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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along

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Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring

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Speaker 1: you insight from the best and economics, finance, investment, and

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Speaker 1: international relations. Find Bloomberg Surveillance on Ample podcast, SoundCloud, Bloomberg

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Speaker 1: dot Com, and of course, on the Bloomberg terminal. This

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Speaker 1: is the interview that I've been looking forward to for

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Speaker 1: a very long time. Adam Twoose is Columbia University professor,

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Speaker 1: author of Crashed in the Past, which really tracked what

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Speaker 1: we saw a past a couple of years in terms

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Speaker 1: of the economy post crisis. Now he comes out with Shutdown,

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Speaker 1: How COVID shook the world's economy and Adam, in some ways,

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Speaker 1: you are one of the pre eminent, if not the

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Speaker 1: pre eminent historians a fast moving current financial history, and

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Speaker 1: I'm wondering how difficult it was for you to get

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Speaker 1: your arms around the shut down and reopening that still

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Speaker 1: has beguiled economists to this day. Um, it's a really

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Speaker 1: tricky problem, and we no want to kid around about this.

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Speaker 1: Writing history in real time is is a risky kind

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Speaker 1: of business. I don't expect this book to last forever.

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Speaker 1: But I guess what I did was to start with

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Speaker 1: the main event, and the main event is a news

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Speaker 1: story that I think the general public is just not

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Speaker 1: aware of to the extent that they need to be,

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Speaker 1: And it goes directly to the market. You were just

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Speaker 1: talking about the U. S. Treasury market. That's really what

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Speaker 1: we need to put across, right, the incredible seismic tremor

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Speaker 1: that we saw in the most important financial market in

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Speaker 1: the world, the anchor of safe assets globally, the U. S.

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Speaker 1: Treasury is which we're in chaos in March. And the book,

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Speaker 1: in a sense, is an effort to think through from

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Speaker 1: there the stabilization effort that that succeeded to an extent,

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Speaker 1: but also its limits. So that's kind of the chick

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Speaker 1: of the book is to say, right, well, this is

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Speaker 1: one dimension of the crisis we could get our hands around. Um,

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Speaker 1: what about the rest, Well, let's elaborate on that. I mean,

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Speaker 1: what do does the public perhaps not appreciate with respect

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Speaker 1: to the seismic shift that we saw in March, of

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Speaker 1: in terms of the ramifications of what the Federal Reserve did, well,

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Speaker 1: the money was going the wrong way, right in a

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Speaker 1: panic like that in two thousands of night. You really

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Speaker 1: want the money to go somewhere safe, and the place

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Speaker 1: that we think of as safe is the ten year treasury,

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Speaker 1: thirty year treasury American government io use. And the problem

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Speaker 1: in March is that even those were selling, and then

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Speaker 1: the market stopped functioning, so the big as spreads blew out.

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Speaker 1: You basically couldn't liquidate the thing that you count on

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Speaker 1: as being absolutely liquid in your portfolio, and that then

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Speaker 1: unleashes a chain reaction. And frankly, if that had you know,

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Speaker 1: fully burned through to the extent it was threatening to do,

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Speaker 1: we don't really have a map for that, for that terrain,

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Speaker 1: And you get a sense, I think of just a

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Speaker 1: sheer panic on the bye side. I mean, the Fed

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Speaker 1: steps in. Then by at the end of the month April,

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Speaker 1: they bought five of that crucial market on at a pace,

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Speaker 1: at a rate that you know it vastly exceeds what

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Speaker 1: we saw in two thousand and eight. Professor, We've had

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Speaker 1: a massive policy response in the last eighteen months. You

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Speaker 1: know that, I know that, we all know that. How

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Speaker 1: would you characterize the compare and contrast between what the

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Speaker 1: United States has done and what China did It's very

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Speaker 1: surprising this time around, right, because if you go back

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Speaker 1: to two thousands and eight, China is the big actor,

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Speaker 1: the surprise actor. It really turns the tables on the

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Speaker 1: Western world with a giant fiscal stimulus, which is we

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Speaker 1: all know in China is a kind of weird blend

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Speaker 1: of bank lending and at regular fiscal policy this same round.

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Speaker 1: Because the Chinese contained the epidemics so much earlier, and

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Speaker 1: because also they've got the giant debt bubble to worry about,

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Speaker 1: think about ever grandy um, the Chinese response is more muted.

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Speaker 1: They're more successful, if you like, in containing the epidemic.

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Speaker 1: The US, on the other hand, is hyperactive, and not

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Speaker 1: just on the military side, of course, on the fiscal

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Speaker 1: side too, which is then leading to that huge supply

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Speaker 1: of bonds that you were referring to just a minute ago.

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Speaker 1: Is there a blueprint here, Adam, for how we deal

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Speaker 1: with the next crisis? And can we really compare China

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Speaker 1: with the United States, an authoritarian regime with a democracy.

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Speaker 1: We have to find our own way forward in the West.

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Speaker 1: I really think those comparisons are unhelpful. We need to

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Speaker 1: understand that China's in the world, Our biggest single mistake

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Speaker 1: in January and February last year was to imagine it

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Speaker 1: was their problem. They were going to have to solve

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Speaker 1: it their way. It didn't concern us. You know what

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Speaker 1: was happening. We had had no implications for JFK disastrous miscalculation.

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Speaker 1: As to the actual solutions. We have to do it

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Speaker 1: our own way because the systems are so radically different.

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Speaker 1: And what we've really got to think about is how

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Speaker 1: we as it were multiply the kind of chains of

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Speaker 1: competence which we did display. Think about the vaccine development program,

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Speaker 1: Think about the financial policy response to other areas, which

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Speaker 1: is where we really simularly lacking in the ability to

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Speaker 1: organize a collective reaction to a disaster like this. Adam,

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Speaker 1: when you talk about the monetary policy response in your book,

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Speaker 1: you call it an emergency action of the most radical

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Speaker 1: kind and pose the question what was now normality? Can

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Speaker 1: we ever return to normal monetary and fiscal policy or

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Speaker 1: is the role of central banks now forever changed? That

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Speaker 1: was a rhetorical question, a bad academic habit um. I

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Speaker 1: think probably not Like that's really the message of the

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Speaker 1: book is. I mean, the final line of the book

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Speaker 1: is literally we ain't seen nothing yet. That I think

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Speaker 1: is the crucial takeaway from this. I mean, this wasn't

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Speaker 1: even a bad pandemic by the standards of what the

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Speaker 1: virologists and epidemiologists say is out there coming our way.

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Speaker 1: And we know the kind of cosmic macro risks of

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Speaker 1: climate change and how complicated those are going to be

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Speaker 1: to cope with. I think we have to let go

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Speaker 1: of that idea of the nineteen nineties, nineties nineties independent

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Speaker 1: central bank with a clear separation of fiscal and monetary policy.

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Speaker 1: That isn't our world. It hasn't been our world since

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Speaker 1: two thousand and eight. And even in think Bank before

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Speaker 1: the crisis, it wasn't obvious how either the ECB or

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Speaker 1: the FED could really pull back. You know, they could

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Speaker 1: raise interest sates a little bit, but then we know

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Speaker 1: how ginger they got about that and how they had

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Speaker 1: to pull back. The ECB was doing mini que e

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Speaker 1: e in in the fall of twenty nineteen. Adam. You

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Speaker 1: also talk about how twenty was a year of acceleration

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Speaker 1: in so many trends, and you talk about how it's

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Speaker 1: just really a moment in the process of escalation and

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Speaker 1: the great acceleration is going to continue looking at that

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Speaker 1: from a labor market lens, have we arrived sooner at

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Speaker 1: structurally lower participation. Specifically, I'm thinking of the U S economy,

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Speaker 1: but in general, I do think the US has a

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Speaker 1: particular problem here. It's a little bit standout if you

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Speaker 1: compare the US to other similar advanced economies, really bizarre

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Speaker 1: in persons of historic chains. With Japanese female labor market

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Speaker 1: participation trending above that of the US, there are I

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Speaker 1: think some real issues. American society has to have a long,

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Speaker 1: hard look at itself and think about the kind of

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Speaker 1: politics that would change this. Because this is directly tied

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Speaker 1: up with the social justice piece, with the racial justice piece.

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Speaker 1: The low participation rates that show up in these as

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Speaker 1: it were, cold numbers for low participation, especially of men

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Speaker 1: in prime age, are really a symptom of social dysfunction.

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Speaker 1: This is an issue that has to be addressed to

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Speaker 1: things like the criminal justice system, through education, through the

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Speaker 1: rollout of high quality vacational training for a whole sector

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Speaker 1: of the population. That's I think where those solutions have

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Speaker 1: to be found well to tie this all together. Adam,

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Speaker 1: when you say you ain't seen nothing yet, are you

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Speaker 1: talking about perhaps a bond buying by the Federal Reserve.

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Speaker 1: Are you talking about negative interest rates? Are you talking

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Speaker 1: about essentially a combination of everything that comes together, basically

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Speaker 1: in modern monetary theory on the fiscal side, working in

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Speaker 1: tandem with the Federal Reserve. This is what I call

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Speaker 1: a poly crisis. It's all of those things. But the

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Speaker 1: really harsh lesson that this crisis taught us is that

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Speaker 1: printing the checks is really the easiest part of this.

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Speaker 1: And the n M T folks are write in a

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Speaker 1: sense that we can afford anything we can actually do,

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Speaker 1: But the problem is actually doing the things we need

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Speaker 1: to do, figuring out how to do the infrastructure of

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Speaker 1: figuring out how to make public works work, figuring out

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Speaker 1: how to do adequately scaled baccine programs, and organizing the

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Speaker 1: politics around that, because actually doing things in a society

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Speaker 1: that's complex like the United States, depends on functional politics. Adam,

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Speaker 1: let's tie this one up and put a bow on it.

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Speaker 1: You and I've just talked about the different economic and

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Speaker 1: political systems to address this crisis. China going one way,

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Speaker 1: the United States going another. For a long long time

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Speaker 1: we talked about China becoming more like the Western I

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Speaker 1: think what surprised me personally, and I'd love to wrap

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Speaker 1: things up with your view on this is how much

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Speaker 1: some countries in the West are starting to behave like China.

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Speaker 1: I look to Australia every single morning, almost in shock

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Speaker 1: with some of the things that they're discussing, the things

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Speaker 1: that they're doing. Adam, what's your response, your reaction to

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Speaker 1: being so what has happened in the West and how

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Speaker 1: some of these countries have responded maybe more in the

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Speaker 1: traits of an authoritarian regime there maybe one you'd expect

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Speaker 1: from a democracy. I do think we have to reckon

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Speaker 1: with this. It's it's a trend that is, I agree,

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Speaker 1: extremely alarming. We've all accepted prohibitions and restrictions on our

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Speaker 1: activities that are just would have been unthinkable eighteen months ago.

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Speaker 1: The fact that we're not even in the same studio,

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Speaker 1: for instance, would have been very surprising to most people.

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Speaker 1: And I think for us the answer maybe through politics,

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Speaker 1: it maybe through law. If you look at the track

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Speaker 1: record of the magic bullet here, the thing that really

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Speaker 1: gets us out of jail is technology. And I don't

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Speaker 1: say that glibly. I say that not in the sense

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Speaker 1: if you like, as some sort of techno optimist booster,

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Speaker 1: but as a kind of guest but last resort. That

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Speaker 1: is the one thing that worked for us. And so really,

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Speaker 1: I think the question has got to be how serious

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Speaker 1: are we about that science push? Because right now, if

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Speaker 1: you look at the R and D spending figures, we're

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Speaker 1: not even in the ballpark in the order of magnitude

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Speaker 1: that would be necessary, and that would indicate that we

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Speaker 1: were serious about these problems. Be at climate, be at

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Speaker 1: pandemic risk. We need to be spending hundreds of billions

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Speaker 1: of dollars. When you say that, you realize I don't

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Speaker 1: even quite know how you would do that. That's our problem.

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Speaker 1: How do we scale up these pipelines? Professor, such a

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Speaker 1: good final point, and let's catch up against soon. Really

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Speaker 1: enjoyed it, and I'm two's there of Columbia University professor

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Speaker 1: and author of Shutdown, How COVID shook the World's economy,

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Speaker 1: Running history as we're still running history now, Green joins

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Speaker 1: us now half a Kennedy School senior fellow. Migan. It's

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Speaker 1: been a while, but the story hasn't changed. In fact,

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Speaker 1: the only thing I can think of that has changed

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Speaker 1: is that we were all waiting for September. Now seemingly

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Speaker 1: we're all waiting for two. What's your take on things? Yeah,

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Speaker 1: I think that's right. I mean, the big question remains

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Speaker 1: whether there's going to be inflation and it sustained inflation

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Speaker 1: or not, and that question hasn't been remotely answered. There

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Speaker 1: are data points supporting both sides of that story. We

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Speaker 1: were all hoping a couple of months ago that comes September,

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Speaker 1: kids will go back to school, we'd all go back

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Speaker 1: to the office, events would happen in person again, we'd

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Speaker 1: be traveling again, and that that's clearly not happening. So unfortunately,

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Speaker 1: I think we're going to have to wait a bit

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Speaker 1: longer um and and ride out this delta variant wave

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Speaker 1: to see what the fundamentals really look like. Megan, we

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Speaker 1: spent the last couple of weeks to having this discussion

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Speaker 1: with economists who have all basically said a stress. So

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Speaker 1: perhaps the consensus is that this is a recovery delayed

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Speaker 1: and not derail. But Peter Chair writes an important question

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Speaker 1: about ten minutes ago on this program as to whether

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Speaker 1: the demand right now and the job openings in America

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Speaker 1: which is sky high, do stay that way until next year,

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Speaker 1: and the longer there left unfilled that perhaps they do

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Speaker 1: start to drift away and disappear altogether. Mean you're an economist,

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Speaker 1: what would you type be on that particular diallem at

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Speaker 1: the moment? Yeah, Look, I I think that it depends

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Speaker 1: entirely on the viruses all things have for the past

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Speaker 1: year and a half. But I don't see us going

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Speaker 1: back to shutting down the economy the same way we

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Speaker 1: had before, in which case demand shouldn't wane as significantly

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Speaker 1: as some people fear. Um. I think the much bigger

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Speaker 1: concern is the supply constraint on workers. Um. We saw

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Speaker 1: that in the last job's report a lot of workers

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Speaker 1: didn't want to go out and get jobs because they

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Speaker 1: were concerned about the delta variant um and and that

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Speaker 1: fit through into wage increases wh aren't which aren't necessarily

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Speaker 1: a bad thing, but they do become a concern if

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Speaker 1: they turn into a wage price spiral. I don't think

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Speaker 1: that's happening yet. Average hourly earnings were a pretty significantly,

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Speaker 1: but average weekly earnings were down a bit because hours

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Speaker 1: have cut, so you need both earnings and hours to

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Speaker 1: increase for it to maybe start to creep into a

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Speaker 1: wage price spiral. That being said, companies don't have the

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Speaker 1: same pricing power that they used to, workers don't have

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Speaker 1: the same power that they used to negotiating power for wages,

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Speaker 1: and so I just don't see that creeping in. Megan,

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Speaker 1: how do you view the recent slowdown, the recent disappointments

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Speaker 1: that we've seen in economic data. Is this simply a

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Speaker 1: result of the delta variant and we'll see renewed growth

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Speaker 1: later on in the year, renewed momentum, or is this

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Speaker 1: something different as Pete Sheer was talking about. Look, so

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Speaker 1: from the very start of this pandemic, I've suggested the

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Speaker 1: recovery might look like an e swoosh with a zigzag

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Speaker 1: on the on the end of it um and I

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Speaker 1: think we're seeing a bit of that zig zag like

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Speaker 1: we did previously was shut downs and reopening. So I

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Speaker 1: think a big piece of it is the delta variant.

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Speaker 1: But I've also thought we'd get this bounce back and

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Speaker 1: then a long, hard slog, and I think that might

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Speaker 1: be creeping in as well. So we've had kind of

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Speaker 1: the brunt of the bounce back. We might get a

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Speaker 1: bit more as we end up on the other side

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Speaker 1: of this variant wave um, but of course new variants

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Speaker 1: might come out as well, So I think it's a

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Speaker 1: bit of both, not to give you a typical economist

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Speaker 1: to hand in a well. But then there's this other

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Speaker 1: question about the supply chain disruptions which you mentioned, and

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Speaker 1: one of the biggest port operators came out over the

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Speaker 1: weekend and said, actually, the problem is there's just too

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Speaker 1: much consumption. That people just are buying too much stuff,

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Speaker 1: and that's fueled by the stimulus checks that they've gotten.

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Speaker 1: Do you think that that ultimately it will be the

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Speaker 1: solution that people will have to buy less stuff, which

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Speaker 1: is exactly what the economy does not necessarily want, or

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Speaker 1: certainly nations do not want to see because they want

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Speaker 1: this momentum. I don't think that's the concern. Actually. I

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Speaker 1: think when demand is there, then companies do tend to

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Speaker 1: invest and and ramp up the supply chain. So I

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Speaker 1: think that's much more likely than that consumers have to

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Speaker 1: just consume left less. We might see an increase in prices,

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Speaker 1: and we have seen an increase in prices in the meantime.

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Speaker 1: But again I think that is a question of sorting

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Speaker 1: out some of these supply chain constraints, but I think

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Speaker 1: that's the piece that will shift, not the consumption side. Well, Megan,

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Speaker 1: if you look at the bond market and the steeper

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Speaker 1: curve today, it might be indicating that the market thinks

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Speaker 1: that the FED is going to let inflation run too

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Speaker 1: hot for too long. Is there a risk that the

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Speaker 1: FED pushes out action too far? Yeah, I could. I'm

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Speaker 1: not at all worried about it. I mean, the FED

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Speaker 1: is undershot its target for so incredibly long that it's

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Speaker 1: going to have to overshoot for a while. And and

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Speaker 1: as I've highlighted, I think there are a number of

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Speaker 1: big structural drivers um that have have produced disinflationary forces

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Speaker 1: on the economy, things like market concentration, lower worker power, digitalization, automation.

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Speaker 1: They've all been turbocharged in this pandemic, and and they're

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Speaker 1: keeping upward pressure off of wages and prices. So I'm

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Speaker 1: not worried that inflation is is going to run away

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Speaker 1: and that the FED is going to have to go

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Speaker 1: ahead and catch up like it did in the nine seventies.

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Speaker 1: I don't think we're facing the same environment then. I

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Speaker 1: also don't think bond deals will stay up for that long.

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Speaker 1: I think we are very much stuck in this lower

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Speaker 1: for longer world. The one thing that could change that

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Speaker 1: is if we get all this stimulus and it is

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Speaker 1: used for productive public investment, in which case that's a

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Speaker 1: great thing, right, That will fundamentally increase the longer neutral

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Speaker 1: rate UM. That would mean that we have much more

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Speaker 1: room in terms of monetary policy uh maneuvers in the

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Speaker 1: next downturn. That would boost productivity growth and so that

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Speaker 1: would be nothing but positive. Where is the neutral rate now, Megan?

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Speaker 1: What is our star? I mean, it's like describing the

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Speaker 1: smell of coffee. Nobody really knows UM. You know, it

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Speaker 1: has been incredibly low for decades now, their disagreements on

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Speaker 1: how to measure it. UM. I would say it's it's

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Speaker 1: slightly above zero, and it may have increased a bit

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Speaker 1: because of the digitalization and automation UM during this pandemic

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Speaker 1: as I mentioned before. But I think the brunt of

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Speaker 1: an acceleration and productivity growth and there therefore an increase

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Speaker 1: in our star UM will have to happen off the

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Speaker 1: back of massive infrastructure spending plans investments in human capital,

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Speaker 1: and we think those might be coming, but none of

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Speaker 1: it has been fully legislated yet, so we're still going

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Speaker 1: to have to see and again this this won't be

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Speaker 1: an immediate effect. I think it's going to be a

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Speaker 1: bit of a slow burner, so it might take a

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Speaker 1: while for that to feed through into productivity growth and

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Speaker 1: a higher, longer neutral rate. And Meagan, let's ramp up

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Speaker 1: the converence going into the e CP. It's not a

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Speaker 1: live meeting. It's a live meeting in so far as

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Speaker 1: I think the ECB may well announced that they're going

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Speaker 1: to slow down the previously accelerated purchase of assets under

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Speaker 1: the PET program. It's not a live meeting in terms

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Speaker 1: of a fundamental shift in the e c b s thinking.

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Speaker 1: Though inflation is really high for the Eurozone, I would

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Speaker 1: imagine the ECB is celebrating that they've done an even

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Speaker 1: worse job of hitting their inflation target than the Fed

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Speaker 1: has over the past fifteen years. And so I don't

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Speaker 1: think that will will represent a shift in ECB thinking

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Speaker 1: or a concern that they actually need to go ahead

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Speaker 1: and and all away monetary accommodation quickly. I think it's

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Speaker 1: just a reflection of higher inflation. Um. I think it's

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Speaker 1: probably appropriate they had earlier this year, um agreed to

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Speaker 1: buy more assets every month than they had expected, and

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Speaker 1: they're just ramping that down a little bit. I don't

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Speaker 1: think that they'll suggest that they'll continue to ramp down

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Speaker 1: those purchases. And I don't think that they'll suggest that

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Speaker 1: the pet program, which is currently due to end in

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Speaker 1: March two will end. Then. I think they'll keep that

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Speaker 1: off the table in the discussion at their next Governing

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Speaker 1: Council meeting. So you think that basically this is a

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Speaker 1: bluff the ECB members who have been coming out and

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Speaker 1: saying it might be time to start at least talking

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Speaker 1: about tapering as a result of the inflation rate. Yep.

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Speaker 1: I think it's this is a tweak that we might

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Speaker 1: see if they go ahead and do this. And I

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Speaker 1: don't think this fundament mentally means that the ECB is

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Speaker 1: thinking about inflation or economic growth any differently than they

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Speaker 1: have been. Mike and Green, It's gonna catch up. It's

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Speaker 1: been so long, Mike and Green, that of the Harved

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Speaker 1: Kennedy school. Fella. Yeah, this is a day in life.

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Speaker 1: And Matt Millon, I'm not even sure we can kill

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Speaker 1: this day at work for you. Good morning, Matt, Well

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Speaker 1: you know what, if you love your job, then you

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Speaker 1: can't call it work. Jonathan and my first time back

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Speaker 1: at an auto show since March of two thousand nineteen,

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Speaker 1: So I'm I'm happy to be back in my element.

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Speaker 1: But this show is less about cars and much more

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Speaker 1: about tech than it ever has been before. I'm talking

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Speaker 1: here with Christiano I'm one. He is the CEO of

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Speaker 1: qual calm Um. Christian is great to talk to you

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Speaker 1: because all of the automaker CEOs I've spoken to over

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Speaker 1: the past two days have been focused on chips. You

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Speaker 1: must feel like the most invited dinner guest. How how

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Speaker 1: is it going with your business, especially considering the bottleneck

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Speaker 1: the supply chain issues that we hear so much about

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Speaker 1: the last couple of days. No question, chips are important.

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Speaker 1: You know, we were very excited in general. It's not

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Speaker 1: just because of the importance of chips and there in situation.

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Speaker 1: Core companies are becoming technology companies and uh and that's black.

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Speaker 1: Welcome is here. Automotive It's one of the fastest growing

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Speaker 1: business for us. So we just announced the last earnings

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Speaker 1: call we have over ten billion dollars automotive dedicated revenues

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Speaker 1: in the backlog it's over billion dollars UH for revenue

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Speaker 1: in this fiscal er, and we're partnering with the automotive

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Speaker 1: companies across all domains of transformations, from acting the card

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Speaker 1: of the cloud, they who in car experience and of

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Speaker 1: course autonomy in a a desk. Very exciting time for Cloco.

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Speaker 1: I know your chipsets are being used in Ducati motorcycles.

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Speaker 1: I've been able to experience the first blind spot detection

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Speaker 1: UM as well as automated cruise control on the motorcycle,

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Speaker 1: so that's quite cool. In terms of the broader industry UM,

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Speaker 1: the slowdown seems to be lasting longer than had been expected,

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Speaker 1: and CEOs are telling us six months to twelve months,

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Speaker 1: probably deep into two until it gets sorted. How is

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Speaker 1: it with caalcom, Well, let's let's talk about this. You know,

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Speaker 1: there is a new reality across the board that the

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Speaker 1: percentage of digital component of the economy it's highered. I

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Speaker 1: think we all saw the pandemic accelerated digital transformation many enterprises,

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Speaker 1: and the automotive industry wasn't immune to that. So we're

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Speaker 1: actually excited about the opportunity this demand is here to stay.

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Speaker 1: Of course, we're short in all technology across our industry.

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Speaker 1: But the good news, uh, you know, we put our

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Speaker 1: scale to work. We have been investing with our suppliers

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Speaker 1: and new capacity, and we expect materials supplying improvements as

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Speaker 1: we get at the end of this calendar year. So

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Speaker 1: we're gonna enter two thousand and twenty two with a

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Speaker 1: much more balanced supply demand equation. Can I ask you

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Speaker 1: about some M and A your competitor, and Video wants

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Speaker 1: to buy ARM for forty billion dollars the ft reporting

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Speaker 1: today that regulators are concerned and Video isn't going to

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Speaker 1: allow everyone equal access to ARM chip designs and why

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Speaker 1: a day if they're paying forty billion dollars for it? Right? Um,

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Speaker 1: what are your thoughts on the possibility of a less

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Speaker 1: open arm UM climate here. Look, we're being very consistent

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Speaker 1: in our position about this, as well as many other companies.

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Speaker 1: There are leader uh you know, uh implementers and of

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Speaker 1: ARM technology. ARM already one ARM one on mobile UM

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Speaker 1: mobile device as the c p U s ARM automotives

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Speaker 1: moving to ARM computers. It's an ARM the data centers

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Speaker 1: moving to arms. ARM. It has been quite successful and

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Speaker 1: because was an independent company that was able to rely

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Speaker 1: on the collection of R and D investments of this

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Speaker 1: broad ecosystem. ARMS a great company. We love an independent ARM.

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Speaker 1: We think that's is the reason for its success and

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Speaker 1: that's what the industry needs in the future. Will continue

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Speaker 1: to believe an independent ARM is a better solution for

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Speaker 1: every lot. Well, what happens then if Nvidia gets control

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Speaker 1: of the company. Are you concerned that they would limit

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Speaker 1: your access to designs? Book? At the at the end

431
00:22:02,200 --> 00:22:05,359
Speaker 1: of the day, were trusts that the regulators are going

432
00:22:05,440 --> 00:22:08,679
Speaker 1: to take this serious and UH and UH as digit

433
00:22:08,720 --> 00:22:10,800
Speaker 1: to as we talked about earlier in the interview. As

434
00:22:10,840 --> 00:22:13,480
Speaker 1: digito is now important for every industry. We need to

435
00:22:13,520 --> 00:22:17,680
Speaker 1: have a competitive and open in UH in a transparency ecosystem,

436
00:22:17,960 --> 00:22:21,119
Speaker 1: especially if anybody has a dominant position on the instruction

437
00:22:21,160 --> 00:22:23,800
Speaker 1: set like Arma. Dust. I gotta ask you about China

438
00:22:23,880 --> 00:22:29,280
Speaker 1: as well. UM. Starting a few months ago, regulators in China, UH,

439
00:22:29,280 --> 00:22:33,440
Speaker 1: we're changing the rules from fintech, UM to d D

440
00:22:33,760 --> 00:22:36,679
Speaker 1: to video games every couple of days. It seems like

441
00:22:36,680 --> 00:22:40,000
Speaker 1: there's a new set of rules in China tech. How

442
00:22:40,040 --> 00:22:43,200
Speaker 1: does qual calm work in that kind of environment? Book? I,

443
00:22:43,200 --> 00:22:45,439
Speaker 1: I think I have something else to say. Our China

444
00:22:45,480 --> 00:22:49,480
Speaker 1: business been great. We have a fast growing the stable

445
00:22:49,560 --> 00:22:52,720
Speaker 1: China business. The number of partners in China Football Clome

446
00:22:52,840 --> 00:22:55,960
Speaker 1: is increasing. We always been, you know, partner with them

447
00:22:55,960 --> 00:22:58,639
Speaker 1: in the mobile industry. Right now we saw you know,

448
00:22:58,800 --> 00:23:02,359
Speaker 1: companies in like show Me, Opo Vivo are growing with

449
00:23:02,520 --> 00:23:05,480
Speaker 1: the five T transition. Show Me just became the number two,

450
00:23:05,800 --> 00:23:09,080
Speaker 1: uh you know cell phone, a smartphone manufacturing a ward

451
00:23:09,400 --> 00:23:12,160
Speaker 1: but on out. We now have ten customers in China,

452
00:23:12,400 --> 00:23:15,480
Speaker 1: so the number of partners in QUAL can continue to expand.

453
00:23:16,000 --> 00:23:19,879
Speaker 1: I think we're very fortunate to have a relationship with

454
00:23:20,000 --> 00:23:23,879
Speaker 1: China that maybe a model of what stability look like.

455
00:23:24,320 --> 00:23:28,840
Speaker 1: We participate in growth in advanced technology. The China respect

456
00:23:28,920 --> 00:23:32,080
Speaker 1: intellectual property of qualcom our ore. You know, our patents

457
00:23:32,280 --> 00:23:35,800
Speaker 1: are licensed to our Chinese companies, and we're generating growth

458
00:23:36,440 --> 00:23:38,960
Speaker 1: for us and for our Chinese partners, and we expect

459
00:23:38,960 --> 00:23:42,840
Speaker 1: that to continue. In terms of the broader global growth picture.

460
00:23:43,320 --> 00:23:47,119
Speaker 1: This rebound has been hampered a little bit by the

461
00:23:47,160 --> 00:23:50,639
Speaker 1: resurgence of the delta variant. How does it look to you? Look,

462
00:23:51,320 --> 00:23:55,159
Speaker 1: we are fortunate for being the technology space. You know

463
00:23:55,200 --> 00:23:59,640
Speaker 1: what the pandemic did bye bye, you know, work from

464
00:23:59,640 --> 00:24:03,120
Speaker 1: any where, you know, the enterprise transformation of their home

465
00:24:03,640 --> 00:24:06,480
Speaker 1: and then the acceleration of a digital transformation because the

466
00:24:06,520 --> 00:24:09,840
Speaker 1: companies want to connect their assets has created a boom

467
00:24:09,960 --> 00:24:14,240
Speaker 1: for technology companies. And uh, we all want us to

468
00:24:14,320 --> 00:24:17,000
Speaker 1: get out of this pandemic. Uh, you know, it's uh,

469
00:24:17,080 --> 00:24:19,840
Speaker 1: it's way overdue for us to get the pandemic. Is

470
00:24:19,880 --> 00:24:21,440
Speaker 1: so happy to be here and seeing a lot of people,

471
00:24:21,840 --> 00:24:25,440
Speaker 1: but the reality is some of those technology transformation are

472
00:24:25,520 --> 00:24:29,879
Speaker 1: here to stay. Connectivity is becoming essential, and uh, you

473
00:24:29,920 --> 00:24:33,160
Speaker 1: know we're gonna continue doing teams and zooms and those

474
00:24:33,200 --> 00:24:35,360
Speaker 1: type of meetings for a long time. All right, Christiana,

475
00:24:35,400 --> 00:24:37,920
Speaker 1: thanks very much for your time. Really appreciated. Christiano. I'm

476
00:24:37,920 --> 00:24:40,919
Speaker 1: on the CEO h here at qual Calm at the

477
00:24:41,000 --> 00:24:45,199
Speaker 1: Munich Auto show. Jonathan talking to us about sticky technology

478
00:24:45,760 --> 00:24:49,280
Speaker 1: transformations that we saw during the pandemic, talking about hopefully

479
00:24:49,359 --> 00:24:52,359
Speaker 1: some relief in the chip space by the end of

480
00:24:52,359 --> 00:24:55,159
Speaker 1: the year, as well as UM being content with their

481
00:24:55,160 --> 00:24:58,000
Speaker 1: position in China. Good to see you, buddy, great work

482
00:24:58,119 --> 00:25:00,680
Speaker 1: as always, Lasa, no less than any one. The importance

483
00:25:00,720 --> 00:25:04,359
Speaker 1: of talking to a chip maker at an auto meeting.

484
00:25:10,520 --> 00:25:12,720
Speaker 1: How much are we looking at the actual headline number?

485
00:25:12,760 --> 00:25:14,560
Speaker 1: How much are we looking at the revisions the three

486
00:25:14,560 --> 00:25:17,160
Speaker 1: month average, as you mentioned, which still show a pretty

487
00:25:17,160 --> 00:25:19,280
Speaker 1: decent picture. You call it the best because the guy

488
00:25:19,359 --> 00:25:23,920
Speaker 1: made its Coming up next, it's Jim Security, Chief strategist.

489
00:25:24,000 --> 00:25:26,479
Speaker 1: Jim calls it the best. I'll go with the least worst.

490
00:25:26,760 --> 00:25:30,040
Speaker 1: Four K. Jim, what did you see that others didn't

491
00:25:30,240 --> 00:25:34,360
Speaker 1: and do you think it will persist? And well, yeah,

492
00:25:34,400 --> 00:25:37,000
Speaker 1: I'd say it's the least worst as well, and the

493
00:25:37,040 --> 00:25:39,119
Speaker 1: goal our goal is to be the least worst, and

494
00:25:40,280 --> 00:25:42,320
Speaker 1: the the kind of in terms of leading up to it,

495
00:25:42,440 --> 00:25:45,440
Speaker 1: I would say the daily home based numbers in particular

496
00:25:45,880 --> 00:25:48,720
Speaker 1: have been on the weak side, and certainly that was

497
00:25:48,760 --> 00:25:52,119
Speaker 1: consistent with pretty pretty sharp slowing in the leisure hospitality

498
00:25:52,119 --> 00:25:55,040
Speaker 1: category in particular, which developments fo hundred thousand each to

499
00:25:55,080 --> 00:25:57,639
Speaker 1: the previous two months. So it does look like that

500
00:25:57,800 --> 00:26:00,080
Speaker 1: sector slowed pretty pretty sharply. I mean, there were a

501
00:26:00,160 --> 00:26:03,560
Speaker 1: lot of question and debate about employment in in in

502
00:26:03,600 --> 00:26:06,080
Speaker 1: state and local government, and certainly that started the new

503
00:26:06,080 --> 00:26:07,760
Speaker 1: school years a bit of a wild card, and that's

504
00:26:07,760 --> 00:26:10,320
Speaker 1: gonna be an issue next month for September again, but

505
00:26:11,040 --> 00:26:13,760
Speaker 1: certainly the weight of evidence was that there been significant

506
00:26:13,800 --> 00:26:16,360
Speaker 1: sloan Now four D thousand estimate even to thirty five,

507
00:26:16,359 --> 00:26:18,800
Speaker 1: of course, by pre COVID standards would be pretty strong.

508
00:26:18,880 --> 00:26:21,119
Speaker 1: But I mean it does look like the days of

509
00:26:21,520 --> 00:26:23,760
Speaker 1: nine thousand plus or are gone. And Jim, you know what,

510
00:26:23,800 --> 00:26:25,760
Speaker 1: the equity boasted as soon as those numbers came out,

511
00:26:25,800 --> 00:26:27,400
Speaker 1: They said, this is a blip you can look through

512
00:26:28,280 --> 00:26:30,919
Speaker 1: from your standpoint your perspective. Is this something we can

513
00:26:31,000 --> 00:26:32,800
Speaker 1: look through or the beginning of something we need to

514
00:26:32,840 --> 00:26:35,879
Speaker 1: pay attention to? Um? Well, I think, I mean it

515
00:26:36,000 --> 00:26:38,359
Speaker 1: was unrealistic probably to expect that we're gonna get nine

516
00:26:38,400 --> 00:26:41,040
Speaker 1: hundred thousand a million per month for for an extended period.

517
00:26:41,160 --> 00:26:43,560
Speaker 1: So I think there is clearly a downshift here. Now

518
00:26:43,600 --> 00:26:46,120
Speaker 1: that said, monthly numbers do jump around a lot. There's

519
00:26:46,119 --> 00:26:48,320
Speaker 1: a lot of challenge with seasonal adjustment. There's even a

520
00:26:48,359 --> 00:26:50,040
Speaker 1: bit of a tendency for the August numbers to be

521
00:26:50,280 --> 00:26:53,399
Speaker 1: revised up later. And I mean that said, I mean,

522
00:26:53,480 --> 00:26:55,800
Speaker 1: do we see anything written the last couple of weeks

523
00:26:55,880 --> 00:26:57,760
Speaker 1: to suggest at this point that September is going to

524
00:26:57,800 --> 00:27:00,800
Speaker 1: be a lot better? No? And I mean we are

525
00:27:01,080 --> 00:27:03,919
Speaker 1: assuming in our forecast that, like on an extended basis,

526
00:27:03,920 --> 00:27:05,960
Speaker 1: for the next six months were more like four thousand

527
00:27:06,000 --> 00:27:08,760
Speaker 1: a month or or they're about spot five and better

528
00:27:08,800 --> 00:27:10,960
Speaker 1: than the two thirty five. But at this point I

529
00:27:11,000 --> 00:27:13,600
Speaker 1: can't say there's any hard evidence that September is going

530
00:27:13,640 --> 00:27:16,080
Speaker 1: to be better. So does that support this idea of

531
00:27:16,320 --> 00:27:19,879
Speaker 1: a slower slowdown or a more sustained slowdown that perhaps

532
00:27:19,960 --> 00:27:23,040
Speaker 1: people have been expecting. Are you also downgrading your full

533
00:27:23,119 --> 00:27:26,920
Speaker 1: year GDP forecasts? And well, it's not just the peral

534
00:27:27,040 --> 00:27:29,080
Speaker 1: numbers that have been a bit weaker. Certainly the numbers

535
00:27:29,119 --> 00:27:31,840
Speaker 1: that directly going to GDP have been on the software

536
00:27:31,840 --> 00:27:34,640
Speaker 1: side as well. Consumer spending in particular has slowed down

537
00:27:34,720 --> 00:27:37,960
Speaker 1: since March. I mean, certainly retail sales surged in March

538
00:27:38,520 --> 00:27:40,719
Speaker 1: and when you're the last stimulus payment, and they've kind

539
00:27:40,760 --> 00:27:43,360
Speaker 1: of flattened out even declined a little bit since since then.

540
00:27:43,440 --> 00:27:46,040
Speaker 1: There's some supply issues for sure with autos, but it

541
00:27:46,119 --> 00:27:49,560
Speaker 1: does look like the boost from physcal stimulus has has peaked.

542
00:27:49,920 --> 00:27:53,359
Speaker 1: So we have been counting on slowing going forward. It

543
00:27:53,440 --> 00:27:55,760
Speaker 1: looked like third quarters slowed a bit faster than we thought,

544
00:27:55,800 --> 00:27:57,960
Speaker 1: so we did just mark down our Q three number

545
00:27:58,119 --> 00:28:01,440
Speaker 1: four percent from seven. We still have four percent for

546
00:28:01,480 --> 00:28:04,240
Speaker 1: the fourth quarder for business GDP and but that does

547
00:28:04,320 --> 00:28:06,600
Speaker 1: result in two thousand and twenty one being cut to

548
00:28:07,200 --> 00:28:10,080
Speaker 1: five two on a Q four Q four basis from

549
00:28:10,160 --> 00:28:13,080
Speaker 1: six percent. So yes, we have cut our two twenty

550
00:28:13,080 --> 00:28:15,920
Speaker 1: one numbers. And again I think part of this is

551
00:28:16,200 --> 00:28:18,719
Speaker 1: clearly delta in the COVID wave. I think that's part

552
00:28:18,760 --> 00:28:20,560
Speaker 1: of what's going on. But part of it is the

553
00:28:20,640 --> 00:28:23,680
Speaker 1: inevitable fading a fiscal stimulus, and fiscal stimulus is is

554
00:28:23,720 --> 00:28:26,520
Speaker 1: poys to fade to the point of policy being contraction

555
00:28:26,600 --> 00:28:30,560
Speaker 1: ry on a change basis. Although there is this question

556
00:28:30,800 --> 00:28:32,919
Speaker 1: of a record number of job openings and we'll get

557
00:28:32,960 --> 00:28:34,920
Speaker 1: another read on that tomorrow. With the jold state of

558
00:28:34,920 --> 00:28:39,480
Speaker 1: the job openings, uh figures, why are we not seeing

559
00:28:39,640 --> 00:28:42,960
Speaker 1: more people enter the labor force, especially as we get

560
00:28:43,000 --> 00:28:46,680
Speaker 1: the roll off of these enhanced jobless benefits. I don't understand.

561
00:28:46,720 --> 00:28:48,520
Speaker 1: And I think that a lot of people are asking,

562
00:28:49,000 --> 00:28:51,240
Speaker 1: what if there's something else going on and they're being

563
00:28:51,320 --> 00:28:56,040
Speaker 1: replaced by technology, Our companies are finding other solutions, and well,

564
00:28:56,080 --> 00:28:57,760
Speaker 1: I mean that's the big question, of course, and there's

565
00:28:57,800 --> 00:28:59,240
Speaker 1: been a lot of debate, and it's been a political

566
00:28:59,320 --> 00:29:01,920
Speaker 1: debate of course, over how much of the weakness on

567
00:29:02,040 --> 00:29:04,680
Speaker 1: the supply side that the net drop of the participation

568
00:29:04,800 --> 00:29:07,840
Speaker 1: rate has been because of overly generous unemployment benefits, and

569
00:29:08,120 --> 00:29:10,120
Speaker 1: I mean we started to think that's been a factor.

570
00:29:10,560 --> 00:29:12,640
Speaker 1: I think COVID is still a factor. People. A lot

571
00:29:12,680 --> 00:29:14,280
Speaker 1: of people don't want to go back to work because

572
00:29:14,320 --> 00:29:17,960
Speaker 1: of because of COVID, and COVID has caused issues with

573
00:29:18,400 --> 00:29:21,720
Speaker 1: getting childcare. And in addition, there was a lot of stimulus.

574
00:29:21,760 --> 00:29:23,760
Speaker 1: I think a lot of people are not as in

575
00:29:23,880 --> 00:29:27,080
Speaker 1: need of a job immediately because of all the accumulated

576
00:29:27,080 --> 00:29:29,240
Speaker 1: savings from the stimulus as well. Now that doesn't apply

577
00:29:29,280 --> 00:29:31,160
Speaker 1: to everyone, of course, but there have been a number

578
00:29:31,160 --> 00:29:33,640
Speaker 1: of factors. And I mean, as you say, the unemployment

579
00:29:33,720 --> 00:29:36,440
Speaker 1: benefits are expiring this week and in some states already

580
00:29:36,440 --> 00:29:38,840
Speaker 1: saw them expire, and a lot of talk about how

581
00:29:39,280 --> 00:29:41,120
Speaker 1: it's not clear that even in those states where the

582
00:29:41,240 --> 00:29:44,240
Speaker 1: benefits already expired that there was a sudden surgeon supply

583
00:29:44,360 --> 00:29:47,640
Speaker 1: of labor. But it's hard to really disentangle that from

584
00:29:47,640 --> 00:29:49,840
Speaker 1: all the other effects. I mean, we do expect this

585
00:29:49,920 --> 00:29:52,400
Speaker 1: time goes on, the supply side will come on more

586
00:29:52,440 --> 00:29:54,120
Speaker 1: and more. We don't think the participation rate is going

587
00:29:54,160 --> 00:29:56,280
Speaker 1: to stay as low as it is right now, and Meanwhile,

588
00:29:56,320 --> 00:29:58,120
Speaker 1: on the demand side, we do think things are starting

589
00:29:58,160 --> 00:30:00,080
Speaker 1: to start to cool a bit, so I means of

590
00:30:00,160 --> 00:30:03,480
Speaker 1: these imbalances I think will will resolve over time. But yes,

591
00:30:03,560 --> 00:30:05,960
Speaker 1: there is still strong demand for for labor, and that

592
00:30:06,000 --> 00:30:09,080
Speaker 1: would argue that we should continue to get reasonably strong

593
00:30:09,200 --> 00:30:12,320
Speaker 1: employment numbers going forward. So put it all together, Jim,

594
00:30:12,400 --> 00:30:15,440
Speaker 1: and how different for the equation. How different is the

595
00:30:15,480 --> 00:30:17,800
Speaker 1: equation for the Fed this morning than it was at

596
00:30:17,840 --> 00:30:20,880
Speaker 1: this time on Friday, And I think it certainly keeps

597
00:30:20,880 --> 00:30:22,479
Speaker 1: the debate going. I mean, our view is I mean,

598
00:30:22,600 --> 00:30:25,000
Speaker 1: of course, their signal has been that the taper is

599
00:30:25,080 --> 00:30:27,280
Speaker 1: going to come this year, and of course there are

600
00:30:27,400 --> 00:30:30,120
Speaker 1: three meetings left this year. Now, our interpretation of that

601
00:30:30,240 --> 00:30:32,720
Speaker 1: has been it's not September. Just the wording has not

602
00:30:32,800 --> 00:30:35,320
Speaker 1: been urgent enough that it's been either November or December.

603
00:30:35,680 --> 00:30:37,800
Speaker 1: I think that's still the case. Our view has been December.

604
00:30:38,200 --> 00:30:39,960
Speaker 1: I think to the extent you're getting weaker numbers here,

605
00:30:40,000 --> 00:30:43,320
Speaker 1: including payrolls, including the downgraded Q three GDP numbers, I

606
00:30:43,400 --> 00:30:45,200
Speaker 1: think that helps the case for holding off a bit

607
00:30:45,320 --> 00:30:48,840
Speaker 1: more until December. And obviously we'll get another employment report

608
00:30:48,920 --> 00:30:53,200
Speaker 1: before the before the November meeting. But we think that

609
00:30:53,280 --> 00:30:55,160
Speaker 1: it doesn't stop them from tapering. I mean, obviously, if

610
00:30:55,160 --> 00:30:58,040
Speaker 1: the economy was truly collapsing and you were seeing zero growth,

611
00:30:58,360 --> 00:31:00,880
Speaker 1: that's a different story. But if you're getting a four

612
00:31:00,960 --> 00:31:04,480
Speaker 1: percent type GDP growth, unemployment is still coming down. You

613
00:31:04,520 --> 00:31:06,320
Speaker 1: look at numbers like the Ism index is they're still

614
00:31:06,320 --> 00:31:10,080
Speaker 1: around sixty Jolvis claims at falling. I think there's enough improvement,

615
00:31:10,120 --> 00:31:13,000
Speaker 1: substantial improvement, for them to move ahead with tapering. Now

616
00:31:13,080 --> 00:31:15,200
Speaker 1: the tightening question, the ray High question, of course, is

617
00:31:15,240 --> 00:31:18,960
Speaker 1: completely different, and it explementum is down in two. I

618
00:31:19,040 --> 00:31:22,719
Speaker 1: think that would argue for being patient once typering does

619
00:31:22,800 --> 00:31:25,760
Speaker 1: conclude in late twenty presumably that they're going to sit

620
00:31:25,800 --> 00:31:27,880
Speaker 1: back for a while before they actually raise rates. H

621
00:31:28,000 --> 00:31:30,200
Speaker 1: Jim gonna catch up as always do myself in that

622
00:31:30,240 --> 00:31:34,280
Speaker 1: Sandy's courtis chief US Macrows Strategies. This is the Bloomberg

623
00:31:34,320 --> 00:31:38,640
Speaker 1: Surveillance Podcast. Thanks for listening. Join us live weekdays from

624
00:31:38,720 --> 00:31:42,120
Speaker 1: seven to ten am Eastern on Bloomberg Radio and on

625
00:31:42,200 --> 00:31:46,440
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626
00:31:46,720 --> 00:31:51,600
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627
00:31:52,120 --> 00:31:56,760
Speaker 1: And subscribe to the Surveillance Podcast on Apple podcast, SoundCloud,

628
00:31:56,960 --> 00:32:00,520
Speaker 1: Bloomberg dot com, and of course, on the terminal. I'm

629
00:32:00,600 --> 00:32:03,120
Speaker 1: Tom keene In. This is Bloomer