1 00:00:00,240 --> 00:00:05,000 Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer prices. 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 minds 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 Wynhan a backup America, Will Smart, CEO of 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 --> 00:00:35,800 Speaker 1: Everything's coming up. Roses were back outside of the masks. 12 00:00:35,960 --> 00:00:38,519 Speaker 1: People are getting back to work. The economy is growing, 13 00:00:38,880 --> 00:00:42,600 Speaker 1: So should we be worried? This is Bloomberg Wall Street Week. 14 00:00:42,760 --> 00:00:46,440 Speaker 1: I'm David Weston. This week we saw more of everything, 15 00:00:46,680 --> 00:00:49,520 Speaker 1: more stimulus as both the Fed and the ECB say 16 00:00:49,560 --> 00:00:53,920 Speaker 1: they'll keep buying those bonds at accelerated rates. More inflation 17 00:00:54,040 --> 00:00:56,160 Speaker 1: is the U s CPI grew at the top of 18 00:00:56,200 --> 00:00:59,120 Speaker 1: the range of expectations. It was up five per cent 19 00:00:59,400 --> 00:01:01,880 Speaker 1: year over year for the month of May. And Chinese 20 00:01:01,880 --> 00:01:05,400 Speaker 1: producer prices shot up, more job openings for those looking 21 00:01:05,400 --> 00:01:09,000 Speaker 1: for work as the jolts numbers are running at record highs, 22 00:01:09,120 --> 00:01:12,520 Speaker 1: and more mean stocks as AMC and game Stuff are 23 00:01:12,560 --> 00:01:16,640 Speaker 1: so last month, replaced by stocks like Clover Health and 24 00:01:16,760 --> 00:01:21,640 Speaker 1: Clean Energy Fuels and prison operator Geo Group. But the 25 00:01:21,680 --> 00:01:24,679 Speaker 1: one thing there wasn't more of was fear as the 26 00:01:24,720 --> 00:01:28,200 Speaker 1: ten year yield dipped back down below one and equities 27 00:01:28,240 --> 00:01:30,600 Speaker 1: spent the week flirting with record highs, with the SMP 28 00:01:30,720 --> 00:01:32,600 Speaker 1: five hundred up for a third week in a row. 29 00:01:33,000 --> 00:01:35,360 Speaker 1: So being a trader may have been some fun this week, 30 00:01:35,400 --> 00:01:38,360 Speaker 1: but won was it for investors? Then we learn anything 31 00:01:38,400 --> 00:01:40,640 Speaker 1: for the longer term? And is there a downside to 32 00:01:40,760 --> 00:01:44,120 Speaker 1: all this forward momentum for some answers? Welcome now Steve Rattner. 33 00:01:44,160 --> 00:01:47,319 Speaker 1: He's chairman CEO of Willow Advisors, which invest the family 34 00:01:47,319 --> 00:01:50,640 Speaker 1: and philanthropic assets of Michael Bloomberg, founder and majority owner 35 00:01:50,640 --> 00:01:54,000 Speaker 1: of our parent company, and Katikotch Global, co head of 36 00:01:54,000 --> 00:01:57,280 Speaker 1: fundamental equity funds at Golden Sex. So welcome both to 37 00:01:57,360 --> 00:01:59,480 Speaker 1: both of you, Steve and Katie cam Let's start with you. 38 00:02:00,240 --> 00:02:02,240 Speaker 1: The headline for me this week is we had as 39 00:02:02,240 --> 00:02:04,760 Speaker 1: I say five percent inflation. You ever, you're in the 40 00:02:04,800 --> 00:02:07,680 Speaker 1: month of May. That's the highest has been in thirty years. Uh, 41 00:02:07,720 --> 00:02:10,720 Speaker 1: the real yield is at negative rates that we're we 42 00:02:10,760 --> 00:02:12,760 Speaker 1: haven't seen since Thanking eighty when inflation was out of 43 00:02:12,760 --> 00:02:14,840 Speaker 1: control and the market just shrugged it off. How can 44 00:02:14,880 --> 00:02:18,720 Speaker 1: that be? Right? Yeah, very interesting inflation print. Like you said, 45 00:02:18,760 --> 00:02:22,079 Speaker 1: the CPI basket clearly showing a lot of upward pressure. 46 00:02:22,200 --> 00:02:24,440 Speaker 1: And to answer your question, why is the market shrugging 47 00:02:24,440 --> 00:02:26,799 Speaker 1: it off? It's obviously because the Fed is telling us 48 00:02:26,840 --> 00:02:30,760 Speaker 1: this is transitory, and the market also is believing its transitory. 49 00:02:31,080 --> 00:02:33,000 Speaker 1: And that's the reason we haven't seen a lot of 50 00:02:33,080 --> 00:02:34,920 Speaker 1: movement in the tenure. And so this is what people 51 00:02:34,919 --> 00:02:36,919 Speaker 1: are really gonna have to get their heads around in 52 00:02:36,960 --> 00:02:39,799 Speaker 1: the coming weeks as to whether or not this will unlock. 53 00:02:39,960 --> 00:02:42,639 Speaker 1: Is it really a supply chain issue? Um as as 54 00:02:42,639 --> 00:02:44,680 Speaker 1: an example, that's driving that. So we have to spend 55 00:02:44,720 --> 00:02:47,239 Speaker 1: some time thinking through that. But I would separate the 56 00:02:47,720 --> 00:02:50,240 Speaker 1: CPI basket issue from the wage issue, and I just 57 00:02:50,280 --> 00:02:52,639 Speaker 1: want to comment on that quickly. Um I can make 58 00:02:52,680 --> 00:02:54,480 Speaker 1: a case for a lot of things in that basket 59 00:02:54,480 --> 00:02:57,559 Speaker 1: being transitory. We are worried about some of the inflationary 60 00:02:57,600 --> 00:03:00,640 Speaker 1: pressures that we're seeing in wages. You mentioned her jobs 61 00:03:00,960 --> 00:03:04,280 Speaker 1: available over nine million, the biggest in history. From our 62 00:03:04,320 --> 00:03:07,280 Speaker 1: portfolio companies, we're seeing some people have to increase we 63 00:03:07,480 --> 00:03:10,920 Speaker 1: just by to bring people back into the labor market. 64 00:03:11,400 --> 00:03:13,600 Speaker 1: It may be possible, and this could be good in 65 00:03:13,639 --> 00:03:15,519 Speaker 1: some ways. That we are at the precipice of a 66 00:03:15,639 --> 00:03:20,560 Speaker 1: redis redistribution cycle from capital to labor and that is 67 00:03:20,600 --> 00:03:23,080 Speaker 1: going to have some inflationary pressures that we're really gonna 68 00:03:23,160 --> 00:03:25,280 Speaker 1: need to watch. And if that is the case, that 69 00:03:25,320 --> 00:03:27,880 Speaker 1: will show up in margins of companies and that's something 70 00:03:27,919 --> 00:03:30,560 Speaker 1: we have to be vigilant around. So taking that all together, 71 00:03:30,680 --> 00:03:33,720 Speaker 1: people think it's transitory. The market may be too complacent 72 00:03:33,720 --> 00:03:36,200 Speaker 1: about this, and we're very very focused on how it's 73 00:03:36,240 --> 00:03:39,160 Speaker 1: coming through on wages. So Steve, as a major investor, 74 00:03:39,320 --> 00:03:41,760 Speaker 1: are are is there a danger we are being too complacent? 75 00:03:41,800 --> 00:03:43,520 Speaker 1: And go back to the FED for a second. We 76 00:03:43,560 --> 00:03:45,120 Speaker 1: all like to focus on the Fed and what they're doing. 77 00:03:45,120 --> 00:03:47,880 Speaker 1: They have control over things like interest rates, particularly short 78 00:03:47,960 --> 00:03:49,880 Speaker 1: end of the curve. They can really affect that. They 79 00:03:49,880 --> 00:03:53,800 Speaker 1: can certainly affect financial conditions. They can't really determine inflation 80 00:03:53,840 --> 00:03:56,040 Speaker 1: they could only sort of predict where it's going. Do 81 00:03:56,120 --> 00:03:57,960 Speaker 1: we think they have it right? The FED can not 82 00:03:58,120 --> 00:04:01,080 Speaker 1: only predict inflation, they can create inflation. But that that's 83 00:04:01,120 --> 00:04:03,680 Speaker 1: maybe another story. But I think what Katie said at 84 00:04:03,720 --> 00:04:05,600 Speaker 1: the beginning of all of the Katie said was I 85 00:04:05,640 --> 00:04:08,160 Speaker 1: think dead on, But particularly at the beginning of her answer, 86 00:04:08,560 --> 00:04:12,760 Speaker 1: she pointed out this disconnect between what many professional economists 87 00:04:12,760 --> 00:04:14,840 Speaker 1: like Barry Summers, who I have no agree with, as 88 00:04:14,880 --> 00:04:17,039 Speaker 1: you know, but also a lot of CT goes and 89 00:04:17,080 --> 00:04:19,360 Speaker 1: other people outside of the markets, I think is going 90 00:04:19,400 --> 00:04:21,920 Speaker 1: on with what the markets think is going on. When 91 00:04:21,920 --> 00:04:26,200 Speaker 1: you look at what's happening to inflationary expectations as measured 92 00:04:26,200 --> 00:04:29,400 Speaker 1: by the markets, they remained to use the fed's famous phase, 93 00:04:29,480 --> 00:04:32,440 Speaker 1: in fact favorite phrase and famous phrase, they remained well angered. 94 00:04:32,480 --> 00:04:35,560 Speaker 1: Whether you look at the break evens between tips and nominals, 95 00:04:35,560 --> 00:04:37,599 Speaker 1: whether you look at the forwards, whether you look at 96 00:04:37,640 --> 00:04:39,760 Speaker 1: the five year five year forwards, any place you look 97 00:04:40,120 --> 00:04:43,560 Speaker 1: in the market, it's it's suggesting that inflation will remain 98 00:04:43,760 --> 00:04:45,040 Speaker 1: in the two and a quarter or two and a 99 00:04:45,080 --> 00:04:47,800 Speaker 1: half percent range. Many of the rest of us have 100 00:04:47,920 --> 00:04:50,320 Speaker 1: different views about that, but that's at least what the 101 00:04:50,320 --> 00:04:54,359 Speaker 1: market thinks at the moment as and when the facts change. 102 00:04:54,400 --> 00:04:58,480 Speaker 1: As King's famously uh said, Uh, we can change our 103 00:04:58,520 --> 00:05:00,800 Speaker 1: minds and the market may change it mind And to 104 00:05:00,880 --> 00:05:03,760 Speaker 1: a comment you made a second ago, the FED can 105 00:05:03,880 --> 00:05:07,440 Speaker 1: control inflation and create it and and stop it. But 106 00:05:07,520 --> 00:05:09,800 Speaker 1: the one thing that really can't do is control the 107 00:05:09,839 --> 00:05:12,320 Speaker 1: long end of the treasury curve. And in a fight 108 00:05:12,480 --> 00:05:14,719 Speaker 1: between the Fed and the markets of what happens so 109 00:05:14,800 --> 00:05:17,080 Speaker 1: longer term interest rates, not the FED funds right, not 110 00:05:17,160 --> 00:05:18,880 Speaker 1: the two year, but when you get out to ten, 111 00:05:19,520 --> 00:05:22,839 Speaker 1: twenty and thirty years, I believe, and I think history 112 00:05:22,880 --> 00:05:25,360 Speaker 1: would suggest that the markets are were often right than 113 00:05:25,400 --> 00:05:27,920 Speaker 1: the Fed is right, and that becomes a test of wills. 114 00:05:28,640 --> 00:05:31,120 Speaker 1: So O, Katy, you mentioned inflation, particularly when it comes 115 00:05:31,160 --> 00:05:33,479 Speaker 1: to wages, But what does that do to you as 116 00:05:33,520 --> 00:05:36,200 Speaker 1: an investment in equities? Do you have to really discern 117 00:05:36,360 --> 00:05:39,200 Speaker 1: between companies, for example, with smaller margins that might get 118 00:05:39,200 --> 00:05:41,840 Speaker 1: really squeezed with wage pressure, because one of the things 119 00:05:41,839 --> 00:05:45,000 Speaker 1: that can happen inflation, whether it's wages or its input costs, 120 00:05:45,160 --> 00:05:47,840 Speaker 1: you can really hurt the margins. Yeah. Absolutely, And so 121 00:05:47,880 --> 00:05:50,280 Speaker 1: I think with wages one thing the main thing that 122 00:05:50,320 --> 00:05:51,920 Speaker 1: we have to figure out here is that we know 123 00:05:52,000 --> 00:05:53,920 Speaker 1: that wages are going up, as as I said, we're 124 00:05:53,920 --> 00:05:56,360 Speaker 1: seeing a lot of data on that from our portfolio companies. 125 00:05:56,640 --> 00:05:58,920 Speaker 1: Um we need to and it's quite an interesting thing 126 00:05:59,000 --> 00:06:02,279 Speaker 1: because we've actually been able to achieve through this stimulus 127 00:06:02,600 --> 00:06:05,080 Speaker 1: and increase effectively in the minimum wage that we have 128 00:06:05,200 --> 00:06:08,160 Speaker 1: not been able to do through policy ever, and so 129 00:06:08,240 --> 00:06:11,280 Speaker 1: that's in and of itself quite interesting. Then we need 130 00:06:11,320 --> 00:06:13,440 Speaker 1: to actually see with these wages, is this a one 131 00:06:13,480 --> 00:06:15,680 Speaker 1: time reset or were actually going to have growth of 132 00:06:16,640 --> 00:06:19,560 Speaker 1: upward growth on wage pressure going forward, And so that's 133 00:06:19,560 --> 00:06:21,719 Speaker 1: what we have to monitor. If we have that, it 134 00:06:21,920 --> 00:06:25,200 Speaker 1: is going to start to erode margins more meaningfully and 135 00:06:25,240 --> 00:06:27,800 Speaker 1: that could be negative for equity markets. Just taking one 136 00:06:27,880 --> 00:06:29,880 Speaker 1: step back here though, I think what we're seeing in 137 00:06:29,920 --> 00:06:32,279 Speaker 1: equity markets now as it relates to inflation is that 138 00:06:32,320 --> 00:06:35,760 Speaker 1: markets are up so very healthy return for equity markets 139 00:06:35,760 --> 00:06:38,080 Speaker 1: here to date, but the inflation is playing out what's 140 00:06:38,120 --> 00:06:41,960 Speaker 1: happening under the markets obviously with value having strong leadership 141 00:06:42,040 --> 00:06:45,880 Speaker 1: over growth markets, and that's directly because of inflationary pressures. 142 00:06:46,200 --> 00:06:49,279 Speaker 1: Many thanks to Steve Rattner of Willow Advisors and Katie 143 00:06:49,320 --> 00:06:53,599 Speaker 1: Kotch from Goldman Sachs Asset Management coming up. Jeff Bezos 144 00:06:53,680 --> 00:06:56,760 Speaker 1: says he's going into space this summer, but can he 145 00:06:56,839 --> 00:06:59,840 Speaker 1: make some money up there? We ask test Patch of 146 00:07:00,000 --> 00:07:04,040 Speaker 1: Messember Venture Partners. That's next on Wall Street Week on Bloomberg. 147 00:07:09,600 --> 00:07:13,560 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 148 00:07:13,720 --> 00:07:17,840 Speaker 1: Bloomberg Radio. Space is now open not just to astronauts, 149 00:07:17,960 --> 00:07:21,360 Speaker 1: but to billionaires. Jeff Bezos announced this week that he's 150 00:07:21,400 --> 00:07:23,600 Speaker 1: going to take on an eleven minute trip to space 151 00:07:23,640 --> 00:07:26,400 Speaker 1: on a Blue Origin rocket next month. And he's not 152 00:07:26,520 --> 00:07:29,680 Speaker 1: the only one. Virgin Galactics Richard Branson plans to take 153 00:07:29,680 --> 00:07:32,520 Speaker 1: a similar trip as early as this summer. We're asking 154 00:07:32,520 --> 00:07:35,880 Speaker 1: our founder Richard Branson to come on and really test 155 00:07:35,920 --> 00:07:38,680 Speaker 1: the private astronaut experience for us. We think who better 156 00:07:38,760 --> 00:07:42,640 Speaker 1: to do that? That's Virgin Galactic CEO Michael Cole Glacier. 157 00:07:42,920 --> 00:07:46,960 Speaker 1: For investors, space is a growth market. Morgan Stanley estimates 158 00:07:47,000 --> 00:07:50,000 Speaker 1: that the global space industry could grow to one trillion 159 00:07:50,040 --> 00:07:54,800 Speaker 1: dollars in competition among the space barons started when Jeff 160 00:07:54,800 --> 00:07:58,360 Speaker 1: Bezos founded Blue Origin back in two thousand. My vision 161 00:07:58,400 --> 00:08:02,480 Speaker 1: for Blue Origin, the long term vision is millions of 162 00:08:02,560 --> 00:08:05,600 Speaker 1: people living and working in space. We need a space 163 00:08:05,640 --> 00:08:09,160 Speaker 1: staring civilization for a whole bunch of reasons, and that's 164 00:08:09,200 --> 00:08:12,720 Speaker 1: the vision. The company operated quietly for fifteen years until 165 00:08:12,760 --> 00:08:16,760 Speaker 1: it started testing its new Shepherd rocket. SpaceX was second 166 00:08:16,800 --> 00:08:19,400 Speaker 1: into the private space race, joining in two thousand two. 167 00:08:19,840 --> 00:08:22,360 Speaker 1: In just a few years, it launched its Falcon one 168 00:08:22,480 --> 00:08:25,280 Speaker 1: rocket and pulled ahead of its competitors in a series 169 00:08:25,360 --> 00:08:28,760 Speaker 1: of first SpaceX led the first private mission to the 170 00:08:28,800 --> 00:08:32,760 Speaker 1: International Space Station, filling a role left vacant after NASA 171 00:08:32,800 --> 00:08:36,680 Speaker 1: retired its space Shuttle fleet in two thousand eleven. Here's 172 00:08:36,800 --> 00:08:42,040 Speaker 1: Morgan Stanley's Adam Jonas. SpaceX is the apex predator in 173 00:08:42,160 --> 00:08:46,199 Speaker 1: the space market. Some would argue they're sucking the air 174 00:08:46,240 --> 00:08:48,240 Speaker 1: out of the universe right now in terms of talent 175 00:08:48,280 --> 00:08:51,680 Speaker 1: and capital. While SpaceX and Blue Origin compete over NASA 176 00:08:51,760 --> 00:08:55,480 Speaker 1: contracts to launch satellites and service the space station, Virgin 177 00:08:55,520 --> 00:08:59,920 Speaker 1: Galactic focuses on space tourism. It celebrated its first manned 178 00:09:00,120 --> 00:09:02,800 Speaker 1: space flight in May and is planning to conduct more 179 00:09:02,840 --> 00:09:06,240 Speaker 1: test flights with the goal of taking commercial passengers to 180 00:09:06,320 --> 00:09:10,800 Speaker 1: the edge of space again. Here's Virgin Galactic CEO Michael 181 00:09:10,880 --> 00:09:13,600 Speaker 1: cold Glazier. We believe this is going to be a 182 00:09:13,600 --> 00:09:17,360 Speaker 1: supply constrained business for quite some time. The demand of 183 00:09:17,400 --> 00:09:19,760 Speaker 1: this is going to be well out in front of 184 00:09:19,800 --> 00:09:21,839 Speaker 1: our ability to build and scale the fleet up for 185 00:09:21,880 --> 00:09:25,920 Speaker 1: a while, and as such it will be reasonably expensive 186 00:09:25,960 --> 00:09:28,680 Speaker 1: as it goes forward. There is so much excitement and yes, 187 00:09:28,920 --> 00:09:32,160 Speaker 1: romance in space, but the question is is it investival? 188 00:09:32,160 --> 00:09:34,920 Speaker 1: Can we make money out there in space? Welcome now 189 00:09:34,960 --> 00:09:37,320 Speaker 1: test Hatch, who is devoting her career to answering that 190 00:09:37,480 --> 00:09:40,800 Speaker 1: key question. She started out as an aeronautical engineer hoping 191 00:09:40,840 --> 00:09:43,440 Speaker 1: to be an astronaut, worked at SpaceX and at Boing, 192 00:09:43,679 --> 00:09:46,200 Speaker 1: but now she's become a venture capitalist. She has a 193 00:09:46,240 --> 00:09:49,440 Speaker 1: partner at Bessemer Venture Partners, and we welcome right now 194 00:09:49,520 --> 00:09:51,880 Speaker 1: to Wall Street Week. So give us a sense of 195 00:09:51,960 --> 00:09:54,480 Speaker 1: how we might make money out there beyond just getting 196 00:09:54,480 --> 00:09:57,760 Speaker 1: excited about it. Of course, when investing in any company, 197 00:09:57,800 --> 00:09:59,360 Speaker 1: there's a handful of things you want to look at. 198 00:09:59,600 --> 00:10:01,679 Speaker 1: You want to look at the top line revenue, how 199 00:10:01,760 --> 00:10:04,160 Speaker 1: quickly and efficiently it's growing. You want to look at 200 00:10:04,800 --> 00:10:08,400 Speaker 1: the competitors in the space and the quality of the team. 201 00:10:08,440 --> 00:10:12,680 Speaker 1: When it comes to space companies specifically, there's additional nuances 202 00:10:12,720 --> 00:10:15,440 Speaker 1: you want to factor into your consideration. Let's use three 203 00:10:15,480 --> 00:10:20,400 Speaker 1: of the most common examples, launch vehicles, satellites, and space tourism. 204 00:10:20,480 --> 00:10:22,679 Speaker 1: When it comes to launch vehicles, you want to look 205 00:10:22,679 --> 00:10:25,040 Speaker 1: at the number of successful launches and the number of 206 00:10:25,080 --> 00:10:28,240 Speaker 1: assets that rocket is launched into space. When it comes 207 00:10:28,240 --> 00:10:30,080 Speaker 1: to satellites, you want to look at the number of 208 00:10:30,120 --> 00:10:33,840 Speaker 1: satellites and specifically what sensors they have in space. And 209 00:10:33,840 --> 00:10:36,679 Speaker 1: then space tourist companies eventually you want to look at 210 00:10:36,679 --> 00:10:39,360 Speaker 1: people that they've launched into space. That's not reality at 211 00:10:39,360 --> 00:10:43,160 Speaker 1: the moment. So an early indicator is successful test flights, 212 00:10:43,200 --> 00:10:46,000 Speaker 1: and all of these things are an early proxy in 213 00:10:46,040 --> 00:10:48,959 Speaker 1: space tourists case and an actual in launch vehicle in 214 00:10:49,000 --> 00:10:52,520 Speaker 1: satellitees case to revenue, again, a very important thing for 215 00:10:52,840 --> 00:10:55,960 Speaker 1: all companies, even space companies test right now for many 216 00:10:56,000 --> 00:10:58,400 Speaker 1: of us who aren't as initiating in this as you are. 217 00:10:58,600 --> 00:11:01,000 Speaker 1: When we think about private at space race, we think 218 00:11:01,040 --> 00:11:03,199 Speaker 1: about three big companies, right, We think about SpaceX, We 219 00:11:03,240 --> 00:11:05,960 Speaker 1: think Abou Blue Origin, we think of Virgin Galactic, two 220 00:11:05,960 --> 00:11:08,480 Speaker 1: of which are private actually, but essentially that there are 221 00:11:08,480 --> 00:11:10,120 Speaker 1: other companies out there as well that may not be 222 00:11:10,160 --> 00:11:12,920 Speaker 1: as well known or as big. It's amazing all that 223 00:11:13,320 --> 00:11:15,720 Speaker 1: space X, Blue Origin and Virgin Galactic are doing for 224 00:11:15,760 --> 00:11:19,960 Speaker 1: the space industry. They're really paving a path for hundreds. 225 00:11:20,440 --> 00:11:25,720 Speaker 1: There are over four hundreds space startups following in in 226 00:11:25,720 --> 00:11:29,439 Speaker 1: in those three footsteps and hope to be those next three. Uh. 227 00:11:29,440 --> 00:11:32,199 Speaker 1: There's about a dozen space startup companies that are going 228 00:11:32,280 --> 00:11:35,600 Speaker 1: public this year via s back a special purpose acquisition company, 229 00:11:35,720 --> 00:11:37,760 Speaker 1: and will be available to the public by the end 230 00:11:37,760 --> 00:11:40,840 Speaker 1: of the year. It's a really large market, and it's 231 00:11:40,840 --> 00:11:44,120 Speaker 1: an overall three hundred and fifty billion dollar economy that 232 00:11:44,520 --> 00:11:46,960 Speaker 1: we use in our everyday lives, whether it's to watch TV, 233 00:11:47,160 --> 00:11:50,320 Speaker 1: listen to the radio, navigate us to our destination, and 234 00:11:50,320 --> 00:11:54,319 Speaker 1: and and these startups are really lowering the barrier of 235 00:11:54,440 --> 00:11:57,440 Speaker 1: entry to space and continuing to open space for business. 236 00:11:57,640 --> 00:11:59,480 Speaker 1: So pick up on that specifically, how much of this 237 00:11:59,520 --> 00:12:03,000 Speaker 1: is telecom muncations is putting satellites up? I mean, you've 238 00:12:03,000 --> 00:12:05,360 Speaker 1: taught me actually about something called cube SATs. I didn't 239 00:12:05,360 --> 00:12:07,240 Speaker 1: know they existed. I just think about the big ones. 240 00:12:07,320 --> 00:12:09,680 Speaker 1: Tell Star back to the old days, right, But we 241 00:12:09,720 --> 00:12:11,880 Speaker 1: have a whole new range of satellites that some of 242 00:12:11,920 --> 00:12:14,880 Speaker 1: these private companies are putting up there. Decades of Moore's 243 00:12:14,960 --> 00:12:18,520 Speaker 1: law has exponentially decreased the size and increased the power 244 00:12:18,559 --> 00:12:21,520 Speaker 1: of commercial off the shelf electronics to allow for the 245 00:12:21,520 --> 00:12:24,559 Speaker 1: invention of the cubes at, which reversed the model that 246 00:12:24,600 --> 00:12:27,880 Speaker 1: you were just sharing of massive school best sized satellites 247 00:12:28,080 --> 00:12:30,679 Speaker 1: that would take years of not decades, and tens, if 248 00:12:30,679 --> 00:12:33,160 Speaker 1: not hundreds of millions of dollars to design, build, test, 249 00:12:33,200 --> 00:12:37,560 Speaker 1: and launch into geostationary orbit thirty six thousand kilometers away 250 00:12:37,559 --> 00:12:41,240 Speaker 1: from the world. The invention of the cubes at flipped 251 00:12:41,240 --> 00:12:44,920 Speaker 1: that model so that you can launch your camera onto 252 00:12:44,960 --> 00:12:48,000 Speaker 1: a tissue boxed size satellite whizzn't around the Earth every 253 00:12:48,080 --> 00:12:50,800 Speaker 1: ninety minutes. If you saw the movie Gravity, it's where 254 00:12:50,800 --> 00:12:53,760 Speaker 1: Sandra Bolock and George clooneyware on our International Space Station. 255 00:12:54,400 --> 00:12:59,200 Speaker 1: And these cube SATs have really allowed entrepreneurs, students, people's 256 00:12:59,200 --> 00:13:03,040 Speaker 1: imagination to launch unique sensors to take photos of the Earth, 257 00:13:03,280 --> 00:13:06,960 Speaker 1: to communicate with the Earth. And I especially am interested 258 00:13:07,200 --> 00:13:10,960 Speaker 1: in novel or unique sensors that are in space on 259 00:13:10,960 --> 00:13:13,880 Speaker 1: this CubeSat that help life on Earth. What sorts of 260 00:13:13,920 --> 00:13:17,640 Speaker 1: profit margins can you make on things like launching CubeSats 261 00:13:17,720 --> 00:13:20,640 Speaker 1: is that a profitable business. Hey, every business, even if 262 00:13:20,679 --> 00:13:23,120 Speaker 1: it's space, needs to be profitable at least from a 263 00:13:23,360 --> 00:13:29,439 Speaker 1: venture capital investment perspective. And once you make your constellation, 264 00:13:29,520 --> 00:13:31,640 Speaker 1: once you get to a carrying capacity where you have 265 00:13:31,679 --> 00:13:34,960 Speaker 1: the number of assets you need in space, the margins 266 00:13:35,120 --> 00:13:39,320 Speaker 1: can be can be quite good north of if not 267 00:13:39,400 --> 00:13:42,200 Speaker 1: more or less depending on how often you need to 268 00:13:42,240 --> 00:13:46,480 Speaker 1: replenish your satellites. So I can use a specific example, 269 00:13:47,160 --> 00:13:50,439 Speaker 1: um Bestumber venture partners firm, I'm a partner at has 270 00:13:50,440 --> 00:13:54,040 Speaker 1: invested in a company called spire Global, the largest general 271 00:13:54,040 --> 00:13:58,400 Speaker 1: purpose cubes at constellation. We have three very specific sensors 272 00:13:58,400 --> 00:14:02,240 Speaker 1: for aviation, maritime and weather monitoring and protecting. It is 273 00:14:02,280 --> 00:14:04,720 Speaker 1: one of the companies that has announced its back merger 274 00:14:04,800 --> 00:14:08,480 Speaker 1: with Knapsite and embarking down that path to go public. 275 00:14:09,400 --> 00:14:12,240 Speaker 1: We have about eight lemurs, which we call our cub 276 00:14:12,280 --> 00:14:15,160 Speaker 1: SATs in space and that's all we need. We've hit 277 00:14:15,240 --> 00:14:20,000 Speaker 1: that capacity and it will dramatically increase the margins for 278 00:14:20,040 --> 00:14:22,440 Speaker 1: the business now that we only need to replenish every 279 00:14:22,480 --> 00:14:25,320 Speaker 1: three to five years rather than launch to get to 280 00:14:25,320 --> 00:14:27,440 Speaker 1: the A D in first place test. We think of 281 00:14:27,520 --> 00:14:30,320 Speaker 1: this as a massively capital intensive business. I mean, it 282 00:14:30,480 --> 00:14:32,680 Speaker 1: was at one point only the government, and now when 283 00:14:32,680 --> 00:14:34,040 Speaker 1: you have some of these big companies, there's a lot 284 00:14:34,080 --> 00:14:36,760 Speaker 1: of capital involved. Is that true? Even with things like 285 00:14:36,840 --> 00:14:40,000 Speaker 1: cubes at companies, it's more capital intensive and it takes 286 00:14:40,040 --> 00:14:43,240 Speaker 1: longer than let's stay software software companies, you change a 287 00:14:43,240 --> 00:14:45,360 Speaker 1: lot of code, you push it into the ether, and 288 00:14:45,400 --> 00:14:49,320 Speaker 1: you get your result. Versus satellites and launch vehicles, you 289 00:14:49,400 --> 00:14:52,600 Speaker 1: have to launch your asset into space before you start 290 00:14:52,640 --> 00:14:55,240 Speaker 1: generating your product and therefore revenue. Thank you so much 291 00:14:55,280 --> 00:14:59,280 Speaker 1: to Tess Hatch, partner at Bessemer Venture Partners. Coming up 292 00:14:59,280 --> 00:15:02,160 Speaker 1: on Wall Street, we contributor Jillian Tett of The Financial 293 00:15:02,200 --> 00:15:05,920 Speaker 1: Times explains why being an anthropologist, or at least knowing one, 294 00:15:06,240 --> 00:15:09,560 Speaker 1: could make us better investors. That's next on Wall Street 295 00:15:09,600 --> 00:15:18,480 Speaker 1: Week on Bloomberg. This is Bloomberg Wall Street Week with 296 00:15:18,640 --> 00:15:22,200 Speaker 1: David Weston from Bloomberg Radio. To those of us coming 297 00:15:22,280 --> 00:15:25,160 Speaker 1: from the outside global, Wall Street might just remind us 298 00:15:25,200 --> 00:15:27,920 Speaker 1: those exotic tribes from Papua New Guinea or Borneo that 299 00:15:27,960 --> 00:15:31,080 Speaker 1: we read about in our undergraduate anthropology classes. But it 300 00:15:31,120 --> 00:15:34,160 Speaker 1: turns out that the similars are more than just superficial something. 301 00:15:34,160 --> 00:15:37,600 Speaker 1: It takes a true anthropologist to explain. Before she became 302 00:15:37,600 --> 00:15:40,640 Speaker 1: an acclaimed financial journalist and author, Jillian Tett of The 303 00:15:40,640 --> 00:15:43,800 Speaker 1: Financial Times trained as an anthropologist at Cambridge and she 304 00:15:43,880 --> 00:15:45,800 Speaker 1: brings us a different way to look at many of 305 00:15:45,840 --> 00:15:48,320 Speaker 1: the stories recovery every day in her new book and 306 00:15:48,440 --> 00:15:51,240 Speaker 1: through vision, a new way to see in business and life. 307 00:15:51,280 --> 00:15:53,000 Speaker 1: And we welcome her now to give us someone of 308 00:15:53,080 --> 00:15:55,360 Speaker 1: the taste of the lessons this book has to teach 309 00:15:55,400 --> 00:15:58,280 Speaker 1: us all. So welcome Jillian. Congratulations on this book. It's 310 00:15:58,280 --> 00:16:00,800 Speaker 1: a fascinting book because you go through quite a few 311 00:16:00,800 --> 00:16:02,960 Speaker 1: stories actually that we know about it, and then you've 312 00:16:03,000 --> 00:16:05,200 Speaker 1: covered through the years and we think of a sort 313 00:16:05,200 --> 00:16:08,440 Speaker 1: of Wall Street stories and apply and anthro vision as 314 00:16:08,480 --> 00:16:10,480 Speaker 1: it were, to them. We can't go through them all. 315 00:16:10,520 --> 00:16:12,520 Speaker 1: I recommend somebody get the book. Area, But let's take 316 00:16:12,600 --> 00:16:15,080 Speaker 1: one that's very timely right now. Let's work from home 317 00:16:15,560 --> 00:16:17,760 Speaker 1: and what happened when we were forced to separate from 318 00:16:17,800 --> 00:16:20,560 Speaker 1: one another? And now as we re enter, explain what 319 00:16:20,640 --> 00:16:25,080 Speaker 1: anthropology might teach us about that phenomenon. Well, one of 320 00:16:25,080 --> 00:16:29,240 Speaker 1: the things anthropology argues is that culture matters. In a 321 00:16:29,320 --> 00:16:32,920 Speaker 1: world of artificial intelligence. We need to use some anthropology 322 00:16:32,960 --> 00:16:35,400 Speaker 1: intelligence to really look at all the things that big 323 00:16:35,480 --> 00:16:38,240 Speaker 1: data contract, which is these cultural patterns which are often 324 00:16:38,280 --> 00:16:43,320 Speaker 1: contradictory and lookdown. Has made many of us in amateur 325 00:16:43,320 --> 00:16:46,920 Speaker 1: anthropologists almost by default, because we've just had a big 326 00:16:47,000 --> 00:16:49,600 Speaker 1: culture shock where all the things that we used to 327 00:16:49,640 --> 00:16:52,240 Speaker 1: take for granted about our work lives and home lives 328 00:16:52,520 --> 00:16:55,560 Speaker 1: have been turned upside down, and suddenly we've had to 329 00:16:55,560 --> 00:16:58,880 Speaker 1: think about things like social boundaries whose are in our 330 00:16:59,000 --> 00:17:01,400 Speaker 1: cod or our trial life, and we've had to think 331 00:17:01,400 --> 00:17:03,960 Speaker 1: about the rituals that shape our lives. We've had to 332 00:17:04,000 --> 00:17:08,040 Speaker 1: think about all the daily routines that we rely on. 333 00:17:08,800 --> 00:17:12,040 Speaker 1: And what's fascinating is that many people have learned that 334 00:17:12,680 --> 00:17:15,160 Speaker 1: being at home you can do some things incredibly well. 335 00:17:15,800 --> 00:17:19,080 Speaker 1: Many people have realized actually value having that boundary between 336 00:17:19,119 --> 00:17:23,080 Speaker 1: home life and work life in space and in time UM. 337 00:17:23,119 --> 00:17:25,800 Speaker 1: And they've also realized that one of the benefits of 338 00:17:25,840 --> 00:17:29,000 Speaker 1: being in an office is not what people think. It's 339 00:17:29,040 --> 00:17:32,000 Speaker 1: not the processes and the formal tools that we use 340 00:17:32,080 --> 00:17:35,440 Speaker 1: to get work done. It's often the sent through experience 341 00:17:35,440 --> 00:17:39,520 Speaker 1: of interacting with colleagues and bumping into people and having 342 00:17:39,520 --> 00:17:43,480 Speaker 1: so indipudous encounters that really matters. UM. There's a process 343 00:17:43,520 --> 00:17:47,040 Speaker 1: of what anthropologists call sense making going on in offices, 344 00:17:47,640 --> 00:17:50,240 Speaker 1: and many people have found that pretty hard to replicate 345 00:17:50,280 --> 00:17:54,040 Speaker 1: in zoom. So the question that's fascinating now is as 346 00:17:54,080 --> 00:17:56,040 Speaker 1: we go back to the office, or some of us do, 347 00:17:56,920 --> 00:17:58,600 Speaker 1: what are we going to keep How are we going 348 00:17:58,640 --> 00:18:02,520 Speaker 1: to redefine our rich alls and our social groups, and 349 00:18:02,560 --> 00:18:05,200 Speaker 1: now that we have an opportunity to reset them with 350 00:18:05,480 --> 00:18:08,359 Speaker 1: much more awareness in the past, how are we going 351 00:18:08,400 --> 00:18:10,680 Speaker 1: to choose to do that? And just to be clear 352 00:18:10,760 --> 00:18:12,480 Speaker 1: from your book, I learned we're not just talking about 353 00:18:12,520 --> 00:18:14,880 Speaker 1: soft science here, we're talking about making money. Some people 354 00:18:14,960 --> 00:18:17,919 Speaker 1: anticipated this. You talk about some trading rooms before the 355 00:18:17,920 --> 00:18:21,880 Speaker 1: pandemic where some people will understood the importance of that 356 00:18:22,080 --> 00:18:25,320 Speaker 1: lateral vision, as it were, even by having lower computers, 357 00:18:25,359 --> 00:18:28,240 Speaker 1: they can see one another absolutely. I mean, one of 358 00:18:28,240 --> 00:18:31,200 Speaker 1: the key messages in anthropology is that if you live 359 00:18:31,200 --> 00:18:33,920 Speaker 1: your life with tunnel vision, just looking at things that 360 00:18:33,960 --> 00:18:37,160 Speaker 1: are directly under your nose, and you don't take time 361 00:18:37,200 --> 00:18:39,880 Speaker 1: to have lateral vision to look around you, then you're 362 00:18:39,920 --> 00:18:43,720 Speaker 1: losing out. And ironically, financial trader has known that for 363 00:18:43,760 --> 00:18:46,800 Speaker 1: a long time because actually there's an anthropologist who went 364 00:18:46,880 --> 00:18:49,760 Speaker 1: to study Wall Street traders around the turn of the century. 365 00:18:50,200 --> 00:18:53,040 Speaker 1: And notice that even though Wall Street traders technically have 366 00:18:53,160 --> 00:18:55,440 Speaker 1: the ability to work from home, way back in the 367 00:18:55,560 --> 00:18:58,840 Speaker 1: year two thousands with a Bloomberg terminal or other tools 368 00:18:58,880 --> 00:19:02,679 Speaker 1: like that, banks were building bigger and bigger trading flaws. 369 00:19:03,440 --> 00:19:06,000 Speaker 1: And when he asked why, he realized it was because 370 00:19:06,000 --> 00:19:09,720 Speaker 1: of this issue of sense making, awareness of others of 371 00:19:10,040 --> 00:19:14,600 Speaker 1: lateral perspective, and also something called incidental information exchange, which 372 00:19:14,640 --> 00:19:18,680 Speaker 1: is really what happens when you have small teams who 373 00:19:18,680 --> 00:19:21,800 Speaker 1: may have very good levels of social capital inside the team, 374 00:19:21,920 --> 00:19:24,479 Speaker 1: needing to bump into each other and collide and swap 375 00:19:24,560 --> 00:19:28,439 Speaker 1: ideas and the keepon is this with zoom calls, small 376 00:19:28,520 --> 00:19:32,320 Speaker 1: teams doing specific tasks can usually replicate that quite well 377 00:19:32,359 --> 00:19:36,399 Speaker 1: in cyberspace, but we all know that having that incidental 378 00:19:36,480 --> 00:19:41,119 Speaker 1: information exchange, that serendipitous encounter, basically running into someone in 379 00:19:41,119 --> 00:19:44,639 Speaker 1: the corridor, that's what you can't replicate with zoom. So 380 00:19:44,720 --> 00:19:46,840 Speaker 1: one of the other very interesting questions that companies are 381 00:19:46,840 --> 00:19:49,320 Speaker 1: going to have to think think about culturally when they 382 00:19:49,359 --> 00:19:51,520 Speaker 1: go back to the office is what do you do 383 00:19:51,640 --> 00:19:54,560 Speaker 1: if part of your workforce is at home and part 384 00:19:54,600 --> 00:19:56,679 Speaker 1: of it is actually in the office. And that's going 385 00:19:56,760 --> 00:20:00,880 Speaker 1: to require a lot of reflection. An we have left here, 386 00:20:00,920 --> 00:20:02,480 Speaker 1: I want to come up to this week in your 387 00:20:02,560 --> 00:20:04,840 Speaker 1: calm on the Cornwall Consensus, and I wonder whether the 388 00:20:05,000 --> 00:20:08,800 Speaker 1: G seven there's a little lateral vision going on. Absolutely, 389 00:20:08,840 --> 00:20:10,840 Speaker 1: there's so much I'd love to say that where anviropology 390 00:20:10,840 --> 00:20:13,280 Speaker 1: you can share light today. One thing that it really 391 00:20:13,280 --> 00:20:15,280 Speaker 1: can make people think about is the importance of symbols 392 00:20:15,320 --> 00:20:18,080 Speaker 1: and rituals. We often think they're empty and meaning it's 393 00:20:18,440 --> 00:20:21,240 Speaker 1: but they present a vision on an idealized future people 394 00:20:21,280 --> 00:20:23,159 Speaker 1: would like to have. And if you look at the 395 00:20:23,200 --> 00:20:25,080 Speaker 1: G seven this week and look at the memos that 396 00:20:25,119 --> 00:20:28,280 Speaker 1: have come out, yes they may not correspond to reality, 397 00:20:28,640 --> 00:20:31,640 Speaker 1: but what's fascinating is a vision they give in terms 398 00:20:31,680 --> 00:20:33,680 Speaker 1: of how they want the world to work. It's very 399 00:20:33,720 --> 00:20:37,000 Speaker 1: different from where we were thirty years ago when you 400 00:20:37,080 --> 00:20:40,040 Speaker 1: had things like the Washington Consensus come out, which is 401 00:20:40,080 --> 00:20:44,040 Speaker 1: all about free market economics and globalization, the so called 402 00:20:44,080 --> 00:20:47,920 Speaker 1: Cornwall Consensus, and that's actually lamb of memo. What's much 403 00:20:47,960 --> 00:20:52,639 Speaker 1: more lateral, inclusive vision, that's frankly closer to anthrow vision. Yeah, exactly, 404 00:20:52,680 --> 00:20:55,840 Speaker 1: were including things like climate change and public health. Thank 405 00:20:55,840 --> 00:20:58,400 Speaker 1: you so much and congratulations once again. That's wall Stree. 406 00:20:58,440 --> 00:21:01,040 Speaker 1: We contributed Jillian Tell the Financial Times and author of 407 00:21:01,080 --> 00:21:03,560 Speaker 1: this new book You Have to Get It Answer Revision 408 00:21:03,840 --> 00:21:06,160 Speaker 1: coming up. We wrap up the week with special contributor 409 00:21:06,240 --> 00:21:09,480 Speaker 1: Larry Summers of Harvard. That's next on Wall Street Week 410 00:21:09,760 --> 00:21:18,560 Speaker 1: on Bloomberg. This is Bloomberg Wall Street Week with David 411 00:21:18,600 --> 00:21:21,800 Speaker 1: Weston from Bloomberg Radio. We're gonna wrap up our week 412 00:21:21,840 --> 00:21:24,760 Speaker 1: as we always do, with our special contributing Larry Summers 413 00:21:24,800 --> 00:21:26,720 Speaker 1: of Harvard. So Larry, thank you so much for being 414 00:21:26,720 --> 00:21:29,320 Speaker 1: with us. It was another bad week on inflation. We 415 00:21:29,400 --> 00:21:31,840 Speaker 1: had numbers we hadn't seen in thirty years now for 416 00:21:31,880 --> 00:21:33,639 Speaker 1: the month of May year over year, it was five 417 00:21:34,240 --> 00:21:36,280 Speaker 1: up in the top line number. What do you make 418 00:21:36,320 --> 00:21:39,480 Speaker 1: of it? Look, it's it's more evidence that we've got 419 00:21:39,480 --> 00:21:45,320 Speaker 1: a problem, that the risk to the economy is overheating. 420 00:21:46,080 --> 00:21:49,920 Speaker 1: That you can't have COVID get to the rear view mirror. 421 00:21:50,800 --> 00:21:54,199 Speaker 1: Fiscal policy be pushed to the floor, in terms of 422 00:21:54,240 --> 00:22:00,480 Speaker 1: the accelerator, monetary policy be pushed to the floor, the 423 00:22:00,600 --> 00:22:06,640 Speaker 1: consumer coming roaring back, and have it all fit together. 424 00:22:07,359 --> 00:22:11,840 Speaker 1: You just can't, and it's gonna lead the problems and 425 00:22:11,880 --> 00:22:15,000 Speaker 1: the sooner we recognize that, the better it will be. 426 00:22:16,160 --> 00:22:19,240 Speaker 1: You know, David, here's something I think people don't appreciate 427 00:22:19,320 --> 00:22:24,440 Speaker 1: that maybe it's worth highlighting for your listeners. Monetary policy 428 00:22:24,600 --> 00:22:29,639 Speaker 1: isn't constant. Monetary policy is getting easier when the interest 429 00:22:29,760 --> 00:22:36,320 Speaker 1: rate stays the same and inflation rises, real interest rates fall. 430 00:22:37,600 --> 00:22:42,200 Speaker 1: So monetary policy has been getting steadily easier through this year, 431 00:22:42,920 --> 00:22:46,200 Speaker 1: even as the economy is booming. And if you do 432 00:22:46,280 --> 00:22:49,560 Speaker 1: what the analysts most of the banks do, and it's 433 00:22:49,600 --> 00:22:53,480 Speaker 1: a sensible enough thing to do, form a comprehensive index 434 00:22:53,520 --> 00:22:56,199 Speaker 1: of financial conditions where you look at the stock market, 435 00:22:56,200 --> 00:22:57,919 Speaker 1: and you look at the dollar, and you look at 436 00:22:57,960 --> 00:23:01,440 Speaker 1: long term bond yields and what not. Then the rate 437 00:23:01,480 --> 00:23:04,120 Speaker 1: at which is getting easier, and the extent to which 438 00:23:04,160 --> 00:23:09,560 Speaker 1: it's unprecedentedly easier is faster, is even more so. The 439 00:23:09,640 --> 00:23:13,560 Speaker 1: economy is like going ninety miles an hour. And not 440 00:23:13,680 --> 00:23:18,120 Speaker 1: only are we not hitting the brake, we're pushing. Not 441 00:23:18,119 --> 00:23:20,640 Speaker 1: not only are we keeping our foot on the accelerator, 442 00:23:21,160 --> 00:23:25,639 Speaker 1: we're actually having more expansionary monetary policy by all the 443 00:23:25,760 --> 00:23:29,199 Speaker 1: standard measures than we were four months ago. And I 444 00:23:29,280 --> 00:23:32,199 Speaker 1: just think that defies good sense. So Larry, just to 445 00:23:32,240 --> 00:23:34,920 Speaker 1: reinforce your point, and negative real yields are down lower 446 00:23:34,960 --> 00:23:37,840 Speaker 1: in than ben since inflation was out of control. But 447 00:23:37,960 --> 00:23:39,680 Speaker 1: let me play the red team here a little bit 448 00:23:39,880 --> 00:23:42,680 Speaker 1: and make the argument it's transient. That's what we keep hearing, 449 00:23:42,760 --> 00:23:44,080 Speaker 1: and it really has to do with the parts of 450 00:23:44,119 --> 00:23:48,240 Speaker 1: the economy they're reopening. Look, David, we have transient inflation, 451 00:23:48,840 --> 00:23:52,359 Speaker 1: annual inflation, and last month, according to Core cp I 452 00:23:52,520 --> 00:23:57,919 Speaker 1: was above ten percent. Majority of that is surely UH transient. 453 00:23:58,320 --> 00:24:01,800 Speaker 1: We've got used car prices, We've got other examples to 454 00:24:01,880 --> 00:24:06,000 Speaker 1: people's site that are clearly transient. But it is an 455 00:24:06,000 --> 00:24:11,200 Speaker 1: elementary fallacy to confuse the idea that we have some 456 00:24:11,359 --> 00:24:16,800 Speaker 1: transient inflation with the false proposition that all the inflation 457 00:24:17,440 --> 00:24:21,840 Speaker 1: is transient and we have nothing to be concerned about 458 00:24:22,640 --> 00:24:26,439 Speaker 1: if you look at things that are longer lasting, labor 459 00:24:26,480 --> 00:24:31,440 Speaker 1: shortages pervasive, if you look at things like the largest 460 00:24:31,560 --> 00:24:38,120 Speaker 1: component of UH, the cost of Living index, housing, Housing 461 00:24:38,240 --> 00:24:42,240 Speaker 1: is on fire, as you as you know, as your listeners, 462 00:24:42,560 --> 00:24:47,120 Speaker 1: UH know, a majority of houses are selling above they're 463 00:24:47,160 --> 00:24:50,920 Speaker 1: asking prices. In many parts of the country, housing inflation 464 00:24:50,960 --> 00:24:54,679 Speaker 1: has been close to the vast majority of which is 465 00:24:54,720 --> 00:25:00,119 Speaker 1: not yet shown up UH in uh Any index. And 466 00:25:00,280 --> 00:25:04,120 Speaker 1: so if you look at what purchasing managers are saying, 467 00:25:04,640 --> 00:25:09,800 Speaker 1: if you look at what households are expecting, all of 468 00:25:09,840 --> 00:25:14,119 Speaker 1: this suggests that we're in the process of seeing a change. 469 00:25:14,680 --> 00:25:18,640 Speaker 1: And the people who are big on this transient idea 470 00:25:19,480 --> 00:25:25,080 Speaker 1: need to ask themselves. Do they really believe that ten 471 00:25:25,160 --> 00:25:29,200 Speaker 1: pc growth which we're going to have this quarter, growth 472 00:25:29,200 --> 00:25:34,160 Speaker 1: which people think we're gonna have next quarter, dramatic declines 473 00:25:34,520 --> 00:25:40,080 Speaker 1: in unemployment or growth in labor shortage either way, that 474 00:25:40,160 --> 00:25:42,560 Speaker 1: we're gonna have all that and that's going to be 475 00:25:42,680 --> 00:25:46,520 Speaker 1: part of a process that drives inflation down. I don't 476 00:25:46,560 --> 00:25:50,320 Speaker 1: think so, Hilaria. Let me ask you, assuming you're right, 477 00:25:50,359 --> 00:25:53,040 Speaker 1: which I do, why aren't the markets reacting. I mean, 478 00:25:53,160 --> 00:25:55,080 Speaker 1: you can sort of expect the inflation, but I think 479 00:25:55,080 --> 00:25:57,600 Speaker 1: we would have expected the markets to react. Unlike many 480 00:25:57,600 --> 00:26:02,080 Speaker 1: of the others in this debate, I admit it when 481 00:26:02,880 --> 00:26:07,040 Speaker 1: I'm surprised and what happened is not what I expected, 482 00:26:07,080 --> 00:26:09,840 Speaker 1: and I think about how I have to change my thinking. 483 00:26:10,640 --> 00:26:15,520 Speaker 1: And just as they didn't anticipate what happened to the 484 00:26:15,560 --> 00:26:20,199 Speaker 1: inflation figures, I didn't anticipate the kind of decline in 485 00:26:20,320 --> 00:26:24,000 Speaker 1: nominally yields that we've seen. So I've spent a lot 486 00:26:24,040 --> 00:26:29,919 Speaker 1: of time thinking about it. Here are some aspects of it. First, Uh, 487 00:26:30,040 --> 00:26:36,040 Speaker 1: we have seen inflation expectations rise a bit over the 488 00:26:36,119 --> 00:26:40,280 Speaker 1: last few months, even as interest rates have declined. Second, 489 00:26:40,800 --> 00:26:44,320 Speaker 1: there is a sense that everybody has their eyes on 490 00:26:44,400 --> 00:26:48,320 Speaker 1: the FED and the fact that the FED is sticking 491 00:26:48,480 --> 00:26:53,720 Speaker 1: with it's super low interest, super big que e policies 492 00:26:54,320 --> 00:26:58,679 Speaker 1: even as all this is going on and surprising people. 493 00:26:59,440 --> 00:27:04,160 Speaker 1: Is I think contributing to our having uh lower interest 494 00:27:04,240 --> 00:27:11,520 Speaker 1: rates than we otherwise would ironically, because people think that 495 00:27:11,560 --> 00:27:16,920 Speaker 1: the FEDS policy is so tied to the unemployment rate. 496 00:27:17,920 --> 00:27:21,480 Speaker 1: When we turn out to have bottle deckx that hold 497 00:27:21,560 --> 00:27:26,840 Speaker 1: down hiring, then we have higher unemployment even as we 498 00:27:26,920 --> 00:27:30,600 Speaker 1: have more inflationary pressure. But people think the FEDS just 499 00:27:30,760 --> 00:27:34,800 Speaker 1: about the unemployment, not about the inflationary pressure, and so 500 00:27:34,880 --> 00:27:38,440 Speaker 1: they take down their views about interest rates. Finn. Let's 501 00:27:38,560 --> 00:27:40,840 Speaker 1: have a quick summer says here if we can, Larry, 502 00:27:41,119 --> 00:27:42,639 Speaker 1: let's do a little bit differently. And you've been a 503 00:27:42,640 --> 00:27:45,560 Speaker 1: professor for many years, tenure professor, give some letter grades 504 00:27:45,600 --> 00:27:47,879 Speaker 1: about how some institutions have deal this pandemic. Start with 505 00:27:47,880 --> 00:27:51,560 Speaker 1: the I m F A minus maybe and maybe an A. 506 00:27:51,800 --> 00:27:55,639 Speaker 1: They've recognized the gravity of the problem. They organized the 507 00:27:55,720 --> 00:28:04,520 Speaker 1: raising of uh SDRs. They all for UH dramatic UH responses. 508 00:28:04,880 --> 00:28:08,480 Speaker 1: The reason I say a minus is they've been a 509 00:28:08,480 --> 00:28:11,880 Speaker 1: bit more aggressive about telling everybody else to spend their 510 00:28:11,920 --> 00:28:15,000 Speaker 1: money than they have about putting their own balance sheet 511 00:28:15,400 --> 00:28:18,920 Speaker 1: UH on the table. But I think Crystalline and Georgieva 512 00:28:19,040 --> 00:28:22,960 Speaker 1: has done a great job, and I wish our international 513 00:28:23,000 --> 00:28:26,199 Speaker 1: institutions were as effective as the I m F. What 514 00:28:26,240 --> 00:28:30,479 Speaker 1: about the World Bank? Incomplete? At best? The World Bank 515 00:28:30,880 --> 00:28:38,280 Speaker 1: is committed. World Banks leadership has been committed to a 516 00:28:38,360 --> 00:28:41,920 Speaker 1: model that sees the Bank as a kind of business 517 00:28:41,960 --> 00:28:48,440 Speaker 1: institution that focuses on individual country lending, that focuses on 518 00:28:49,760 --> 00:28:55,920 Speaker 1: debt restructuring. The World Bank needs to be about world 519 00:28:56,000 --> 00:29:01,800 Speaker 1: public goods. That needs to be increasingly the focus of 520 00:29:01,840 --> 00:29:06,000 Speaker 1: its efforts, and what they've done in that area has 521 00:29:06,120 --> 00:29:14,000 Speaker 1: been slow, incremental, and UH grudging. I hope it will 522 00:29:14,120 --> 00:29:21,320 Speaker 1: uh move uh over over time. UH. Frankly, if I 523 00:29:21,360 --> 00:29:25,440 Speaker 1: was at the Treasury Um, we'd be having a lot 524 00:29:25,480 --> 00:29:30,760 Speaker 1: of painful conversations between the major shareholder and UH the 525 00:29:30,800 --> 00:29:35,680 Speaker 1: World Bank about how it can step up more quickly. 526 00:29:35,880 --> 00:29:39,320 Speaker 1: Last one, United States Senate, how is it handled a pandemic? So? 527 00:29:39,480 --> 00:29:43,920 Speaker 1: Uh so so uh. The fact that there is bipartisan 528 00:29:44,000 --> 00:29:49,200 Speaker 1: legislation on competitiveness is something that's encouraging, although I sure 529 00:29:49,240 --> 00:29:52,720 Speaker 1: wish it was more about research and less about bailing 530 00:29:52,720 --> 00:30:00,960 Speaker 1: out particular US uh uh industries. Uh. I'm pretty disappointed 531 00:30:01,000 --> 00:30:03,120 Speaker 1: that it doesn't look like we're going to manage to 532 00:30:03,200 --> 00:30:05,800 Speaker 1: do what it seems to me we obviously need to do, 533 00:30:06,320 --> 00:30:09,920 Speaker 1: which is to tax aft flowing people more to finance 534 00:30:10,000 --> 00:30:14,680 Speaker 1: a significant increase in public investment. And I'm especially worried 535 00:30:15,200 --> 00:30:19,360 Speaker 1: that the only bipartisan deals on the table leave out 536 00:30:19,400 --> 00:30:24,400 Speaker 1: what's probably the most important historically part of Joe Biden's 537 00:30:24,440 --> 00:30:29,719 Speaker 1: four trillion dollar program, which is the emphasis on green 538 00:30:30,040 --> 00:30:31,920 Speaker 1: That is Larry Summers, thank you so much, our special 539 00:30:31,920 --> 00:30:36,320 Speaker 1: contributor on Wall Street Week, of course, of Harvard University. Finally, 540 00:30:36,480 --> 00:30:41,160 Speaker 1: one more thought, which twenties are we in? Things are 541 00:30:41,200 --> 00:30:44,440 Speaker 1: looking up, not for everyone, not everywhere, but for an 542 00:30:44,480 --> 00:30:47,800 Speaker 1: awful lot of business and the economy and people and 543 00:30:47,840 --> 00:30:51,160 Speaker 1: the markets reflect the big bounce back. But how can 544 00:30:51,200 --> 00:30:54,880 Speaker 1: we tell whether it's too much and too soon? Back 545 00:30:54,920 --> 00:30:58,200 Speaker 1: in January, Berkley CEO Jeff Staley told our colleague France 546 00:30:58,280 --> 00:31:01,600 Speaker 1: and Laqua at Davos that big search could peril the 547 00:31:01,800 --> 00:31:05,160 Speaker 1: Roaring twenties if you go back to the you know, 548 00:31:05,240 --> 00:31:08,520 Speaker 1: to the Spanish flu, which it's probably the greatest pandemic 549 00:31:08,680 --> 00:31:12,560 Speaker 1: of UH of the century. You know what that led 550 00:31:12,600 --> 00:31:17,920 Speaker 1: to and it finally got um arrested was the Raring twenties. 551 00:31:18,080 --> 00:31:20,760 Speaker 1: And it's not just the recovery for a pandemic that 552 00:31:20,840 --> 00:31:24,560 Speaker 1: makes these twenties look a bit like those twenties. Once again, 553 00:31:24,680 --> 00:31:27,560 Speaker 1: we have records being set in the stock market with 554 00:31:27,720 --> 00:31:30,920 Speaker 1: the meme stocks, this time defying all gravity. And once 555 00:31:30,920 --> 00:31:34,760 Speaker 1: again we have tech innovation changing our lives, although we 556 00:31:34,840 --> 00:31:37,400 Speaker 1: don't yet know whether Elon Musk and his e v 557 00:31:37,640 --> 00:31:40,480 Speaker 1: s will have quite the effect that Thomas Edison did 558 00:31:40,520 --> 00:31:44,280 Speaker 1: with his light bulb last time. But one big difference 559 00:31:44,440 --> 00:31:46,720 Speaker 1: is that, as far as I know, in the Roaring twenties, 560 00:31:46,760 --> 00:31:49,280 Speaker 1: no one was looking to replace the US dollar with 561 00:31:49,400 --> 00:31:54,120 Speaker 1: some new fangled currency, something like say Bitcoin is bouncing 562 00:31:54,240 --> 00:31:57,600 Speaker 1: all over the place. It's not clear when or if 563 00:31:57,680 --> 00:32:00,760 Speaker 1: regulators will get their arms around this crypto currency rush, 564 00:32:01,080 --> 00:32:04,280 Speaker 1: but we're not waiting, no, no, Despite the fact that 565 00:32:04,360 --> 00:32:07,280 Speaker 1: it's unstable and so far not suitable either for exchange 566 00:32:07,360 --> 00:32:10,200 Speaker 1: or for storing value, We're decided to try putting away 567 00:32:10,240 --> 00:32:13,880 Speaker 1: for our retirement. This month, for us All, a provider 568 00:32:13,920 --> 00:32:16,840 Speaker 1: of four O one case for four employers, announced it 569 00:32:16,880 --> 00:32:19,640 Speaker 1: would team up with coin base to allow participants to 570 00:32:19,680 --> 00:32:23,880 Speaker 1: put five of their retirement savings into crypto like bitcoin, 571 00:32:24,120 --> 00:32:27,800 Speaker 1: ether or light coin. Now this is, to be sure, 572 00:32:27,880 --> 00:32:30,680 Speaker 1: only a drop in the bucket of retirement savings, but 573 00:32:30,760 --> 00:32:33,560 Speaker 1: it is worth asking ourselves whether it's a sign of 574 00:32:33,600 --> 00:32:38,040 Speaker 1: the times and which times that does it. For this 575 00:32:38,080 --> 00:32:41,160 Speaker 1: episode of Wall Street Week, I'm David Weston. This is Bloomberg. 576 00:32:41,440 --> 00:32:42,200 Speaker 1: See you next week.