached
Speaker 1: us and said they're going to propose an alternative slate
Speaker 1: for a board, we said we would get behind them.
Speaker 1: So when they announced in December, we came out the
Speaker 1: same day endorsing their slate UH. And that was intentional,
Speaker 1: and we worked behind that UH, supporting their effort. We
Speaker 1: weren't proxy solicitors. What we were doing was really just
Speaker 1: calling our huge network of institutional investors in all the
Speaker 1: groups and raising this and making them aware. UH. And
Speaker 1: I think in the end it was Exon's own actions
Speaker 1: of adding board members suddenly talking about carbon sequestration. They
Speaker 1: really changed their tune because they realized that shareholders were
Speaker 1: unhappy and we're frustrated. And look at that stock chart.
Speaker 1: It really turned around. Now all the integrated oils have
Speaker 1: come up, but look at Exon relative to the others.
Speaker 1: And I think the fact that we were finally engaging
Speaker 1: with them and making some traction with management was waking
Speaker 1: the shareholders up and they cared and it was a
Speaker 1: huge move. So I think the the announcement that we
Speaker 1: saw that we elected three they elected three board members
Speaker 1: onto the Excellent Mobile board is dramatic and it really
Speaker 1: is going to signal a change from the top. Now
Speaker 1: their hard work begins. I don't want ex On Mobile
Speaker 1: to become a codact a Blockbuster video store, or I'll
Speaker 1: go back in my time a warehouse record store. We
Speaker 1: want to see ex On Mobile actually exist twenty and
Speaker 1: thirty years from now. But they've got to change and
Speaker 1: adapt to be able to do that. They can't just
Speaker 1: stick their head in an oil and gas only and
Speaker 1: I now we've received criticism that because that's their main calling.
Speaker 1: But they can adapt and they can adjust. Have a
Speaker 1: become an energy company, and we're gonna need the hydrocarbons
Speaker 1: into the future, but we're not gonna in necessarily need
Speaker 1: to burn them. We're gonna use them for lubricants and
Speaker 1: other things. So they've got a product mix, They've got
Speaker 1: a very solid company, they have good research. I'm optimistic
Speaker 1: with a new fresh board at the top and a
Speaker 1: change of tone at the top that this company can
Speaker 1: can adjust and adapt into the future and survive as
Speaker 1: we're seeing with all the major oils having to do
Speaker 1: to recognize the future is lower and lower carbon emissions. Barbara,
Speaker 1: and what about it. You're an expert in E s
Speaker 1: G investing and something I think of an enthusiast for Chris,
Speaker 1: what I think you did was great, and if you
Speaker 1: can change their capital allocations decisions and save your investment.
Speaker 1: Good on you. That is phenomenal. But what happened this
Speaker 1: week with the launch of another index tracking e t F,
Speaker 1: I don't think is the answer. There is no energy
Speaker 1: transition without an investor transition. So E s G one
Speaker 1: point oh was by the end X and slightly overweight
Speaker 1: tech and underweight oil and gas and charge a premium
Speaker 1: for it. So we've gone from passive B s G
Speaker 1: to what I would now call passive aggressive E s
Speaker 1: G with engine one point oh. And while it's good
Speaker 1: and I hope you know I wish them, I wish
Speaker 1: them well. I think E s G two point oh
Speaker 1: is not engine number one. E s G two point
Speaker 1: oh is the little engine that could, and the little
Speaker 1: engine that could invest in the renewables and the copper
Speaker 1: and nickel and lithium minds that are mining and sustainable
Speaker 1: ways that are going to drive this transition. It's investing
Speaker 1: in E s G leaders who are decarbonizing and are
Speaker 1: disrupting their models because we do need, as Chris says,
Speaker 1: their services, but we need them with less carbon. So
Speaker 1: I don't think E s G two point I was
Speaker 1: about the index at all. I think it's about decarbonization,
Speaker 1: and it takes investment, not divestment. If you listen to
Speaker 1: all they wrote a report they said we need fifty
Speaker 1: trillion to solve climate change. A hundred and three trillion
Speaker 1: has been committed for the un principle responsible investment, two
Speaker 1: times what's needed. So the problem isn't the money. The
Speaker 1: problem is it's going to all the wrong places. And so, Chris,
Speaker 1: I'm so excited that institutional capital is finally starting to
Speaker 1: work together. But what I now that you've got directors
Speaker 1: and now that you've got disclosure, I think the next
Speaker 1: step is using your health to advocate for policy change,
Speaker 1: because if you enact attack on carbon, you're going to
Speaker 1: get the same the same result without having to jump
Speaker 1: up and down on the board room. When you change
Speaker 1: the incentive, you change behaviors. Chris, what do you say? No, Barbara,
Speaker 1: and I agree with you. I was just gonna say that,
Speaker 1: you know, and I think that the key is we
Speaker 1: have been making very large sustainable and long term investments.
Speaker 1: We've been allocating more money to more sustainable companies. What
Speaker 1: we're trying to do is to recognize that everybody, whether
Speaker 1: it's an index and there's just still a lot of
Speaker 1: money in index funds, but that all the companies, if
Speaker 1: they want to survive in the future, have to change
Speaker 1: and adapt um. They can't just stay stuck in the
Speaker 1: current methodology. And and you're right, David, We've got to
Speaker 1: take carbon out of the atmosphere. We've got to change
Speaker 1: the way we get energy, the way we transport, and
Speaker 1: especially the way we do agriculture, and then ultimately certain
Speaker 1: things like as we've talked, concrete steel manufacturers have to
Speaker 1: find new, better ways, less carbon intensive ways to do that.
Speaker 1: So for us, it's it's a holistic investment including our index,
Speaker 1: not excluding it, but including it. And it is active management.
Speaker 1: I've said for a while, but I think of E,
Speaker 1: S and G climate change is the one active decision
Speaker 1: people have to make, and they have to make it
Speaker 1: now because in the next ten to twenty years the
Speaker 1: world is going to radically change and you can't just
Speaker 1: sit on an index and wait. You need to invest
Speaker 1: and make active decisions ahead of that to create capture
Speaker 1: those opportunities. So we think that the changes is inevitable.
Speaker 1: We've got a big sustainable portfolio that we already invest
Speaker 1: over a billion in new sustainable solutions and we're gonna
Speaker 1: increase that over time. So this is a truly great
Speaker 1: discussion on s G. I want both of you come
Speaker 1: back and have it at greater the links because we
Speaker 1: have more to talk about. But I want to throw
Speaker 1: you a curve ball right now. I'll go to view Barbara,
Speaker 1: and because we now know the game stop that meme
Speaker 1: stock has been added, the Russell one thousand. That's just
Speaker 1: happened at the end of the week. So what do
Speaker 1: you make of these meme stocks? Are they changing the
Speaker 1: entire index investing scene? Oh goodness, you know I don't.
Speaker 1: I love to short, but I don't even involved in
Speaker 1: those of these. It's not a good investment, right, and
Speaker 1: so it's it's a heartbreaking to see companies like that
Speaker 1: getting an index. We all know it's not worth what
Speaker 1: it is to what it's trading for today. Um, so yeah,
Speaker 1: I don't. I'm not I'm not for passive investing. There
Speaker 1: you go. I really appreciate this panel has been terrific.
Speaker 1: It's our panel of Chris Aleman, he's Calcier's c I O,
Speaker 1: and Barbara and Bernard CEO and founder of Windcrest Capital
Speaker 1: coming up. So many ways to take a company of
Speaker 1: public from I p O s to direct listings to spacts.
Speaker 1: Which one is right for you? We asked Stacy Cunningham,
Speaker 1: the president of the New York Stock Exchange. That's next
Speaker 1: on Wall Street Week on Bloomberg. This is Bloomberg Wall
Speaker 1: Street Week with David Weston from Bloomberg Radio. Spacks companies
Speaker 1: are turning to blank check mergers to go public more
Speaker 1: than ever before. Just this year, there have been more
Speaker 1: than five hundred and fifty SPACs so far, which is
Speaker 1: more than all of two twenty when more than eighty
Speaker 1: three billion dollars flooded into the space. Here's James Zelter
Speaker 1: of Apollo, So with it with this fact product really
Speaker 1: gaining emergence in the equity markets because of what's going
Speaker 1: on the I P O process, You know, is our
Speaker 1: is our ecosystem of clients and borrowers are our spac issuers.
Speaker 1: We want to make sure that we have the tools
Speaker 1: to respond to them. But this back boom is seeing
Speaker 1: some bumps in the road. A blank check company might
Speaker 1: get you public, but thus far the returns after you
Speaker 1: get the deal done haven't been all that impressive. One
Speaker 1: index that tracks SPACs is down since it's February. High
Speaker 1: fading trading volumes and the possibility of tighter monetary conditions
Speaker 1: are taking a toll on companies that went public through
Speaker 1: blank check mergers. Bab. It is not just something about
Speaker 1: one stock rising. It's a concept. It's about the fact
Speaker 1: that everyone believes it's some new newould saying that this
Speaker 1: concept is here to stay and about to change the world.
Speaker 1: So it is um as I say, a good idea
Speaker 1: going too far. That's Rashier Sharma from Morgan Stanley Investment Management.
Speaker 1: SPACs provide a shortcut to the stock market which business
Speaker 1: is seeking to go public are eager to take on
Speaker 1: the other side of the equation. Investors and SPACs have
Speaker 1: the chance to score a big gain, but know that
Speaker 1: they'll get their money back if the SPAC doesn't meet
Speaker 1: its deadline in getting a big deal done. Here's Social
Speaker 1: Capitals Schamath, Paula Hapatia. It evens the playing field. It
Speaker 1: democratizes access to high growth companies. How because it allows
Speaker 1: retail and it allows long tailed institutional investors. Folks that
Speaker 1: may not have necessarily been Tier one hatch funds now
Speaker 1: they can also play. Regulators have struggled to keep up
Speaker 1: with this back craze, and now the SEC is taking
Speaker 1: a closer look, at least at the disclosure issues. Investors
Speaker 1: in blank check companies give cash to sponsors before they
Speaker 1: know what company they will be investing in. It's really
Speaker 1: making sure that the sponsor who's behind that is fully
Speaker 1: disclosing their take on it. These are very expensive dilutive products.
Speaker 1: That's SEC Chair Gary Gensler. Another concern with SPACs is
Speaker 1: that companies can pitch to investors based on their forward
Speaker 1: looking financials, which isn't allowed in a traditional I p O. Again,
Speaker 1: here's Gensler, and it's those disclosures. Ensuring that the red
Speaker 1: tail investors get the right disclosures and are protected and
Speaker 1: somebody's not misleading them, and secondarily that they're participating just
Speaker 1: like the the institutional investors. So how do you know
Speaker 1: which way of going public is right for you? When
Speaker 1: we turn now to the woman really at the center
Speaker 1: of this process, she is Stacy Cunningham, President of the
Speaker 1: New York Stock Exchange. Stacy, thank you so much for
Speaker 1: being with us on Wall Street Week. There are so
Speaker 1: many different ways I p o s and direct listings
Speaker 1: and SPACs. Now what determines which is the best way
Speaker 1: to take a given company public. It depends on the company.
Speaker 1: If you want to raise money the traditional way, you
Speaker 1: might consider using an I p O, going out on
Speaker 1: the road show with your bankers who are holding your
Speaker 1: hand throughout the process, and working to get that established
Speaker 1: investor base that you want for the long term. And
Speaker 1: that's the reason why so many companies continue to choose
Speaker 1: the I p O processes. They want to choose that
Speaker 1: investor based with the allocation process. If you want to
Speaker 1: have more control around timing and price and work with
Speaker 1: a counterparty, a spact might make more sense for you
Speaker 1: as an issuer, and so you there's less dependency on
Speaker 1: market conditions. With this fact process, you have a little
Speaker 1: bit more control. And then a direct listing really takes
Speaker 1: the elements of of democratizing access to that first day.
Speaker 1: All investors are on a level playing field with a
Speaker 1: direct listing, so retail and institutional alike can just enter
Speaker 1: their their interest and the market prices that opening. And
Speaker 1: so if you're focused on cost of capital and having
Speaker 1: equal access to all investors, that's been a real driver
Speaker 1: for many of those companies choosing a direct listing. Another
Speaker 1: element of the direct listing that's been interesting to companies
Speaker 1: is being able to provide forward looking guidance. And so
Speaker 1: if it's a company that wants to talk about their
Speaker 1: future projections, they've been able to do so within a
Speaker 1: direct listing. They were also relying on that within a spack,
Speaker 1: But the SEC put out some guidance in April about
Speaker 1: the more accounting in spacts and about that future guidance
Speaker 1: because it wasn't uh. Companies have been relying on the
Speaker 1: the a safe harbor provision that is typical for mergers
Speaker 1: to be able to provide that future guidance. In the
Speaker 1: SEC said, wait a minute, that might not apply here
Speaker 1: because as a spack you're really becoming a public company
Speaker 1: for the first time. And so those that those were
Speaker 1: elements that are being slowed down this back market a bit,
Speaker 1: and you're starting to pick them up. The important thing
Speaker 1: is is companies have choices now and they're looking at
Speaker 1: what is the right path to the public markets for them.
Speaker 1: At the end of the day, no matter which path
Speaker 1: they choose, they become a public company and investors are
Speaker 1: going to price their their their stock in the public
Speaker 1: markets exactly the same way. Thank you. So much for
Speaker 1: being with us on Wall Street Week. That's Stacy Huntingham.
Speaker 1: She is the president of the New York Stock Exchange. Thanks.
Speaker 1: Coming up, we get the take of our special contributor
Speaker 1: Larry's Summers of Harvard on a trust policy and whether
Speaker 1: the Biden administration just might be headed in the wrong direction.
Speaker 1: That's next down Wall Street Week on Bloomberg. This is
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: And to wrap up the week, we're joined once again
Speaker 1: by our special contributor, Larry Summers of Harvard. So, Larry,
Speaker 1: We've had a lot of infrastructure Weeks over the last
Speaker 1: few years. Maybe this one really will be infrastructure Week
Speaker 1: because President Biden came out of the White House and
Speaker 1: announced a bipartisan agree at least on a framework on infrastructure.
Speaker 1: There has about five eight billion dollars in new money.
Speaker 1: What do you make of what was agreed to? I
Speaker 1: was glad to see it. The investments overdue. The investment
Speaker 1: will strengthen our economy. The investment will help support employment
Speaker 1: of groups that have had uh trouble. The investment will
Speaker 1: show that America is able to come together and do things.
Speaker 1: And the investment was paid for. I was particularly gratified
Speaker 1: to see for the first time a bipartisan congressional agreement
Speaker 1: recognizing that if we do what we need to do
Speaker 1: as a country and enforced the tax law, better give
Speaker 1: the I R S the resources it needs to go
Speaker 1: back to the strength once had that we can raise
Speaker 1: meaningful amounts of revenue. And I think all of that
Speaker 1: bodes very well for the future. At the same time, Laurie,
Speaker 1: we quickly learned that it's one step in a two
Speaker 1: step process. It's a little bit of an ambiguity here
Speaker 1: about that second step, but certainly Nancy Pelosi, the Speak
Speaker 1: of the House, said we're not going anywhere with this
Speaker 1: agreement on bipartisan bill without having the more partisan approach
Speaker 1: that has the other part of infrastructure, with the White
Speaker 1: House calls the family part of the infrastructure. How essential
Speaker 1: is that second component. Look, we need to make human
Speaker 1: investments in this country. We need above all to be
Speaker 1: investing in early childhood education, uh for our kids. We
Speaker 1: talk about STEM, but how can we how can our
Speaker 1: kids believe we're serious about STEM when huge fracts to
Speaker 1: the chemistry dribs in the country have air conditioning and
Speaker 1: heating systems and UH air air systems that UH don't work.
Speaker 1: So we need more investment than is in this bill.
Speaker 1: This bill is a beginning, it is not an end,
Speaker 1: and so the aspiration too much more is in my view,
Speaker 1: completely correct. Um will it all fit together and happen?
Speaker 1: Here's what I know. We weren't going to get to
Speaker 1: the end of the race unless we've got out of
Speaker 1: the blocks, and we surely got out of the blocks
Speaker 1: in a really important way UH here, and I'm glad.
Speaker 1: I'm glad to see that. And I hope we'll find
Speaker 1: an approach that will pay for the spending UH that
Speaker 1: we need, that will recognize its benefits to the economy
Speaker 1: in a clear way, that will make sure that we're
Speaker 1: investing in what, after all, is our most precious national
Speaker 1: resource UH, our people, that will be taking steps necessary
Speaker 1: in terms of the global issues, like the prevention of
Speaker 1: climate change and like the mitigation of future UH pandemics.
Speaker 1: There is a lot that is left to do that
Speaker 1: should be supported, and the question is are we gonna
Speaker 1: find ways of doing it that are carefully thought out,
Speaker 1: that are disciplined, that are involving the private sector where
Speaker 1: it can make a major contribution, and I hope that's
Speaker 1: what we'll see going forward. But I'm gratified by the
Speaker 1: progress we've seen. Larry, this may have been Infrastructure Week,
Speaker 1: but ANNA trust is a near runner up. As a
Speaker 1: practical matter, we had five bills get through the Judiciary
Speaker 1: committea about fundamentally redoing our antitrust laws to really go
Speaker 1: after I think it's fair to say big tech to
Speaker 1: a large degree. We also have a new chair of
Speaker 1: the CFTC and Lena Khan, who has made a career
Speaker 1: thus far of really challenging some of the big tech
Speaker 1: and that more fundamentally, the antitrust approached, the overall approach
Speaker 1: to the question what do you make of this? Do
Speaker 1: we need to be rethinking in a trust approach in
Speaker 1: light of what's happened with big tech? I'm halfway UH
Speaker 1: with the critics. A new economy needs new thinking and
Speaker 1: UH new approaches. UH. The old concepts weren't designed with
Speaker 1: issues like UH platform companies in mind. But I part
Speaker 1: company completely with UH. The legal scholars UH scholars who
Speaker 1: frankly in many cases are not very familiar with UH
Speaker 1: economic reasoning UH in its intricacy. The people who call
Speaker 1: themselves neo Brandeisians and want to go back to what
Speaker 1: Justice Brandi said in nineteen sixteen. Ultimately, an efficient economy
Speaker 1: that serves consumers well is the right criteria for antitrust policy.
Speaker 1: Any attempt to change the goal of antitrust policy to
Speaker 1: be protecting competitors rather than protecting competition, I believe will
Speaker 1: do grave damage to UH the American economy. So yes,
Speaker 1: we need new approaches, possibly new UH laws, but they
Speaker 1: need to be ultimately grounded in an economic approach that
Speaker 1: is based on having a more functional and efficient economy,
Speaker 1: and the idea that big is bad per se, or
Speaker 1: the idea that big should be broken up just so
Speaker 1: that smaller companies have a better chance to compete even
Speaker 1: when they are less efficient. You read the traditional antitrust
Speaker 1: decisions of the nineties sixties, and they are a horror
Speaker 1: show in terms of their economic illiteracy, where companies make
Speaker 1: efforts to defend themselves by saying that they're inefficient and
Speaker 1: therefore they're not gonna win out over competitors and competition.
Speaker 1: That is the way to American failure, and we must
Speaker 1: make sure that we don't go back to that point.
Speaker 1: That is no argument for indiscriminate corporate power. That is
Speaker 1: no argument for accepting what may maybe abusive practices. But
Speaker 1: let's have a new uh anti trust for a new economy,
Speaker 1: not go back to fail and replace doctrines of the past.
Speaker 1: So learn. Let's conclude with a quick round of summer says. Here.
Speaker 1: Number one, we had Janet Yell in the Treasury Secondary
Speaker 1: go up on Capitol Hills, was testing on her budget actually,
Speaker 1: and she said she's fairly confident the inflation we'd be
Speaker 1: back down under five percent at the end of the year.
Speaker 1: What was your reaction, Gosh, Dave, that anybody was talking
Speaker 1: about five cent would have been inconceivable uh three or
Speaker 1: four months ago, when the consensus was in a completely
Speaker 1: uh different uh place. My guess is that at the
Speaker 1: end of the year inflation will for this year come
Speaker 1: out pretty close to five And it would surprise me
Speaker 1: if we had five percent inflation with no effect on
Speaker 1: inflation UH expectations. It could go either way with respect
Speaker 1: to five percent, I'd be happy, happy to take the
Speaker 1: bet on over at UH four and a half four
Speaker 1: and a half percent. But I think the real comment
Speaker 1: is that it was only three weeks ago when acknowledgements
Speaker 1: that inflation would reach three percent UH this year were
Speaker 1: treated as significantly news UH newsworthy. So this is in
Speaker 1: line with what I have to say. I have predicted
Speaker 1: on your show almost every week that inflation is going
Speaker 1: to surprise on the highside relative to expectations, and I'm
Speaker 1: afraid that continues to be my view. So very well,
Speaker 1: we're on the second half, looking at the second of
Speaker 1: the year. Let's talk about markets overall. What are you expecting?
Speaker 1: More urbulence, less turbulence. I think more UH. You know,
Speaker 1: I for the crisis in some ways that I grew
Speaker 1: up with, UH was the Japanese bubble in the late
Speaker 1: nineteen eighties. And what was interesting was that there were
Speaker 1: a lot of people who were anxious about the Japanese market,
Speaker 1: and then it survived and it kept going and kept rising,
Speaker 1: and then more people got anxious and it grew and
Speaker 1: at a certain point most of the anxious to thrown
Speaker 1: in the towel, and that's when we had UH, really
Speaker 1: an epic UH financial collapse in Japan. And Japan isn't
Speaker 1: Japan's market isn't anywhere near back to where it was
Speaker 1: UH thirty years UH thirty years ago. I don't think
Speaker 1: we're gonna get anything like that in the United States,
Speaker 1: but I think there's a point uh there, when warriors
Speaker 1: have been disproved a few times and people are saying
Speaker 1: we're in a new era, that's when you need to
Speaker 1: be very careful. So my guess is we'll see higher
Speaker 1: rates over the next six months, in the second half
Speaker 1: of the year, and with those higher rates, they'll probably
Speaker 1: be uh more uh more turbulent. Uh. I was glad
Speaker 1: to see the Fed uh move in a quite significant
Speaker 1: way to reflect worries where I've been concerned and others
Speaker 1: have been concerned that they were behind the curve. But
Speaker 1: I think we've got a lot of processing ahead of
Speaker 1: us in markets. Okay, thank you once again to Larry Summers,
Speaker 1: our special contributor. Of course, he's a professor at Harvard. Finally,
Speaker 1: one more thought, and this one hits close to home.
Speaker 1: New York is, after all, the home of Wall Street.
Speaker 1: That location in Lower Manhattan named for a wall the
Speaker 1: Dutch built in the seventeenth century to keep out the
Speaker 1: British and pirates. And let's be frank, I'm not sure
Speaker 1: how successful they were on either of those. New York
Speaker 1: has always been centered in business and in commerce. It's
Speaker 1: always been open to the world, particularly the commercial world.
Speaker 1: And so when the pandemic hit and commerce and imports,
Speaker 1: whether of goods or of tourists, shut down overnight, New
Speaker 1: York was hit particularly hard. This week, New York took
Speaker 1: an important step toward coming back as it gathered at
Speaker 1: the polls for the first time since the pandemic. This
Speaker 1: first post pandemic election was to choose the candidates for
Speaker 1: mayor and controller and the rest of the city leadership.
Speaker 1: We don't know the results yet, we won't know for
Speaker 1: some weeks to come because of that ranked choice voting
Speaker 1: we've learned so much of about, but we do know
Speaker 1: that Wall Street will have a new mayor, and one
Speaker 1: that sees the enormous potential for growth. So once again,
Speaker 1: it's time for New York to reinvent itself. And whatever
Speaker 1: our political persuasion, global Wall Street passed to be rooting
Speaker 1: it on. That does it. For this episode of Wall
Speaker 1: Street Week, I'm David Weston. This is Bloomberg. See you
Speaker 1: next week.