1 00:00:00,240 --> 00:00:05,000 Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes. 2 00:00:05,040 --> 00:00:07,400 Speaker 1: The economy is in the process of rebounding. Will the 3 00:00:07,480 --> 00:00:10,479 Speaker 1: utter reserve have its own digital currency? The financial stories 4 00:00:10,520 --> 00:00:12,879 Speaker 1: that cheap hard work. Many people think the eels are 5 00:00:12,880 --> 00:00:15,080 Speaker 1: just going to keep marching up. We have more spending 6 00:00:15,120 --> 00:00:17,200 Speaker 1: coming out of Congress. One of the big questions I 7 00:00:17,200 --> 00:00:19,880 Speaker 1: think on investor's mind inflation through the eyes of the 8 00:00:19,920 --> 00:00:23,560 Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary, 9 00:00:23,640 --> 00:00:27,240 Speaker 1: Bryan wynhand back of America, Will smar Ceo, Charlie Sharp, 10 00:00:27,360 --> 00:00:31,560 Speaker 1: Bloomberg wool Street Week with David Weston from Bloomberg Radio, 11 00:00:32,000 --> 00:00:35,680 Speaker 1: searching for direction in corporate earnings in Ukraine and in 12 00:00:35,760 --> 00:00:39,040 Speaker 1: the economy. This is Bloomberg Wall Street Week. I'm David Weston. 13 00:00:40,200 --> 00:00:43,200 Speaker 1: Markets turned to earnings this week to find some relief 14 00:00:43,280 --> 00:00:46,360 Speaker 1: from that bad January start, and it looked like tech 15 00:00:46,479 --> 00:00:49,280 Speaker 1: might help us. When Alphabet shot the lights out in 16 00:00:49,320 --> 00:00:53,080 Speaker 1: growing ad search revenue at Google, something CFO Ruth Porrett 17 00:00:53,120 --> 00:00:56,360 Speaker 1: said was because of the strength of the overall economy 18 00:00:56,720 --> 00:01:00,360 Speaker 1: and the shift to e commerce. But then then Meta 19 00:01:00,400 --> 00:01:03,480 Speaker 1: came out with its earnings, sending its stock and sharply 20 00:01:03,520 --> 00:01:08,040 Speaker 1: downward over on news of solid Facebook and user growth, 21 00:01:08,120 --> 00:01:12,959 Speaker 1: which Mark Zuckerbert blamed on stiffer competition. People have a 22 00:01:13,040 --> 00:01:15,640 Speaker 1: lot of choices for how they want to spend their time, 23 00:01:16,200 --> 00:01:20,320 Speaker 1: and apps like TikTok are growing very quickly, and this 24 00:01:20,400 --> 00:01:23,479 Speaker 1: is why our focus on real is so important over 25 00:01:23,480 --> 00:01:25,920 Speaker 1: the long term. And at the end of the week, 26 00:01:26,160 --> 00:01:30,560 Speaker 1: Amazon completed the tech whipsaw by posting strong cloud earnings 27 00:01:30,560 --> 00:01:33,560 Speaker 1: and raising the price for Amazon Prime, which sent its 28 00:01:33,560 --> 00:01:37,400 Speaker 1: stock sharply higher. And we didn't get any real break 29 00:01:37,440 --> 00:01:41,360 Speaker 1: and geopolitics either, as President Biden and President Putin continued 30 00:01:41,400 --> 00:01:44,720 Speaker 1: to talk past one another over the crisis in Ukraine, 31 00:01:45,959 --> 00:01:49,640 Speaker 1: but with Russia's continued his build up if its forces 32 00:01:50,600 --> 00:01:55,320 Speaker 1: around Ukraine, we are ready no matter what happens when 33 00:01:55,320 --> 00:02:01,040 Speaker 1: you might we are analyzing written response is that US 34 00:02:01,160 --> 00:02:05,600 Speaker 1: and NATO received on January six, but it's already clear. 35 00:02:06,160 --> 00:02:09,760 Speaker 1: I inform Mr. Prime Minister about it that principal Russian 36 00:02:09,760 --> 00:02:13,800 Speaker 1: concerns were ignored and if earnings and geopolitics weren't enough 37 00:02:13,840 --> 00:02:17,240 Speaker 1: to confuse this. Along came those US jobs numbers on Friday, 38 00:02:17,520 --> 00:02:20,360 Speaker 1: stunning the markets and economists alike with four and sixty 39 00:02:20,440 --> 00:02:23,160 Speaker 1: seven thousand new jobs in January, we expect only one 40 00:02:23,960 --> 00:02:26,600 Speaker 1: thousand and adding another three in a thousand or visions 41 00:02:26,639 --> 00:02:30,120 Speaker 1: for December. Well, how do markets respond to so much confusion? 42 00:02:30,360 --> 00:02:33,360 Speaker 1: They get volatile, with the SMP five moving up in 43 00:02:33,360 --> 00:02:35,800 Speaker 1: the beginning of the week, dropping on Thursday into Friday, 44 00:02:35,840 --> 00:02:38,079 Speaker 1: and then coming back to end the week up one 45 00:02:38,080 --> 00:02:41,440 Speaker 1: point five and the NASDAC followed a similar pattern, but 46 00:02:41,520 --> 00:02:44,280 Speaker 1: a bit more dramatically, shooting up only to plunge on 47 00:02:44,320 --> 00:02:47,040 Speaker 1: Thursday and rising again on Friday to add two point 48 00:02:47,040 --> 00:02:49,240 Speaker 1: four percent of the week. While in bonds, the ten 49 00:02:49,320 --> 00:02:52,600 Speaker 1: uere yields seemed relatively tame, hovering around one point eight 50 00:02:52,600 --> 00:02:54,800 Speaker 1: percent for most of the week, but then shooting up 51 00:02:54,800 --> 00:02:57,440 Speaker 1: to over one point nine when those jobs numbers came 52 00:02:57,480 --> 00:02:59,280 Speaker 1: in at the end of the week. Tell Us makes 53 00:02:59,280 --> 00:03:02,480 Speaker 1: sense about lo called weekend the markets welcome now Sonal 54 00:03:02,600 --> 00:03:06,360 Speaker 1: DCAI Franklin Templeton Fixed Income chief investment Officer, and Charmine 55 00:03:06,360 --> 00:03:09,160 Speaker 1: most of our Rochmanny. She's chief investment officer for Goldman 56 00:03:09,200 --> 00:03:12,240 Speaker 1: Sex Consumer Wealth Management. So let me start with you. Charmine. 57 00:03:12,440 --> 00:03:15,920 Speaker 1: You have your outlook for two out I've pictured right 58 00:03:15,960 --> 00:03:19,240 Speaker 1: now the cover you have an icebreaker going through some 59 00:03:19,320 --> 00:03:21,919 Speaker 1: really perilous waters here with a lot of icebergs. Tell 60 00:03:22,000 --> 00:03:24,120 Speaker 1: us what you're concerned about for US equities going into 61 00:03:25,000 --> 00:03:27,560 Speaker 1: the key messages an icebreaker, it's a U S Coast 62 00:03:27,560 --> 00:03:31,560 Speaker 1: Guard icebreaker that we've called USS equities, and it's going 63 00:03:31,880 --> 00:03:36,560 Speaker 1: through all these icebergs. Hence the term piloting through. And 64 00:03:36,600 --> 00:03:39,480 Speaker 1: our view is that US equities are best positioned to 65 00:03:39,640 --> 00:03:42,920 Speaker 1: pilot through all the risks, and the icebergs are labeled 66 00:03:42,960 --> 00:03:45,720 Speaker 1: according to the risks we know are inevitable in the 67 00:03:45,840 --> 00:03:49,240 Speaker 1: year like this. So the biggest iceberg out there is 68 00:03:49,320 --> 00:03:53,360 Speaker 1: first inflation, then the next iceberg is interest rate hikes, 69 00:03:53,440 --> 00:03:57,080 Speaker 1: and much further out we have the prospect that maybe 70 00:03:57,080 --> 00:03:59,960 Speaker 1: we're going to have a recession. But there's some icebergs 71 00:04:00,040 --> 00:04:04,000 Speaker 1: we've passed through, like Omicron and big energy prices. And 72 00:04:04,080 --> 00:04:07,120 Speaker 1: so the recommendation to our clients is that stay invested. 73 00:04:07,800 --> 00:04:11,960 Speaker 1: And we're calling it USS equities because we're emphasizing US equities. 74 00:04:12,320 --> 00:04:15,880 Speaker 1: But let's recognize all the risks out there that we 75 00:04:16,000 --> 00:04:19,479 Speaker 1: think will introduce a lot of volatility, as you said, 76 00:04:19,920 --> 00:04:24,560 Speaker 1: but will not derail the economy or derail modestly positive 77 00:04:24,560 --> 00:04:27,719 Speaker 1: returns and equities, we still recommend staying invested because we 78 00:04:27,760 --> 00:04:31,000 Speaker 1: have about a six percent total return as our base case. 79 00:04:31,360 --> 00:04:34,640 Speaker 1: So certainly a lot of volatility, certainly risks that we 80 00:04:34,720 --> 00:04:37,880 Speaker 1: have to navigate, but something that we think is manageable 81 00:04:38,040 --> 00:04:41,880 Speaker 1: for two. So sent out to continue the analogy here 82 00:04:41,920 --> 00:04:43,640 Speaker 1: for a moment. It did feel this week sometimes in 83 00:04:43,680 --> 00:04:47,080 Speaker 1: the markets like it was an icebreaker, zig zagging around 84 00:04:47,160 --> 00:04:49,200 Speaker 1: some of these icebergs, and two of them, as we 85 00:04:49,279 --> 00:04:52,479 Speaker 1: heard from Charmine, were rate hikes and inflation. Tell us 86 00:04:52,520 --> 00:04:54,880 Speaker 1: about those jobs numbers that came out stunned a lot 87 00:04:54,960 --> 00:04:57,400 Speaker 1: of people on Friday. Does that send a signal to 88 00:04:57,440 --> 00:05:00,400 Speaker 1: the Fed? You got to raise your rates even faster 89 00:05:00,520 --> 00:05:03,719 Speaker 1: and even more so? You know, those jobs numbers, we 90 00:05:03,800 --> 00:05:08,520 Speaker 1: have to recognize that we have seasonal adjustment factors playing 91 00:05:08,680 --> 00:05:12,480 Speaker 1: into these jobs numbers. So the jobs numbers, the participation 92 00:05:12,600 --> 00:05:15,920 Speaker 1: rate numbers, actually it's not very clear what they're telling you. 93 00:05:15,920 --> 00:05:17,640 Speaker 1: You know, you talked a little bit about the revision 94 00:05:17,720 --> 00:05:21,120 Speaker 1: data December's numbers. There was also a revision to November's numbers, 95 00:05:21,240 --> 00:05:24,120 Speaker 1: largest revisions on record. However, if you look at the 96 00:05:24,200 --> 00:05:27,080 Speaker 1: year as a whole, some numbers were revised down. It's 97 00:05:27,120 --> 00:05:30,719 Speaker 1: seasonal adjustments. So you know, what you actually take away 98 00:05:30,720 --> 00:05:33,240 Speaker 1: from that is a little hard to see. What I'm 99 00:05:33,279 --> 00:05:35,800 Speaker 1: taking away from the entire report really is that five 100 00:05:35,839 --> 00:05:40,159 Speaker 1: point seven wage increased number. And then if you look 101 00:05:40,320 --> 00:05:44,680 Speaker 1: at non managerial you're looking at six point five, so 102 00:05:44,720 --> 00:05:47,960 Speaker 1: you're looking at really strong wage growth. That's the number 103 00:05:47,960 --> 00:05:50,960 Speaker 1: which I am focused on. And if I look further 104 00:05:51,240 --> 00:05:55,760 Speaker 1: and think about inflation next week, I think that I 105 00:05:55,800 --> 00:05:59,080 Speaker 1: would start getting worried if you've got that upside surprise 106 00:05:59,240 --> 00:06:03,040 Speaker 1: to what is rudely expected to be a zero point 107 00:06:03,440 --> 00:06:07,240 Speaker 1: fourish style increase, which will give you a headline of 108 00:06:07,240 --> 00:06:10,839 Speaker 1: all the seven cent But I'd say that's where my 109 00:06:11,680 --> 00:06:15,360 Speaker 1: concerns would be about the FED speeding up, but it 110 00:06:15,400 --> 00:06:18,560 Speaker 1: would have to be in conjunction with that inflation number. Sherman, 111 00:06:18,600 --> 00:06:20,680 Speaker 1: I don't know about you, but when I hear wage increases, 112 00:06:20,720 --> 00:06:22,520 Speaker 1: I think two things. Number, When it's nice for the 113 00:06:22,520 --> 00:06:25,160 Speaker 1: people getting paid more money, that's really good. On the 114 00:06:25,160 --> 00:06:27,920 Speaker 1: other hand, it can do something to margins for corporations. 115 00:06:28,080 --> 00:06:30,720 Speaker 1: Did it give you any pause at this point? Going two? 116 00:06:30,760 --> 00:06:34,800 Speaker 1: About earnings. When we think about earnings, we believe that 117 00:06:34,839 --> 00:06:38,000 Speaker 1: they have been the strongest driver of the returns since 118 00:06:38,040 --> 00:06:41,320 Speaker 1: the global financial crisis, and they will also be the 119 00:06:41,400 --> 00:06:45,440 Speaker 1: primary driver of returns in twenty two. So our base 120 00:06:45,520 --> 00:06:48,760 Speaker 1: case is about twelve percent growth and earnings, but we 121 00:06:48,839 --> 00:06:52,800 Speaker 1: are assuming that we will see some reduction in margins. 122 00:06:52,839 --> 00:06:55,440 Speaker 1: Last thank thank you so much, Sonaleci, and and most 123 00:06:55,480 --> 00:06:57,440 Speaker 1: of our recommendy will be staying with us as we 124 00:06:57,480 --> 00:07:01,479 Speaker 1: turn to geography and how the United States maybe diverging 125 00:07:01,520 --> 00:07:03,320 Speaker 1: from much of the rest of the world. That's next 126 00:07:03,320 --> 00:07:08,520 Speaker 1: on Wall Street Week on Bloomberg. This is Bloomberg Wall 127 00:07:08,560 --> 00:07:12,640 Speaker 1: Street Week with David Weston from Bloomberg Radio. It wasn't 128 00:07:12,640 --> 00:07:15,000 Speaker 1: just the US markets that got some surprises this week. 129 00:07:15,040 --> 00:07:18,280 Speaker 1: The European Central Bank didn't move, but Manamin Guarde sure 130 00:07:18,320 --> 00:07:21,360 Speaker 1: made a turn in the direction of tightening, and the 131 00:07:21,400 --> 00:07:23,679 Speaker 1: Bank of England moved up a full fifty basis points. 132 00:07:23,760 --> 00:07:26,520 Speaker 1: Show mean, most of our Rochmani of Golden Saxon, Sonaldsai 133 00:07:26,720 --> 00:07:29,120 Speaker 1: of Franklin Templeton remained with us to talk about what 134 00:07:29,120 --> 00:07:30,960 Speaker 1: geography has to do with it, at least when it 135 00:07:30,960 --> 00:07:32,720 Speaker 1: comes to investing these days. So so so now let's talk 136 00:07:32,720 --> 00:07:34,680 Speaker 1: to start with you, because as I say, we saw 137 00:07:34,720 --> 00:07:37,040 Speaker 1: more action on the central back front in Bank of 138 00:07:37,080 --> 00:07:39,960 Speaker 1: England and also ECB. This way, it's surprised, I think 139 00:07:40,040 --> 00:07:41,760 Speaker 1: some people at least what did it do to the 140 00:07:41,800 --> 00:07:45,400 Speaker 1: bond market. Well, we finally saw Blunden School positive cross 141 00:07:45,400 --> 00:07:48,520 Speaker 1: samon three years right, so we it definitely had an impact. 142 00:07:49,000 --> 00:07:51,560 Speaker 1: I would say that the Bank of England is the 143 00:07:51,640 --> 00:07:55,840 Speaker 1: one which I find fascinating. Definitely. The ECB moves large 144 00:07:55,840 --> 00:07:58,880 Speaker 1: ship pools of money. When you see the see a 145 00:07:59,000 --> 00:08:02,720 Speaker 1: major central bank shift on a dime between December and 146 00:08:02,760 --> 00:08:06,120 Speaker 1: now December, probably no rate increases this year and now 147 00:08:06,400 --> 00:08:09,240 Speaker 1: pretty clear that we'll have a couple of rate increases 148 00:08:09,240 --> 00:08:11,720 Speaker 1: i'd say later on this year. It's it's a big 149 00:08:11,800 --> 00:08:14,040 Speaker 1: change if you look at the Bank of England. And 150 00:08:14,080 --> 00:08:16,840 Speaker 1: that was a truly hawkish term because not only are 151 00:08:16,840 --> 00:08:20,320 Speaker 1: we talk in the US, there's still open questions and 152 00:08:20,360 --> 00:08:23,120 Speaker 1: the market fully believes that when the FED reduces the 153 00:08:23,160 --> 00:08:26,400 Speaker 1: size of its balance sheet, it won't actively be selling 154 00:08:26,480 --> 00:08:29,000 Speaker 1: down the balance sheet, which would be big, big news 155 00:08:29,040 --> 00:08:32,959 Speaker 1: for the US the UK. The Bank of England has 156 00:08:33,000 --> 00:08:36,240 Speaker 1: made actually said that they might do that. That's very 157 00:08:36,320 --> 00:08:40,240 Speaker 1: hawkish and very unexpected. And I always look at the 158 00:08:40,240 --> 00:08:43,439 Speaker 1: Bank of England because it's so interesting. They have the 159 00:08:43,520 --> 00:08:47,319 Speaker 1: liberty to move because it's a smaller country own currency, 160 00:08:47,880 --> 00:08:50,040 Speaker 1: and I often look at them as a leading indicator 161 00:08:50,080 --> 00:08:52,680 Speaker 1: of the potentially other major central banks would go. So 162 00:08:53,520 --> 00:08:57,400 Speaker 1: something to keep keep an eye on. Markets potentially have 163 00:08:57,640 --> 00:09:01,800 Speaker 1: room to be majorly surprised and loads of voluntility. I mean, 164 00:09:02,120 --> 00:09:05,560 Speaker 1: talk about the equity side, US versus Europe. US, yes, first, 165 00:09:05,640 --> 00:09:06,960 Speaker 1: the rest of the world. How did you look in 166 00:09:07,760 --> 00:09:11,959 Speaker 1: is it gonna look like that? We have been much 167 00:09:12,000 --> 00:09:15,480 Speaker 1: more bullish on US equities and have recommended that our 168 00:09:15,520 --> 00:09:20,120 Speaker 1: clients actually overweight US equities and their portfolios relative to 169 00:09:20,160 --> 00:09:22,600 Speaker 1: market cap. And just to give you a sense of 170 00:09:22,640 --> 00:09:25,200 Speaker 1: the magnitude of the difference in terms of US and 171 00:09:25,240 --> 00:09:27,880 Speaker 1: other parts of the world, since the trough of the 172 00:09:27,880 --> 00:09:32,040 Speaker 1: global financial crisis, US equities have returned about seven hundred 173 00:09:32,120 --> 00:09:35,840 Speaker 1: sixty And we'd like to use culative numbers because we 174 00:09:35,920 --> 00:09:38,679 Speaker 1: think it is just such a huge number. It has 175 00:09:38,720 --> 00:09:43,599 Speaker 1: more impact when people hear the culative numbers. Developed equities 176 00:09:43,640 --> 00:09:48,000 Speaker 1: outside the US returned around let's say two hundred and sixty, 177 00:09:48,520 --> 00:09:53,679 Speaker 1: so roughly five hundred percent lower returns. Emerging markets a 178 00:09:53,720 --> 00:09:56,360 Speaker 1: little bit less than that. In China just two d 179 00:09:57,800 --> 00:10:01,760 Speaker 1: so US has far out earned an outpaced in terms 180 00:10:01,800 --> 00:10:04,400 Speaker 1: of returns the rest of the world, and last year 181 00:10:04,840 --> 00:10:07,480 Speaker 1: just was an incredible example of that. So last year 182 00:10:07,559 --> 00:10:11,240 Speaker 1: US equities up just under thirty percent, let's say twenty nine, 183 00:10:12,480 --> 00:10:16,800 Speaker 1: non US developed equities around twenty, emerging markets flat and 184 00:10:16,960 --> 00:10:21,560 Speaker 1: China down. While that kind of a difference can't persist forever, 185 00:10:21,640 --> 00:10:24,680 Speaker 1: as they say, trees do not grow to the skies, however, 186 00:10:24,800 --> 00:10:28,360 Speaker 1: we do think US will continue to out earn other 187 00:10:28,440 --> 00:10:31,600 Speaker 1: parts of the world, other regions, and so even though 188 00:10:31,640 --> 00:10:34,680 Speaker 1: they appear cheaper, we think some of that cheapness is 189 00:10:34,720 --> 00:10:37,240 Speaker 1: just because of the sector exposure. US has a lot 190 00:10:37,320 --> 00:10:41,280 Speaker 1: more earnings, for example, from technology and faster growing sectors. 191 00:10:41,640 --> 00:10:45,000 Speaker 1: They have less market cap weight in areas like energy 192 00:10:45,000 --> 00:10:48,960 Speaker 1: and financials that are cheaper, while emerging markets and non 193 00:10:49,080 --> 00:10:51,559 Speaker 1: US developed economies have more of that. And so, now, 194 00:10:51,640 --> 00:10:54,240 Speaker 1: what about on the bond side, given what's going right now, 195 00:10:54,320 --> 00:10:56,280 Speaker 1: does it make any sense, for example, to be owning 196 00:10:56,679 --> 00:11:00,800 Speaker 1: European bonds, particularly sovereign bonds right now? Again, you've got 197 00:11:00,800 --> 00:11:02,839 Speaker 1: to pick and choose. You The one thing about Europe 198 00:11:02,840 --> 00:11:05,200 Speaker 1: which is true is there are different countries in Europe 199 00:11:05,200 --> 00:11:08,320 Speaker 1: different underlying fundamentals, and there's always going to there will 200 00:11:08,400 --> 00:11:11,880 Speaker 1: always be parks of Europe which look attractive at different 201 00:11:11,920 --> 00:11:14,600 Speaker 1: points in time, and I think that as you start 202 00:11:14,679 --> 00:11:18,880 Speaker 1: seeing you wills go up in your roope. Conversely, one 203 00:11:18,920 --> 00:11:22,800 Speaker 1: of the anchors which kept which people expected would keep 204 00:11:23,040 --> 00:11:26,200 Speaker 1: US ten years from going up too high, which is 205 00:11:26,280 --> 00:11:30,559 Speaker 1: that as the differential with Europe, with the Europe Eurozone 206 00:11:30,679 --> 00:11:35,400 Speaker 1: kept increasing, you would see influence into into the US, 207 00:11:35,440 --> 00:11:37,800 Speaker 1: and thus the long end would stay anchored. That starts 208 00:11:37,920 --> 00:11:40,720 Speaker 1: that that argument starts becoming a bit a bit weaker 209 00:11:41,160 --> 00:11:43,680 Speaker 1: as you get some kind of normalization, and it's gonna 210 00:11:43,720 --> 00:11:46,719 Speaker 1: be much lower Sherman. When you describe the really substantial 211 00:11:46,720 --> 00:11:51,120 Speaker 1: difference between for example, US and Europe with equities, I 212 00:11:51,160 --> 00:11:53,320 Speaker 1: tend to think over the long term, you can't have 213 00:11:53,360 --> 00:11:55,080 Speaker 1: those kind of differentials are to serve a law of 214 00:11:55,120 --> 00:11:58,559 Speaker 1: osmosis in financial markets? Does that suggest maybe it is 215 00:11:58,600 --> 00:12:00,880 Speaker 1: time to actually go into so the markets such as 216 00:12:00,920 --> 00:12:04,160 Speaker 1: Europe because they are undervalued. That is actually one of 217 00:12:04,240 --> 00:12:06,480 Speaker 1: the questions or clients ask us. So when you look 218 00:12:06,520 --> 00:12:11,480 Speaker 1: at valuations across a series of metrics, US is trading 219 00:12:11,520 --> 00:12:15,760 Speaker 1: at a much higher premium relative to again emerging markets 220 00:12:15,880 --> 00:12:18,800 Speaker 1: and non US developed and clients are asking, isn't this 221 00:12:18,880 --> 00:12:21,760 Speaker 1: time to go, given that it's much cheaper than even 222 00:12:21,800 --> 00:12:24,960 Speaker 1: average levels, But first of all, we do adjust for 223 00:12:25,080 --> 00:12:28,360 Speaker 1: sector weights and it doesn't look as cheap. And as 224 00:12:28,360 --> 00:12:32,439 Speaker 1: we project forward, US trend growth is actually higher than 225 00:12:32,480 --> 00:12:35,400 Speaker 1: that of let's say, the Eurozone or Japan, so you'd 226 00:12:35,440 --> 00:12:39,120 Speaker 1: expect better earnings growth. The other two really interesting facts 227 00:12:39,120 --> 00:12:42,199 Speaker 1: are US labor is a much more productive labor force 228 00:12:42,640 --> 00:12:46,720 Speaker 1: and US corporate management has much better UH management scores, 229 00:12:47,080 --> 00:12:50,360 Speaker 1: so actually they get better earnings out of similar levels 230 00:12:50,440 --> 00:12:53,160 Speaker 1: of growth. And so our view is that the earnings 231 00:12:53,160 --> 00:12:57,520 Speaker 1: gap will continue, but the outperformance will not be as significant. 232 00:12:57,920 --> 00:13:00,000 Speaker 1: So now we've had this whole discussion without once mentioned 233 00:13:00,120 --> 00:13:02,480 Speaker 1: supply chains, which has been talked about an awful lot. 234 00:13:02,679 --> 00:13:04,880 Speaker 1: Talk about supply chains, and do you see a differential 235 00:13:04,880 --> 00:13:07,320 Speaker 1: potential between the United States and Europe, or United States 236 00:13:07,400 --> 00:13:10,080 Speaker 1: and Asia with respective relief of some of the clogging 237 00:13:10,559 --> 00:13:13,240 Speaker 1: of the supply chains. I'm not so sure we're going 238 00:13:13,280 --> 00:13:16,200 Speaker 1: to see differences on supply chains. I would actually say 239 00:13:16,280 --> 00:13:20,520 Speaker 1: that one thing which has really kept me a little 240 00:13:20,559 --> 00:13:23,240 Speaker 1: bit amused is that when I look at the inflation 241 00:13:24,000 --> 00:13:26,280 Speaker 1: expectations for most of this year. The second half of 242 00:13:26,320 --> 00:13:29,320 Speaker 1: the year, you typically see a very sharp decline in 243 00:13:29,440 --> 00:13:32,400 Speaker 1: expectations of where inflation will go, partly related to the 244 00:13:32,440 --> 00:13:35,120 Speaker 1: idea that you know, you've got these effects which fallout, 245 00:13:35,360 --> 00:13:39,120 Speaker 1: but then also with this idea that supply chains are 246 00:13:39,160 --> 00:13:41,280 Speaker 1: going to clear up, and I don't. I really don't 247 00:13:41,280 --> 00:13:44,000 Speaker 1: think supply chains follow the years, so I don't I 248 00:13:44,000 --> 00:13:46,560 Speaker 1: don't put much faith in that. The other thing I'd 249 00:13:46,600 --> 00:13:50,960 Speaker 1: say is, we haven't talked about this much, but fortunately 250 00:13:51,120 --> 00:13:54,280 Speaker 1: it is only China, but China is committed to a 251 00:13:54,400 --> 00:13:59,480 Speaker 1: zero COVID policy. Now, zero COVID is interesting because you 252 00:13:59,520 --> 00:14:05,080 Speaker 1: can have completely, very difficult to predict stocks and stocks 253 00:14:05,120 --> 00:14:08,880 Speaker 1: to supply chains, and therefore I remain a little bit 254 00:14:08,920 --> 00:14:14,240 Speaker 1: skeptical about an easy, smooth unclogging of all the supply chains. 255 00:14:14,360 --> 00:14:17,120 Speaker 1: That's one thing. That's another point I would say, which 256 00:14:17,160 --> 00:14:20,360 Speaker 1: is different to me between the US and certainly Europe, 257 00:14:20,400 --> 00:14:23,960 Speaker 1: would be that UH would be that in the U 258 00:14:24,040 --> 00:14:26,720 Speaker 1: S you've got very very strong demand, no question, We've 259 00:14:26,720 --> 00:14:28,760 Speaker 1: got no trouble with demand in the United States and 260 00:14:28,880 --> 00:14:31,880 Speaker 1: to supply holding it back many thanks. Now that's anat 261 00:14:32,520 --> 00:14:35,480 Speaker 1: of Franklin Temple and Charmine. Most of our rakimany of 262 00:14:35,600 --> 00:14:40,880 Speaker 1: Golden Sachs coming up. If inflation is the question, can 263 00:14:41,000 --> 00:14:44,080 Speaker 1: real estate be at least part of the answer. We 264 00:14:44,120 --> 00:14:46,040 Speaker 1: had to read on the state of the market from 265 00:14:46,120 --> 00:14:50,520 Speaker 1: Jeff blah CEO of Related companies in our buildings were 266 00:14:50,640 --> 00:14:54,440 Speaker 1: essentially full and rents, you know, even higher than pre COVID. 267 00:14:56,040 --> 00:15:02,120 Speaker 1: This is Wall Street Week on Bloomberg. This is Bloomberg 268 00:15:02,200 --> 00:15:08,520 Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. FED 269 00:15:08,600 --> 00:15:11,560 Speaker 1: chair j Pal made it official last week. Dealing with 270 00:15:11,600 --> 00:15:15,880 Speaker 1: inflation has become job one. Inflation remains well above our 271 00:15:16,280 --> 00:15:20,480 Speaker 1: longer run goal of two. Supply and demand and balance 272 00:15:20,520 --> 00:15:22,520 Speaker 1: is related to the pandemic and the reopening of the 273 00:15:22,560 --> 00:15:26,560 Speaker 1: economy have continued to contribute to elevated levels of inflation. 274 00:15:26,760 --> 00:15:29,200 Speaker 1: But as the FED tries to get inflation under control, 275 00:15:29,480 --> 00:15:32,640 Speaker 1: real estate maybe pushing the other way. All of us, 276 00:15:32,680 --> 00:15:35,360 Speaker 1: from New York City mayor Adams on down want to 277 00:15:35,400 --> 00:15:39,000 Speaker 1: get people back into the office. I need my companies 278 00:15:39,040 --> 00:15:41,760 Speaker 1: back open and operated. You can't run a city like 279 00:15:41,800 --> 00:15:47,120 Speaker 1: New York even as the prices are going up for tenants. 280 00:15:47,120 --> 00:15:51,200 Speaker 1: Our data has a rent increase of almost eighteen percent 281 00:15:51,360 --> 00:15:54,000 Speaker 1: over the course of one But what may not be 282 00:15:54,080 --> 00:15:57,840 Speaker 1: good for inflation or renters may work just fine for investors. 283 00:15:58,120 --> 00:16:01,800 Speaker 1: Investors like John Gray of Backstone the real estate market, 284 00:16:01,840 --> 00:16:05,440 Speaker 1: for instance, because the fundamentals are very strong, particularly the 285 00:16:05,520 --> 00:16:09,600 Speaker 1: sectors were focused on. We're seeing pretty robust SAMs. And 286 00:16:09,680 --> 00:16:12,960 Speaker 1: of course, if it's inflation you're worried about. Mark Kissel 287 00:16:13,040 --> 00:16:16,160 Speaker 1: of PIMCO reminds us that real estate is the tried 288 00:16:16,320 --> 00:16:19,560 Speaker 1: and true hedge. We like apartment rates for a lot 289 00:16:19,600 --> 00:16:22,560 Speaker 1: of reasons. It's not just the fact that they're real assets. 290 00:16:22,600 --> 00:16:26,000 Speaker 1: The fact that they are an implicit inflation hedge for 291 00:16:26,080 --> 00:16:32,360 Speaker 1: higher rents UH and higher wages as another reason. And 292 00:16:32,360 --> 00:16:34,720 Speaker 1: when it comes to real estate, particularly real estate in 293 00:16:34,760 --> 00:16:37,080 Speaker 1: the New York area, there is no one who knows 294 00:16:37,080 --> 00:16:40,920 Speaker 1: it better than Jeff Blau Here's the CEO of Related Companies. So, Jeff, 295 00:16:40,960 --> 00:16:43,000 Speaker 1: thanks so much for joining us. Let's start with New York. 296 00:16:43,000 --> 00:16:45,800 Speaker 1: Tell us what's going on with residential, what's going on 297 00:16:46,000 --> 00:16:48,640 Speaker 1: with officers. We hear a lot of stories about dramatically 298 00:16:48,680 --> 00:16:51,880 Speaker 1: increased prices. New York is really, i would say, on 299 00:16:51,880 --> 00:16:55,680 Speaker 1: a tremendous rebound post COVID. You know, I would say 300 00:16:55,840 --> 00:16:58,520 Speaker 1: everyone really thought we'd be fully back to the office, 301 00:16:58,640 --> 00:17:01,480 Speaker 1: back to everything's fighting in New York right after New 302 00:17:01,560 --> 00:17:04,639 Speaker 1: Year's within with the variant. I think that got delayed 303 00:17:04,640 --> 00:17:06,320 Speaker 1: a little bit, but it seems to be blowing its 304 00:17:06,320 --> 00:17:09,399 Speaker 1: way through the city. And certainly I can tell you 305 00:17:09,440 --> 00:17:12,000 Speaker 1: on the office side, our tenants are all planning for 306 00:17:12,600 --> 00:17:15,919 Speaker 1: real return back to work UM whatever that new definition 307 00:17:16,080 --> 00:17:18,880 Speaker 1: is UM, you know, sometime in the month of February. 308 00:17:18,880 --> 00:17:21,800 Speaker 1: And I think that's very very positive. We've got double 309 00:17:21,840 --> 00:17:26,399 Speaker 1: digit increases of occupancy UM, people actually showing up to 310 00:17:26,440 --> 00:17:29,320 Speaker 1: the office UM week over week, and so I think 311 00:17:29,320 --> 00:17:33,920 Speaker 1: that's a very positive trend in terms of the city overall. UM. 312 00:17:33,960 --> 00:17:37,480 Speaker 1: You've definitely seen people who had left during COVID come back. 313 00:17:38,280 --> 00:17:41,760 Speaker 1: Apartment buildings that went down in terms of occupancy to 314 00:17:44,560 --> 00:17:48,840 Speaker 1: roughly are now back to UM. In our buildings were 315 00:17:48,960 --> 00:17:52,240 Speaker 1: essentially full UM at rents, you know, even higher than 316 00:17:52,280 --> 00:17:55,560 Speaker 1: pre COVID. So that's been a tremendous bounce back because 317 00:17:55,920 --> 00:18:00,280 Speaker 1: we were down to that roughly number and concessions and 318 00:18:00,440 --> 00:18:04,240 Speaker 1: so on, and so that's been a tremendous rebound on 319 00:18:04,359 --> 00:18:08,680 Speaker 1: the for sale condominium side, New York City had its 320 00:18:08,680 --> 00:18:12,800 Speaker 1: best for sale year since two thousand seven. UM, So 321 00:18:12,880 --> 00:18:15,280 Speaker 1: I think again showing that resilience of the market. And 322 00:18:15,640 --> 00:18:19,280 Speaker 1: back to the city. UM, there's something like seventeen thousand 323 00:18:19,280 --> 00:18:22,359 Speaker 1: apartments that traded hands last year, as they said, the 324 00:18:22,359 --> 00:18:26,000 Speaker 1: biggest increase since UM, the biggest sales volume since two 325 00:18:26,080 --> 00:18:28,680 Speaker 1: thousand seven. So I think the city is feeling pretty 326 00:18:28,720 --> 00:18:32,159 Speaker 1: vibrant almost all parts of the city. Uh. If you 327 00:18:32,240 --> 00:18:35,000 Speaker 1: try to go out to a restaurant. UM. While again 328 00:18:35,040 --> 00:18:37,320 Speaker 1: there was a dip in January, it seems to me 329 00:18:37,400 --> 00:18:41,840 Speaker 1: now things are busy again. The streets are busy, traffics back. UM, 330 00:18:41,880 --> 00:18:44,080 Speaker 1: it feels good. I'd say. The only areas that feel 331 00:18:44,359 --> 00:18:47,480 Speaker 1: kind of quiet to me are are really true commercial 332 00:18:47,520 --> 00:18:50,800 Speaker 1: districts in Midtown a little bit UM here at Hudson Yards, 333 00:18:50,840 --> 00:18:54,160 Speaker 1: it's it's very vibrant if you're outside. UM feels great. 334 00:18:54,480 --> 00:18:56,119 Speaker 1: And so all the things that we love about New 335 00:18:56,200 --> 00:18:58,840 Speaker 1: York seemed to be kind of back in place. And 336 00:18:58,920 --> 00:19:01,399 Speaker 1: I'm feeling good. On the commercial front. You say that 337 00:19:01,440 --> 00:19:04,440 Speaker 1: you are getting back into full occupancy. Are you repurposing 338 00:19:04,520 --> 00:19:06,840 Speaker 1: some of that because we certainly read stories about, particularly 339 00:19:06,880 --> 00:19:09,560 Speaker 1: in the retail area that there's not the same demand 340 00:19:09,560 --> 00:19:11,879 Speaker 1: for space. Are you having to repurpose some of your 341 00:19:11,880 --> 00:19:16,720 Speaker 1: commercial space? We actually we're repurposing. As you said, UM 342 00:19:16,920 --> 00:19:19,200 Speaker 1: retail has probably suffered the most of all the asset 343 00:19:19,280 --> 00:19:22,080 Speaker 1: classes UM at Hudson Yards, I think, you know, we 344 00:19:22,200 --> 00:19:25,639 Speaker 1: built a seven level retail center that was anchored by 345 00:19:25,680 --> 00:19:30,480 Speaker 1: Neiman Marcus, and when Nieman's filed bankruptcy, instead of trying 346 00:19:30,480 --> 00:19:33,280 Speaker 1: to retenant that for retail, we decided to repurpose that 347 00:19:33,359 --> 00:19:36,520 Speaker 1: to office. And so we now we we are in 348 00:19:36,560 --> 00:19:40,000 Speaker 1: the process of converting UM and creating about four hundred 349 00:19:40,040 --> 00:19:42,399 Speaker 1: thousand feet of new office space at Hudson Yards to 350 00:19:42,440 --> 00:19:45,959 Speaker 1: deal with the increased demand that we're seeing from actually 351 00:19:46,000 --> 00:19:47,639 Speaker 1: mostly a lot of it from tenants that are in 352 00:19:47,640 --> 00:19:51,400 Speaker 1: place today that are growing and expanding. And so while uh, 353 00:19:51,440 --> 00:19:54,600 Speaker 1: the office occupancy might be kind of in the mid 354 00:19:54,640 --> 00:19:58,199 Speaker 1: thirties or we I think we had UM day in 355 00:19:58,240 --> 00:20:01,680 Speaker 1: and day out, today companies are a thinking forward beyond 356 00:20:02,160 --> 00:20:04,200 Speaker 1: kind of that full return to the office and making 357 00:20:04,240 --> 00:20:07,000 Speaker 1: the decision to take even more space. And so we're 358 00:20:07,000 --> 00:20:10,080 Speaker 1: feeling pretty optimistic about the office side. And like you said, 359 00:20:10,080 --> 00:20:13,160 Speaker 1: I think there will be some conversions UM where possible 360 00:20:13,280 --> 00:20:16,960 Speaker 1: away from uses that are not quite as valuable anymore, 361 00:20:17,000 --> 00:20:19,359 Speaker 1: retail being the top one. There's been a lot of 362 00:20:19,400 --> 00:20:24,719 Speaker 1: talk about, uh converting hotels into residential or offices into 363 00:20:25,240 --> 00:20:29,320 Speaker 1: different uses. I think it's pretty hard to do those conversions. 364 00:20:29,600 --> 00:20:31,520 Speaker 1: I don't think there'll be too many of them. Um. 365 00:20:31,560 --> 00:20:34,040 Speaker 1: I think I think it's it's hard if you've got 366 00:20:34,040 --> 00:20:37,560 Speaker 1: a building that's got tenants to vacate. UM. So I 367 00:20:38,040 --> 00:20:40,520 Speaker 1: think what we did at Hudson Yards was pretty unusual, 368 00:20:40,560 --> 00:20:43,280 Speaker 1: and you know, we took the opportunity to make that change, 369 00:20:43,280 --> 00:20:46,800 Speaker 1: and uh, that space is mostly least already, so we 370 00:20:46,920 --> 00:20:49,480 Speaker 1: we we're pretty positive about the office sector here. Thank 371 00:20:49,520 --> 00:20:52,000 Speaker 1: you so much to Jeff Blow He is the CEO 372 00:20:52,400 --> 00:20:57,080 Speaker 1: of Related Companies. Coming up, we wrap up the week 373 00:20:57,119 --> 00:21:02,920 Speaker 1: with special contributor Larry Summers of Harvard. This is Wall 374 00:21:02,960 --> 00:21:07,960 Speaker 1: Street Week on Bloomberg. This is Bloomberg Wall Street Week 375 00:21:08,160 --> 00:21:11,840 Speaker 1: with David Weston from Bloomberg Radio. This is Walter Week. 376 00:21:11,960 --> 00:21:13,960 Speaker 1: I'm David west Today we're gonna wrap up this week 377 00:21:14,000 --> 00:21:17,600 Speaker 1: once again with our very special contributing Larry Summers of Harvard. So, Larry, 378 00:21:17,800 --> 00:21:20,479 Speaker 1: one of the big surprises this week were those jobs numbers. 379 00:21:20,520 --> 00:21:24,800 Speaker 1: The estimates were one came out of four sixty seven. Also, 380 00:21:24,840 --> 00:21:27,560 Speaker 1: there were over three hundred thousand jobs added for last 381 00:21:27,600 --> 00:21:30,000 Speaker 1: month in a revision. So what does that tell us? 382 00:21:30,359 --> 00:21:33,000 Speaker 1: Why are we so surprised by this? A lot of 383 00:21:33,000 --> 00:21:36,400 Speaker 1: its special factors? They do a special year end revision 384 00:21:36,840 --> 00:21:40,320 Speaker 1: of the seasonal factors, UH, David, I think the right 385 00:21:40,359 --> 00:21:44,080 Speaker 1: takeaway from these numbers is that the economy is going 386 00:21:44,720 --> 00:21:48,080 Speaker 1: UH strong, and I think the most significant number in 387 00:21:48,160 --> 00:21:51,000 Speaker 1: it may have been the seven tenths of a percent 388 00:21:51,560 --> 00:21:57,439 Speaker 1: almost nine annual rate UH increase in wages UH in 389 00:21:57,560 --> 00:22:00,359 Speaker 1: the last month. It's hard to know exactly really what 390 00:22:00,520 --> 00:22:04,520 Speaker 1: to UH make of make of that, but it sure 391 00:22:04,640 --> 00:22:08,600 Speaker 1: looks like we've now got wage inflation in the United 392 00:22:08,680 --> 00:22:14,120 Speaker 1: States at really a rate that is very strong. And unfortunately, 393 00:22:14,760 --> 00:22:20,000 Speaker 1: since labor is sev of all costs, that suggests that, 394 00:22:20,480 --> 00:22:24,000 Speaker 1: apart from all the special factors used, cars, housing, and 395 00:22:24,080 --> 00:22:30,480 Speaker 1: so forth, we're moving towards entrenching UH inflation at well 396 00:22:30,520 --> 00:22:34,280 Speaker 1: above the target two percent rate. Does this surprise upside 397 00:22:34,440 --> 00:22:37,439 Speaker 1: and the jobs yield? This one more piece of evidence 398 00:22:37,480 --> 00:22:40,760 Speaker 1: that the Fed is behind with the special monetary policy, 399 00:22:40,880 --> 00:22:42,800 Speaker 1: and if so, is the message of Fed from this 400 00:22:42,880 --> 00:22:45,399 Speaker 1: quite possibly, you've got to move faster and bigger than 401 00:22:45,400 --> 00:22:48,800 Speaker 1: perhaps even you thought. There's no question, with the benefit 402 00:22:48,840 --> 00:22:52,480 Speaker 1: of hindsight, that the FED is behind the curve. I 403 00:22:52,480 --> 00:22:57,119 Speaker 1: think it's important to say, respecting the FED, that the 404 00:22:57,280 --> 00:23:01,080 Speaker 1: errors of judgment they made last summer and last spring 405 00:23:01,560 --> 00:23:07,399 Speaker 1: were quite widely shared in the economic forecasting community. But 406 00:23:07,560 --> 00:23:11,240 Speaker 1: they were errors, nonetheless, and I think the Fed's got 407 00:23:11,280 --> 00:23:18,119 Speaker 1: to uh catch up now. And I rather doubt that 408 00:23:18,400 --> 00:23:23,120 Speaker 1: bringing real interest rates up all the way to negative two, 409 00:23:24,200 --> 00:23:28,640 Speaker 1: which is about what's factored in right now, well, let 410 00:23:28,640 --> 00:23:30,640 Speaker 1: me just be specific with you. Over a month ago 411 00:23:30,720 --> 00:23:33,879 Speaker 1: on this program, you said there should be five rate hikes. 412 00:23:34,520 --> 00:23:37,840 Speaker 1: Should it be even higher than that? Look, one of 413 00:23:37,880 --> 00:23:42,080 Speaker 1: the very good things about J. Powell's last press conference 414 00:23:42,760 --> 00:23:46,320 Speaker 1: was he he he didn't say he was doing it, 415 00:23:46,440 --> 00:23:53,399 Speaker 1: but he in effect ditched a lot of misguided framework 416 00:23:53,480 --> 00:23:56,720 Speaker 1: that the FED had talked about earlier when he talked 417 00:23:56,760 --> 00:24:00,160 Speaker 1: about being humble and nimble. And that's the way we've 418 00:24:00,200 --> 00:24:03,400 Speaker 1: all got to be before the data. So I don't 419 00:24:03,440 --> 00:24:05,960 Speaker 1: think there's any need to judge right now whether you 420 00:24:06,040 --> 00:24:10,919 Speaker 1: need five or whether you need seven rate increases. Uh 421 00:24:11,119 --> 00:24:14,800 Speaker 1: this year, my best guess is that they're in the 422 00:24:14,920 --> 00:24:21,639 Speaker 1: end gonna need more than they now think, and UH 423 00:24:21,720 --> 00:24:25,280 Speaker 1: that markets have to be prepared for a rate hike 424 00:24:25,320 --> 00:24:28,520 Speaker 1: in every meeting, and they have to be prepared for 425 00:24:28,560 --> 00:24:33,640 Speaker 1: the possibility that as the inflation process continues, we might 426 00:24:33,760 --> 00:24:38,960 Speaker 1: need to have meetings with more than a single basis 427 00:24:39,080 --> 00:24:44,640 Speaker 1: point UH rate hike. But the data are very uncertain, 428 00:24:45,280 --> 00:24:51,040 Speaker 1: and we've all got to recognize and be humble about that. 429 00:24:51,240 --> 00:24:54,000 Speaker 1: So it's hard for me to know what will happen. 430 00:24:54,480 --> 00:24:58,720 Speaker 1: But certainly anyone who's not prepared for a rate hike 431 00:24:58,920 --> 00:25:03,200 Speaker 1: at every moment me eating as a real possibility, even 432 00:25:03,359 --> 00:25:08,239 Speaker 1: with multiple rate hikes um on occasion, I think is 433 00:25:08,960 --> 00:25:12,680 Speaker 1: underestimating the range of possibility. Larry, you would be the 434 00:25:12,680 --> 00:25:15,080 Speaker 1: first one to say there's a risk in undertightening, also 435 00:25:15,119 --> 00:25:17,440 Speaker 1: a risk in overtightening. Where is that balance in your 436 00:25:17,440 --> 00:25:19,760 Speaker 1: mind right now? What is the bigger risk for US 437 00:25:19,840 --> 00:25:24,600 Speaker 1: overtightening or undertightening. I didn't get an economy with four 438 00:25:24,680 --> 00:25:29,280 Speaker 1: percent and declining unemployment rate, with a record level of 439 00:25:29,400 --> 00:25:34,040 Speaker 1: job vacancies, and with wage inflation now on more and 440 00:25:34,119 --> 00:25:39,399 Speaker 1: more measures above six percent. I think the greater risk 441 00:25:39,600 --> 00:25:43,960 Speaker 1: is that we undertighten and that we end up with 442 00:25:44,800 --> 00:25:49,919 Speaker 1: UH an economy with underlying inflation above four percent, and 443 00:25:49,960 --> 00:25:54,760 Speaker 1: then there's no alternative at some point to do the 444 00:25:54,880 --> 00:25:58,520 Speaker 1: kind of thing that Paul Vulker had to do at 445 00:25:58,520 --> 00:26:00,760 Speaker 1: the end of the n East. Now we're not going 446 00:26:00,800 --> 00:26:03,360 Speaker 1: to have double digit inflation, we're not going to have 447 00:26:04,359 --> 00:26:07,480 Speaker 1: interest rates, we're not going to have a recession of 448 00:26:07,880 --> 00:26:12,200 Speaker 1: that UH magnitude. But I think we are at risk 449 00:26:12,280 --> 00:26:17,280 Speaker 1: of having something directionally UH the same. We've already put 450 00:26:17,320 --> 00:26:21,040 Speaker 1: that into put that risk into play with the delays 451 00:26:21,200 --> 00:26:26,640 Speaker 1: that we have UH made, And the more we are 452 00:26:26,920 --> 00:26:31,840 Speaker 1: on the side of letting inflation go and letting expectations rise, 453 00:26:32,480 --> 00:26:35,360 Speaker 1: the more risk we take. Laurie, one of the developments 454 00:26:35,359 --> 00:26:37,360 Speaker 1: of this week was the beginning of the Olympics, over 455 00:26:37,400 --> 00:26:41,359 Speaker 1: invasing the Winter Olympics. And we see there a different 456 00:26:41,400 --> 00:26:44,800 Speaker 1: system for ours, both politically and economically, being put on 457 00:26:44,880 --> 00:26:49,120 Speaker 1: display for the world as we compete with China and 458 00:26:49,160 --> 00:26:52,000 Speaker 1: other autocracies around the world. Where are we in that competition? 459 00:26:52,040 --> 00:26:54,760 Speaker 1: Are we as strong in our alternative both on a 460 00:26:54,760 --> 00:26:57,399 Speaker 1: political sense and economic term as we were in the past. 461 00:26:58,080 --> 00:27:02,280 Speaker 1: I think we're going to endure and be strong and 462 00:27:02,800 --> 00:27:05,320 Speaker 1: I think there are important respects in which people are 463 00:27:05,320 --> 00:27:08,160 Speaker 1: gonna look back at the way China is viewed right now, 464 00:27:08,720 --> 00:27:10,760 Speaker 1: and it's going to remind them of the way Japan 465 00:27:10,960 --> 00:27:13,600 Speaker 1: was viewed in it's going to remind them of the 466 00:27:13,640 --> 00:27:18,320 Speaker 1: way Russia was viewed in nineteen sixty. That these things 467 00:27:18,400 --> 00:27:23,359 Speaker 1: look like terrible threats, but ultimately our system endures, that's 468 00:27:23,400 --> 00:27:26,120 Speaker 1: my best guests, And I'm not sure, but it does 469 00:27:26,240 --> 00:27:31,120 Speaker 1: depend on our preserving the basis of our system. And 470 00:27:31,160 --> 00:27:37,200 Speaker 1: what's new and profoundly troubling is doubts about the presidential 471 00:27:37,240 --> 00:27:41,359 Speaker 1: succession process. And not so much that there are people 472 00:27:41,400 --> 00:27:44,480 Speaker 1: who want to subvert the process. That's always been true, 473 00:27:45,160 --> 00:27:50,439 Speaker 1: but good mainstream people who don't have the courage to 474 00:27:50,600 --> 00:27:55,320 Speaker 1: do what they know is right and work against and 475 00:27:55,440 --> 00:28:00,640 Speaker 1: bring down those who would subvert the integrity of our 476 00:28:00,840 --> 00:28:04,320 Speaker 1: election process. And that's gonna be a very important test 477 00:28:04,440 --> 00:28:08,520 Speaker 1: for our democracy. And I might say to all those 478 00:28:08,520 --> 00:28:13,000 Speaker 1: who listen to this show who are involved in uh markets, 479 00:28:13,560 --> 00:28:17,040 Speaker 1: that one of the reasons why the American stock market 480 00:28:17,080 --> 00:28:21,200 Speaker 1: has been so strong is that people believe so strongly 481 00:28:21,240 --> 00:28:24,120 Speaker 1: in the rules law in the United States, and that's 482 00:28:24,160 --> 00:28:27,840 Speaker 1: why the multiples on a given stock are much higher 483 00:28:27,880 --> 00:28:32,680 Speaker 1: when it's an American company than when it's the Chinese company. Uh, frankly, 484 00:28:33,240 --> 00:28:36,560 Speaker 1: And if our sense of the rule of law is 485 00:28:36,640 --> 00:28:40,960 Speaker 1: called into question, that's gonna have, in addition to everything else, 486 00:28:41,600 --> 00:28:47,479 Speaker 1: long term consequences for American asset values that we're not 487 00:28:47,520 --> 00:28:51,440 Speaker 1: gonna We're not gonna like that's not the most important thing, 488 00:28:51,600 --> 00:28:55,440 Speaker 1: but I think it's a significant thing and gives investors 489 00:28:55,960 --> 00:28:58,640 Speaker 1: more interests than they may realize they have in these 490 00:28:58,640 --> 00:29:01,840 Speaker 1: political debates. Something we don't hear often enough. It's not 491 00:29:02,200 --> 00:29:04,960 Speaker 1: just politics. Politics are important, but it's also the economy 492 00:29:05,240 --> 00:29:07,280 Speaker 1: and our entire financial system as well. Thank you so 493 00:29:07,360 --> 00:29:09,920 Speaker 1: much to Larry Summers are Harvard, our very special contributor 494 00:29:10,120 --> 00:29:14,760 Speaker 1: here on Wall Street Week. Finally one more thought spreading 495 00:29:14,920 --> 00:29:18,800 Speaker 1: the wealth even to the goat. It's that magical time 496 00:29:18,840 --> 00:29:21,800 Speaker 1: of year on global Wall Street bonus time, with the 497 00:29:21,800 --> 00:29:25,280 Speaker 1: reports of pools going up thirty, forty, even fifty percent 498 00:29:25,880 --> 00:29:29,080 Speaker 1: levels three nare. John of Bloomberg reports, we haven't seen 499 00:29:29,160 --> 00:29:31,760 Speaker 1: in a good long time. Wall Street hasn't seen this 500 00:29:31,880 --> 00:29:34,720 Speaker 1: level of excess in over ten years now, and it's 501 00:29:34,720 --> 00:29:38,239 Speaker 1: hardly surprising. The banks did extremely well last year, and 502 00:29:38,280 --> 00:29:41,040 Speaker 1: there's a lot of competition out there for that top talent. 503 00:29:41,320 --> 00:29:44,920 Speaker 1: As Bank of America Chair and CEO Brian moynihan recognizes, 504 00:29:45,480 --> 00:29:47,320 Speaker 1: you have to pay people. We don't want people want 505 00:29:47,360 --> 00:29:50,360 Speaker 1: to work for less next year, as does Ubs CEO 506 00:29:50,640 --> 00:29:55,440 Speaker 1: Ralph Hamers. We pay competitively. We pay for performance. We 507 00:29:55,560 --> 00:30:00,680 Speaker 1: have the talent to make our our plan and to 508 00:30:00,800 --> 00:30:03,080 Speaker 1: the excent, we need to pay up, but we will 509 00:30:03,120 --> 00:30:05,560 Speaker 1: do so as we have done so last year. But 510 00:30:05,680 --> 00:30:07,720 Speaker 1: generally you don't have to pay up for the top 511 00:30:07,760 --> 00:30:10,520 Speaker 1: talents once they've walked out the door. And that takes 512 00:30:10,560 --> 00:30:13,120 Speaker 1: us to the greatest of all time. The quarterback who's 513 00:30:13,160 --> 00:30:16,120 Speaker 1: won the most Super Bowls buy a lot, and, by 514 00:30:16,120 --> 00:30:18,920 Speaker 1: the way, has the most touchdown passes, the most completed 515 00:30:18,960 --> 00:30:21,040 Speaker 1: passes in the most games. One, not to mention a 516 00:30:21,040 --> 00:30:24,760 Speaker 1: few other records unlikely to be broken anytime soon, if ever. 517 00:30:25,320 --> 00:30:27,959 Speaker 1: This week, Tom Brady made it official he's retiring from 518 00:30:27,960 --> 00:30:31,360 Speaker 1: the NFL after twenty two incredible seasons, explaining to his 519 00:30:31,400 --> 00:30:36,360 Speaker 1: eleven million Instagram followers that his teammates, coaches, fellow competitors 520 00:30:36,360 --> 00:30:39,880 Speaker 1: and fans deserve of me, but right now it's best 521 00:30:39,960 --> 00:30:42,800 Speaker 1: I leave the field. Of play to the next generation 522 00:30:42,840 --> 00:30:46,760 Speaker 1: of dedicated and committed athletes. His close friend and business 523 00:30:46,840 --> 00:30:51,080 Speaker 1: partner in his fitness business TB twelve, Alex Guerrero, told 524 00:30:51,120 --> 00:30:53,200 Speaker 1: ABC S G M A that it's not just his 525 00:30:53,320 --> 00:30:56,479 Speaker 1: family that Brady will be spending more time on. I 526 00:30:56,520 --> 00:30:59,560 Speaker 1: think he's excited about post football career. You know, he's 527 00:30:59,560 --> 00:31:02,680 Speaker 1: got amazing businesses that he's involved in. Certainly, you know, 528 00:31:02,720 --> 00:31:05,120 Speaker 1: he has a passion for health and wellness and and 529 00:31:05,160 --> 00:31:08,080 Speaker 1: sharing you know, the TB twelve method and what we've 530 00:31:08,120 --> 00:31:10,680 Speaker 1: been able to to start there and share that with 531 00:31:10,720 --> 00:31:13,520 Speaker 1: the masses, like he wants people to know how to 532 00:31:13,600 --> 00:31:15,800 Speaker 1: be able to do what they love doing for longer, 533 00:31:15,840 --> 00:31:17,760 Speaker 1: and how to be able to do it regardless of age. 534 00:31:18,040 --> 00:31:20,080 Speaker 1: It didn't come as a big surprise. There had been 535 00:31:20,120 --> 00:31:22,680 Speaker 1: reports of its coming for days. By the end, the 536 00:31:22,720 --> 00:31:25,280 Speaker 1: biggest question was why he was dragging it out, So 537 00:31:25,920 --> 00:31:29,360 Speaker 1: why the weight speculation of the press focused on You 538 00:31:29,440 --> 00:31:33,000 Speaker 1: guessed it his bonus. It turns out that his contract 539 00:31:33,040 --> 00:31:36,280 Speaker 1: with the Tampa Bay Buccaneers specified this Friday is the 540 00:31:36,360 --> 00:31:39,400 Speaker 1: day he would receive the remaining fifteen million dollars of 541 00:31:39,440 --> 00:31:43,000 Speaker 1: his twenty million dollars signing bonus. Some sports were speculated 542 00:31:43,080 --> 00:31:45,160 Speaker 1: that he might be waiting to make sure he got 543 00:31:45,200 --> 00:31:48,080 Speaker 1: the cash, but at least this time it was not 544 00:31:48,360 --> 00:31:52,040 Speaker 1: the bonus talking or even keeping Brady from talking. Under 545 00:31:52,040 --> 00:31:54,360 Speaker 1: the terms of his deal, he was owed that bonus 546 00:31:54,400 --> 00:31:57,320 Speaker 1: no matter what, although it was for a four year 547 00:31:57,360 --> 00:32:00,480 Speaker 1: deal that he will complete only half of. So now 548 00:32:00,640 --> 00:32:02,360 Speaker 1: it's up to the lawyers to figure out whether he 549 00:32:02,360 --> 00:32:04,480 Speaker 1: owes some of that money back. And trust me, they 550 00:32:04,680 --> 00:32:07,400 Speaker 1: will get paid no matter what. But however the money 551 00:32:07,400 --> 00:32:10,200 Speaker 1: sorts out, a lot of fans are going to miss him. 552 00:32:10,400 --> 00:32:13,600 Speaker 1: He gave us so much pleasure around here. Um all 553 00:32:13,640 --> 00:32:18,080 Speaker 1: about women twenty years here for us six Super Bowl wins. 554 00:32:18,480 --> 00:32:20,920 Speaker 1: You can't go wrong. That does it. For this episode 555 00:32:20,920 --> 00:32:23,520 Speaker 1: of Wall Street Week, I'm David Weston. This is Bloomberg. 556 00:32:23,720 --> 00:32:24,840 Speaker 1: See you next week.