1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 2 00:00:13,960 --> 00:00:17,560 Speaker 1: we bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,640 --> 00:00:27,880 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Right Now. 5 00:00:28,200 --> 00:00:31,120 Speaker 1: Jared Bernstein's joins us to say he's a member of 6 00:00:31,160 --> 00:00:34,200 Speaker 1: the White House Council of Economic Advisors for President Biden. 7 00:00:34,560 --> 00:00:39,360 Speaker 1: Barely describes his public service to liberals and conservatives. He 8 00:00:39,560 --> 00:00:43,160 Speaker 1: is one of the liberal economists that conservatives are forced 9 00:00:43,159 --> 00:00:45,600 Speaker 1: to read. They've been doing that for decades with his 10 00:00:45,600 --> 00:00:48,840 Speaker 1: work in Washington, and he joins us now representing, of course, 11 00:00:48,840 --> 00:00:54,240 Speaker 1: the Biden administration. Jared, can you apply stimulus in a 12 00:00:54,400 --> 00:00:59,200 Speaker 1: narrow enough way to help those so beleaguered in this economy? 13 00:01:01,240 --> 00:01:04,880 Speaker 1: Sure we can. In fact, much of what's in the 14 00:01:04,959 --> 00:01:08,720 Speaker 1: American rescue plan is targeted at those at the bottom 15 00:01:08,800 --> 00:01:11,360 Speaker 1: leg of this K shaped recovery, meaning that this is 16 00:01:11,400 --> 00:01:15,440 Speaker 1: a recovery where many folks never missed a paycheck did. 17 00:01:15,800 --> 00:01:18,679 Speaker 1: We're able to work from home and so on, while 18 00:01:18,959 --> 00:01:22,560 Speaker 1: so many others were stuck bearing the brunt of the 19 00:01:22,600 --> 00:01:26,520 Speaker 1: pandemic and the economic crisis. For example, we expand a 20 00:01:26,640 --> 00:01:30,120 Speaker 1: child tax credit, make it fully refundable. According to a 21 00:01:30,160 --> 00:01:34,959 Speaker 1: Columbia Poverty analysis group, this reduces child poverty by fifty percent. 22 00:01:35,319 --> 00:01:38,560 Speaker 1: That's some pretty top shelf targeting from my perspective. We 23 00:01:38,640 --> 00:01:40,839 Speaker 1: have a history here of decades of what I'm gonna 24 00:01:40,840 --> 00:01:45,000 Speaker 1: call lockey in individualism. John Taylor of Stanford, clearly a 25 00:01:45,040 --> 00:01:50,920 Speaker 1: conservative economist, shows the value Jared Bernstein of automatic stabilizers 26 00:01:50,960 --> 00:01:54,280 Speaker 1: that benefit all of us, where the halves are benefited 27 00:01:54,440 --> 00:01:57,680 Speaker 1: by the stabilization of they have not explained in this 28 00:01:57,880 --> 00:02:02,200 Speaker 1: natural disaster how they have us will benefit by stimulus, 29 00:02:02,320 --> 00:02:06,440 Speaker 1: for they have nots Yeah, no, I think first of all, 30 00:02:06,640 --> 00:02:10,800 Speaker 1: one thing to recognize is that our automatic stabilizers often 31 00:02:10,880 --> 00:02:13,080 Speaker 1: shut off too quickly. So one of the things we 32 00:02:13,120 --> 00:02:14,919 Speaker 1: ought to do, and that's a problem that we've had. 33 00:02:15,200 --> 00:02:17,240 Speaker 1: Is one of the reasons why the American rescue plan 34 00:02:17,600 --> 00:02:20,360 Speaker 1: is so urgent, because we've had these kinds of air 35 00:02:20,400 --> 00:02:22,960 Speaker 1: pockets created by the kind of wait and see what 36 00:02:23,080 --> 00:02:25,680 Speaker 1: happens next, so we get behind the curve. What we 37 00:02:25,720 --> 00:02:28,480 Speaker 1: need to do is make sure our automatic stabilizers are 38 00:02:28,560 --> 00:02:31,040 Speaker 1: kicking in with the alacrity that we need them. To 39 00:02:31,400 --> 00:02:34,520 Speaker 1: that's embedded in this plan. Yeah. Look, this is a 40 00:02:34,560 --> 00:02:38,120 Speaker 1: matter of uh, you know, if GDP is a spectator 41 00:02:38,160 --> 00:02:41,720 Speaker 1: sport for half the economy, Uh, it's simply not going 42 00:02:41,760 --> 00:02:44,880 Speaker 1: to achieve the goals of the Biden Harris administration. So 43 00:02:44,960 --> 00:02:49,079 Speaker 1: we have to start building the policy architecture the kind 44 00:02:49,080 --> 00:02:53,519 Speaker 1: of connective tissue that reconnects GDP growth to the prosperity 45 00:02:53,520 --> 00:02:57,560 Speaker 1: of all within a special sensitivity to racial equity. And 46 00:02:57,600 --> 00:03:01,600 Speaker 1: that's in this plan. It's also the more broad building 47 00:03:01,600 --> 00:03:04,120 Speaker 1: back Better plan that's coming later. So alright, let's get 48 00:03:04,120 --> 00:03:06,560 Speaker 1: to those two issues into a distinction. Here. This eight 49 00:03:06,800 --> 00:03:09,400 Speaker 1: and then the stimulus Is this just the eight package 50 00:03:09,400 --> 00:03:12,800 Speaker 1: it package and the stimulus packages coming lights out. I 51 00:03:12,880 --> 00:03:15,799 Speaker 1: definitely think of this much more in terms of relief, 52 00:03:16,360 --> 00:03:20,160 Speaker 1: at least initially than stimulus and the sense of there 53 00:03:20,160 --> 00:03:22,280 Speaker 1: are a lot of people who can't go back to 54 00:03:22,320 --> 00:03:25,040 Speaker 1: work untold. Uh, you know, it's safe to go back 55 00:03:25,080 --> 00:03:26,880 Speaker 1: in the water. So one of the key parts, of 56 00:03:26,919 --> 00:03:29,440 Speaker 1: course of the rescue plan. I heard you guys talking 57 00:03:29,440 --> 00:03:31,760 Speaker 1: about the European Union. They've had great trouble with us, 58 00:03:31,840 --> 00:03:35,560 Speaker 1: and it's reflected in their economy, is to not only 59 00:03:35,600 --> 00:03:39,240 Speaker 1: control the virus, but producing distribute the vaccine in a 60 00:03:39,280 --> 00:03:42,360 Speaker 1: way that is obviously much more driven by science, much 61 00:03:42,360 --> 00:03:45,760 Speaker 1: more organized, has a much clear federal presidents than was 62 00:03:45,960 --> 00:03:49,120 Speaker 1: heretofore the case. The connection, as I'm sure your team 63 00:03:49,200 --> 00:03:53,200 Speaker 1: well knows, between controlling the virus, distributing the vaccine, and 64 00:03:53,240 --> 00:03:56,800 Speaker 1: finally launching a robust recovery is extremely tight, and we 65 00:03:56,840 --> 00:03:59,960 Speaker 1: cannot drop the ball on that. That's where President Biden 66 00:04:00,120 --> 00:04:02,880 Speaker 1: is coming from. That's why the urgency of acting now 67 00:04:03,080 --> 00:04:05,920 Speaker 1: is so acute for him. So let's talk relief to stimulus. 68 00:04:06,040 --> 00:04:08,400 Speaker 1: We understand the relief pomp. We've talked about this bill 69 00:04:08,480 --> 00:04:10,600 Speaker 1: many times. What does the stimulus bill down the road 70 00:04:10,600 --> 00:04:13,680 Speaker 1: look like? Jared, You know, I guess I wouldn't think 71 00:04:13,720 --> 00:04:15,920 Speaker 1: of it so much as a stimulus bill. I think 72 00:04:15,960 --> 00:04:19,200 Speaker 1: down the road, with the help of the rescue Plan, 73 00:04:19,279 --> 00:04:23,039 Speaker 1: the economy should be moving uh in direction we needed to. 74 00:04:23,400 --> 00:04:25,159 Speaker 1: I think again, this gets to the point I was 75 00:04:25,200 --> 00:04:28,400 Speaker 1: making a second ago. It's not enough to have GDP 76 00:04:28,600 --> 00:04:31,320 Speaker 1: growing a trend. We have to make sure that it's 77 00:04:31,400 --> 00:04:34,960 Speaker 1: reaching people who have heretofore been left behind. So now 78 00:04:35,000 --> 00:04:38,600 Speaker 1: we're talking about more structural changes to the economy. Standing 79 00:04:38,680 --> 00:04:42,120 Speaker 1: up a childcare sector that's really never existed in this country, 80 00:04:42,200 --> 00:04:44,360 Speaker 1: to give parents a chance to get into the job 81 00:04:44,400 --> 00:04:47,039 Speaker 1: market if that's what they want to do. Uh. Finally 82 00:04:47,120 --> 00:04:50,760 Speaker 1: taking a real stab at clean energy, making sure that 83 00:04:50,839 --> 00:04:53,400 Speaker 1: we deal with the kind of racial inequities that have 84 00:04:53,480 --> 00:04:56,040 Speaker 1: plagued this economy so long, in the air of housing 85 00:04:56,120 --> 00:04:59,520 Speaker 1: and criminal justice, for example. That's the kind of broader, 86 00:04:59,560 --> 00:05:02,600 Speaker 1: more structural change. I think you have to distinguish between 87 00:05:02,640 --> 00:05:05,600 Speaker 1: cyclical and structural, and I think the latter is more 88 00:05:05,640 --> 00:05:09,200 Speaker 1: of a structural, uh approach. So in order to get there, 89 00:05:09,400 --> 00:05:12,839 Speaker 1: what's more important for the economic recovery FO checks to 90 00:05:12,920 --> 00:05:17,920 Speaker 1: each family or local and state aid. You know, this 91 00:05:18,000 --> 00:05:20,440 Speaker 1: is just we just can't do either are in this case. 92 00:05:20,440 --> 00:05:22,599 Speaker 1: And I think that's a good example, because you know, 93 00:05:22,640 --> 00:05:27,000 Speaker 1: we are in a set of discussions with Republicans who 94 00:05:27,680 --> 00:05:30,520 Speaker 1: in many cases very much share the urgency that we do, 95 00:05:30,839 --> 00:05:32,440 Speaker 1: but sort of want to take a different route to 96 00:05:32,480 --> 00:05:35,880 Speaker 1: get there. And I think the key to the rescue plan, 97 00:05:35,960 --> 00:05:38,919 Speaker 1: as as the President has articulated, is that it really 98 00:05:39,040 --> 00:05:42,279 Speaker 1: is calibrated to meet all the various different needs that 99 00:05:42,320 --> 00:05:45,360 Speaker 1: we face right now. Families are struggling, they need those checks, 100 00:05:45,560 --> 00:05:48,200 Speaker 1: which By the way, we just got polling data clocking 101 00:05:48,240 --> 00:05:52,160 Speaker 1: in about seventy cent approval. But the state and local 102 00:05:52,240 --> 00:05:55,359 Speaker 1: sector has to get help to reopen schools and to 103 00:05:55,600 --> 00:06:00,360 Speaker 1: finally distribute the distribute the vaccine, control the virus and 104 00:06:00,400 --> 00:06:03,440 Speaker 1: put COVID nineteen behind us. Jared, how important is it 105 00:06:03,520 --> 00:06:06,040 Speaker 1: to push as much as possible into this bill due 106 00:06:06,080 --> 00:06:08,400 Speaker 1: to the lack of consensus, the lack of any kind 107 00:06:08,400 --> 00:06:11,599 Speaker 1: of agreement between Republicans and Democrats on the Hill to 108 00:06:11,680 --> 00:06:14,160 Speaker 1: get some of those structural changes through that you're talking about, 109 00:06:14,320 --> 00:06:17,880 Speaker 1: especially if there isn't the onus on getting economic growth. 110 00:06:19,200 --> 00:06:21,240 Speaker 1: You know, I I gotta say, I think that the 111 00:06:22,680 --> 00:06:27,600 Speaker 1: bipartisan support for UH, this kind of UH, this kind 112 00:06:27,600 --> 00:06:30,920 Speaker 1: of relief is actually much broader than you might think. 113 00:06:30,920 --> 00:06:33,080 Speaker 1: Now there's the Hill. That's one thing, and I get 114 00:06:33,120 --> 00:06:36,679 Speaker 1: what you're saying, But in fact, again these polling results 115 00:06:36,680 --> 00:06:38,880 Speaker 1: show that something like two thirds of the American people 116 00:06:38,960 --> 00:06:43,200 Speaker 1: support UH, the president's approach, with the majority of Republicans. 117 00:06:43,760 --> 00:06:46,839 Speaker 1: But it's also if you look at the Business Roundtable, 118 00:06:46,880 --> 00:06:49,000 Speaker 1: the Chamber of Commerce folks you have on your show, 119 00:06:49,279 --> 00:06:51,920 Speaker 1: they support this plan. If you look at Republican mayors 120 00:06:51,920 --> 00:06:56,000 Speaker 1: across the Land. They support this plan. Trump's former chief economist, 121 00:06:56,080 --> 00:06:59,960 Speaker 1: Kevin Hassett, Glenn Hubbard, Bush's former chief economists, they support 122 00:07:00,279 --> 00:07:04,000 Speaker 1: the plan. So it's it's a much broader sense of 123 00:07:04,160 --> 00:07:06,040 Speaker 1: the urgency of the relief. And I think what we're 124 00:07:06,120 --> 00:07:09,000 Speaker 1: arguing about in Washington are a set of details that 125 00:07:09,080 --> 00:07:11,640 Speaker 1: you know, they're important to policy wanks like me and you, 126 00:07:12,000 --> 00:07:14,760 Speaker 1: but for the American people, Uh, they just need to 127 00:07:14,760 --> 00:07:17,200 Speaker 1: get get relief out there, you know, as soon as 128 00:07:17,240 --> 00:07:19,160 Speaker 1: as soon as possible. JAREDA don't mean to be flipped 129 00:07:19,160 --> 00:07:21,800 Speaker 1: about it, but you'd expect the approval writing for checks 130 00:07:22,040 --> 00:07:24,400 Speaker 1: from the government going out to individuals to be high anyway, 131 00:07:24,400 --> 00:07:28,120 Speaker 1: wouldn't you. Yeah, I mean I think I think that 132 00:07:28,120 --> 00:07:30,559 Speaker 1: that doesn't mean it's a bad thing. In other words, 133 00:07:30,800 --> 00:07:33,520 Speaker 1: this is a time when I think we really have 134 00:07:33,720 --> 00:07:37,080 Speaker 1: to look at the kinds of short falls Americans are facing. 135 00:07:37,200 --> 00:07:39,080 Speaker 1: You know, these checks have gotten a lot of flak. 136 00:07:39,800 --> 00:07:43,840 Speaker 1: If you look at a family with seventy five thousand dollars, 137 00:07:43,840 --> 00:07:48,960 Speaker 1: for example, many of these folks have savings or savings raids. 138 00:07:48,960 --> 00:07:50,760 Speaker 1: This is not well known. I looked at this the 139 00:07:50,760 --> 00:07:54,200 Speaker 1: other day. If you look at people who have zero 140 00:07:54,360 --> 00:07:58,160 Speaker 1: or near zero savings raids, you get pretty quickly up 141 00:07:58,200 --> 00:08:03,320 Speaker 1: to income levels around even higher. Now, many of these 142 00:08:03,360 --> 00:08:08,080 Speaker 1: folks are engaged in mortgage moratoria or rent a uh 143 00:08:08,120 --> 00:08:12,760 Speaker 1: temporary not rent moratoria. That means that they are accumulating 144 00:08:12,840 --> 00:08:17,560 Speaker 1: significant debt. At some point when these moratoria and UH 145 00:08:17,680 --> 00:08:21,920 Speaker 1: and and forbearance on mortgages uh and these families are 146 00:08:21,920 --> 00:08:25,280 Speaker 1: gonna face massive debts. So the idea that some of 147 00:08:25,320 --> 00:08:28,280 Speaker 1: this uh, some of some of these direct payments are 148 00:08:28,320 --> 00:08:31,680 Speaker 1: saved and not spent initially is actually a feature, not 149 00:08:31,800 --> 00:08:33,920 Speaker 1: a bug. What we've seen in earlier round is that 150 00:08:33,960 --> 00:08:36,520 Speaker 1: they're initially saved and then when these families hit an 151 00:08:36,520 --> 00:08:39,400 Speaker 1: air pocket, there's there. They're spent. And there are middle 152 00:08:39,440 --> 00:08:43,000 Speaker 1: class families who are struggling here. Jared, one final question. 153 00:08:43,040 --> 00:08:44,839 Speaker 1: You and I have known each other for years. I've 154 00:08:44,840 --> 00:08:47,400 Speaker 1: always asked this question of people. When a new president 155 00:08:47,559 --> 00:08:51,000 Speaker 1: is minted, a president has you into the oval office 156 00:08:51,080 --> 00:08:53,960 Speaker 1: or around a table. He's sitting on the couch. And 157 00:08:54,000 --> 00:08:58,680 Speaker 1: there is a way any given president takes in economic data, 158 00:08:58,760 --> 00:09:03,680 Speaker 1: economic advice, economic perspective. What is the Biden method in 159 00:09:03,720 --> 00:09:07,400 Speaker 1: the oval office? It's a great question. He sits in 160 00:09:07,440 --> 00:09:10,200 Speaker 1: a chair, we sit on a couch. And what he 161 00:09:10,280 --> 00:09:14,959 Speaker 1: does is he asks us our economic advice, and he 162 00:09:15,000 --> 00:09:17,320 Speaker 1: absorbs it through what I think of as kind of 163 00:09:17,320 --> 00:09:21,640 Speaker 1: a political political economy filter. That is, he's he's not 164 00:09:21,679 --> 00:09:25,000 Speaker 1: looking to me to give him political advice. Once when 165 00:09:25,040 --> 00:09:27,440 Speaker 1: I did so, he reminded me that I couldn't be 166 00:09:27,480 --> 00:09:29,600 Speaker 1: elected dog catcher. I mean he did it in a 167 00:09:29,679 --> 00:09:35,360 Speaker 1: nice way. Um, so he's very Joe Biden has has 168 00:09:35,440 --> 00:09:39,360 Speaker 1: just really sharp political antenna, and you know, he knows 169 00:09:39,400 --> 00:09:41,000 Speaker 1: what he knows, he knows he doesn't know, so he 170 00:09:41,080 --> 00:09:44,199 Speaker 1: comes to us for political advice and then he thinks 171 00:09:44,240 --> 00:09:48,160 Speaker 1: through the political machinations to get to the economic place 172 00:09:49,000 --> 00:09:52,800 Speaker 1: that meets his vision. Chad, final question from me, and 173 00:09:52,840 --> 00:09:54,600 Speaker 1: I've sort of got to talk about this. Do you 174 00:09:54,600 --> 00:10:00,280 Speaker 1: think seventy five dollars for a family isn't enough in America? 175 00:10:01,480 --> 00:10:04,160 Speaker 1: You know, I think it's hard to say a blanket 176 00:10:04,280 --> 00:10:07,200 Speaker 1: statement like that, but I can tell you this, there 177 00:10:07,240 --> 00:10:10,760 Speaker 1: are lots of families with that income level who have 178 00:10:10,960 --> 00:10:14,920 Speaker 1: struggled to make ends meet, to keep roofs over their head, 179 00:10:15,160 --> 00:10:18,240 Speaker 1: to meet not only their basic needs, but to meet 180 00:10:18,280 --> 00:10:21,080 Speaker 1: their aspirations to send their kids to college. To pay 181 00:10:21,120 --> 00:10:24,400 Speaker 1: for affordable childcare. And as you know, it's not just 182 00:10:24,480 --> 00:10:27,040 Speaker 1: the level, it's the derivatives. So you know, families who 183 00:10:27,120 --> 00:10:30,280 Speaker 1: are at that level and they're stuck at that level 184 00:10:30,320 --> 00:10:33,560 Speaker 1: even though they're working hard. The economy is increasingly productive. 185 00:10:33,600 --> 00:10:36,400 Speaker 1: They see the stock market going up, they see wealth accumulation. 186 00:10:36,800 --> 00:10:38,679 Speaker 1: You know, we know that the bottom half of families 187 00:10:39,160 --> 00:10:43,800 Speaker 1: have almost zero in terms of equity in the streets. 188 00:10:43,840 --> 00:10:45,240 Speaker 1: Just to jump here, because we only have about a 189 00:10:45,240 --> 00:10:46,600 Speaker 1: couple of minutes, and I need to get this follow 190 00:10:46,679 --> 00:10:50,200 Speaker 1: up in as a family growing up, there years where 191 00:10:50,200 --> 00:10:53,160 Speaker 1: we had folest than that. So believe me, I understand 192 00:10:53,160 --> 00:10:56,600 Speaker 1: what you're talking about here. But this goes beyond pandemic relief. 193 00:10:56,600 --> 00:10:59,000 Speaker 1: You're talking about a real ideological shift in the role 194 00:10:59,040 --> 00:11:02,240 Speaker 1: of government. And if you want bipartisan agreement, Dan and 195 00:11:02,360 --> 00:11:06,760 Speaker 1: d C. That's a big oscar, isn't it, Jared? I mean, 196 00:11:06,800 --> 00:11:08,760 Speaker 1: it isn't it isn't I mean I I think that 197 00:11:08,840 --> 00:11:12,559 Speaker 1: the role of government has to be to provide opportunities 198 00:11:12,559 --> 00:11:15,240 Speaker 1: for not just low but for middle and upper middle 199 00:11:15,280 --> 00:11:18,160 Speaker 1: class families to get ahead, for them to reap some 200 00:11:18,240 --> 00:11:21,480 Speaker 1: of the benefits of the productivity that they're helping to generate, 201 00:11:21,520 --> 00:11:24,040 Speaker 1: they're helping to bake a bigger, bigger pie. They should 202 00:11:24,080 --> 00:11:26,960 Speaker 1: get bigger slices, you know, whatever their income level is. 203 00:11:27,480 --> 00:11:30,720 Speaker 1: But the problem is that those bigger slices have only 204 00:11:30,760 --> 00:11:33,480 Speaker 1: been going to the narrow top top one, top five 205 00:11:33,559 --> 00:11:36,840 Speaker 1: per cent. So I think the key here is partially 206 00:11:36,880 --> 00:11:39,000 Speaker 1: the levels. And we talked about that family is being 207 00:11:39,000 --> 00:11:41,839 Speaker 1: able to meet their aspirations, but the idea that if 208 00:11:41,920 --> 00:11:44,440 Speaker 1: you're playing by the rules, you ought to get ahead. 209 00:11:44,520 --> 00:11:48,200 Speaker 1: And again, I think that policy architecture, that connective tissue 210 00:11:48,240 --> 00:11:51,439 Speaker 1: has been torn over the years by policies that's been 211 00:11:51,520 --> 00:11:53,959 Speaker 1: very insensitive to those in the middle class and down, 212 00:11:54,160 --> 00:11:57,200 Speaker 1: and we're trying to We're gonna try to fix that, Jod. 213 00:11:57,240 --> 00:11:59,040 Speaker 1: I look forward to continue in the conversation with you. 214 00:11:59,120 --> 00:12:02,199 Speaker 1: We appreciate times. Thank you, Jap besting that of the 215 00:12:02,240 --> 00:12:11,080 Speaker 1: White House Council of Economic Advices joining us now from 216 00:12:11,160 --> 00:12:15,080 Speaker 1: Jared Bernstein and the Biden administration. The academic William Dudley 217 00:12:15,160 --> 00:12:17,320 Speaker 1: joins us, of course, his work at Golden Sacks for 218 00:12:17,440 --> 00:12:19,800 Speaker 1: years and then at the New York Fed. We're thrilled 219 00:12:19,800 --> 00:12:23,439 Speaker 1: that Bill Dudley could join us. Writing for Bloomberg opinion today, 220 00:12:23,840 --> 00:12:26,720 Speaker 1: Bill Dudley, I I look at where we are in 221 00:12:26,760 --> 00:12:28,800 Speaker 1: the greater theme of things, and there's going to be 222 00:12:28,840 --> 00:12:32,560 Speaker 1: a point now, maybe a point in the future, where 223 00:12:32,600 --> 00:12:35,320 Speaker 1: the day to day work of the FED to support 224 00:12:35,360 --> 00:12:39,840 Speaker 1: the economy is over and they begin to pull away 225 00:12:40,000 --> 00:12:43,680 Speaker 1: from the monthly fundings that they're doing, they pull away 226 00:12:43,760 --> 00:12:47,880 Speaker 1: from the jargon in the speeches of providing ultra accommodation. 227 00:12:48,320 --> 00:12:52,720 Speaker 1: Are we close to that moment? No, the FED basically 228 00:12:52,720 --> 00:12:56,560 Speaker 1: has told us that sure, police said is premature to 229 00:12:56,600 --> 00:13:00,960 Speaker 1: be talking about even beginning to, you know, wind down 230 00:13:01,040 --> 00:13:03,960 Speaker 1: the rate of acid purchases. So the FED is not 231 00:13:04,120 --> 00:13:08,199 Speaker 1: probably can do anything different at least until late fall 232 00:13:08,840 --> 00:13:12,600 Speaker 1: early next year. Well, that may be the policy as well. 233 00:13:12,600 --> 00:13:14,840 Speaker 1: But then we go FED meeting to FED meeting. You've 234 00:13:14,840 --> 00:13:18,520 Speaker 1: been in the crucible to this, Bill Dudley. Little sentences 235 00:13:18,559 --> 00:13:22,160 Speaker 1: are given out in speeches from say Cleveland, from St. 236 00:13:22,240 --> 00:13:25,679 Speaker 1: Kansas City, from San Francisco, or from the pressures you 237 00:13:25,840 --> 00:13:29,640 Speaker 1: faced in New York. Are we gonna see theory come 238 00:13:29,720 --> 00:13:35,040 Speaker 1: out in the speeches of federal officers in the coming months. Well, 239 00:13:35,040 --> 00:13:37,199 Speaker 1: it really depends on you know, how strong and the 240 00:13:37,320 --> 00:13:39,160 Speaker 1: rebound in the economy is. I mean, what we're hoping 241 00:13:39,600 --> 00:13:42,520 Speaker 1: is people get vaccinated, and once people get vaccinated, social 242 00:13:42,600 --> 00:13:46,719 Speaker 1: distancing can be relaxed, the e commy can be reopened. 243 00:13:47,160 --> 00:13:49,800 Speaker 1: And when that happens, the economy should accelerate pretty sharply 244 00:13:49,840 --> 00:13:52,079 Speaker 1: because you're gonna have a big increase in demand and 245 00:13:52,559 --> 00:13:55,080 Speaker 1: uh in the leisure and hospitality area in particular. People 246 00:13:55,080 --> 00:13:57,280 Speaker 1: are gonna go to movies, they're gonna restaurants, are gonna travel. 247 00:13:57,960 --> 00:14:00,040 Speaker 1: So that could be a pretty strong second half of 248 00:14:00,240 --> 00:14:02,839 Speaker 1: the year if things go well, and I think at 249 00:14:02,880 --> 00:14:04,920 Speaker 1: that point then people will start at the FED will 250 00:14:04,920 --> 00:14:06,880 Speaker 1: start to you know, begin to think about it. Okay, 251 00:14:06,880 --> 00:14:09,920 Speaker 1: how do we start to uh pull pull back? But 252 00:14:09,920 --> 00:14:12,960 Speaker 1: the FED doesn't want to pull back prematurely because there's 253 00:14:13,000 --> 00:14:17,079 Speaker 1: still nine million people that have lost their jobs since 254 00:14:17,080 --> 00:14:18,920 Speaker 1: the pandemic started, and so they don't want to pull 255 00:14:18,920 --> 00:14:22,000 Speaker 1: back too early because they did. If they do, Bonnils 256 00:14:22,080 --> 00:14:24,840 Speaker 1: go up, stock Mark goes down. That titans financial conditions 257 00:14:25,200 --> 00:14:27,120 Speaker 1: and that makes it harder for the FED to achieve 258 00:14:27,200 --> 00:14:29,680 Speaker 1: its objectives as we get closer to running the economy. 259 00:14:29,720 --> 00:14:32,960 Speaker 1: Hot Bell, there's a question of financial stability risks and 260 00:14:33,000 --> 00:14:35,960 Speaker 1: how you measure it in a time of shadow banking, 261 00:14:36,040 --> 00:14:38,360 Speaker 1: at a time of robin hood traders, at a time 262 00:14:38,680 --> 00:14:41,160 Speaker 1: of other structural changes to the market. You put out 263 00:14:41,160 --> 00:14:43,600 Speaker 1: a column about this. Do you think the FED is 264 00:14:43,640 --> 00:14:46,920 Speaker 1: gauging systemic risk correctly as they look forward to and 265 00:14:47,040 --> 00:14:51,240 Speaker 1: perhaps hotter economy. Well, I think the problem that they 266 00:14:51,280 --> 00:14:53,080 Speaker 1: have is that at some point they are going to 267 00:14:53,200 --> 00:14:55,960 Speaker 1: have to turn the dial back away from you know, 268 00:14:56,840 --> 00:15:00,440 Speaker 1: significant accommodation. And when they touch that dial, when they're 269 00:15:00,440 --> 00:15:03,560 Speaker 1: perceived too about to touch that dial, markets are gonna react. 270 00:15:03,560 --> 00:15:05,160 Speaker 1: So I think it's gonna be very difficult for the 271 00:15:05,200 --> 00:15:09,680 Speaker 1: FED to avoid a you know, a bond taper tantrum. Uh. 272 00:15:09,720 --> 00:15:12,120 Speaker 1: You know, you're either all in or you're not. And 273 00:15:12,120 --> 00:15:13,840 Speaker 1: at some point the Fed is not gonna be all in. 274 00:15:13,920 --> 00:15:16,560 Speaker 1: And when that happens, markets are going to react. And 275 00:15:16,640 --> 00:15:18,240 Speaker 1: some of the risks that you put out there in 276 00:15:18,240 --> 00:15:20,200 Speaker 1: this column that you wrote this morning for Bloomberg Opinion, 277 00:15:20,600 --> 00:15:24,720 Speaker 1: you mentioned mutual funds and ways to protect against runs 278 00:15:24,760 --> 00:15:27,960 Speaker 1: on these particular funds. Do you actually view this as 279 00:15:27,960 --> 00:15:30,480 Speaker 1: a real viable risk going forward if there is some 280 00:15:30,480 --> 00:15:33,680 Speaker 1: sort of taper tantrum like you're saying, Well, it depends 281 00:15:33,720 --> 00:15:35,320 Speaker 1: on how violent it is. But you know the problem 282 00:15:35,320 --> 00:15:37,360 Speaker 1: we have is we have mutual funds that are vested 283 00:15:37,400 --> 00:15:40,400 Speaker 1: in very a liquid asset classes like high you'ld dead, 284 00:15:41,040 --> 00:15:43,640 Speaker 1: and yet we offer these mutual funds and we basically 285 00:15:43,640 --> 00:15:46,640 Speaker 1: tell people they get their money out overnight, and you 286 00:15:46,640 --> 00:15:48,560 Speaker 1: can't actually and a lot of people show up at 287 00:15:48,560 --> 00:15:50,880 Speaker 1: that mutual fund to get their money back. The market 288 00:15:50,960 --> 00:15:54,000 Speaker 1: really can't absorb that much mutual bonds being sold into 289 00:15:54,040 --> 00:15:56,680 Speaker 1: the market. So it makes sense for a liquid mutual 290 00:15:56,720 --> 00:15:59,880 Speaker 1: funds to basically tell people, no, you don't get overnight liquidity, 291 00:16:00,000 --> 00:16:03,160 Speaker 1: get weakly liquidity or monthly liquidity, and that gives the 292 00:16:03,280 --> 00:16:06,320 Speaker 1: mutual fund manager time to actually liquidate their assets in 293 00:16:06,320 --> 00:16:08,560 Speaker 1: an orderly way so that you don't have the fire 294 00:16:08,560 --> 00:16:11,440 Speaker 1: sale of assets, which which which would obviously depress prices 295 00:16:11,480 --> 00:16:14,040 Speaker 1: even further. Bill an unfair question, but you know I'm 296 00:16:14,200 --> 00:16:16,440 Speaker 1: legendary for that, So I'm gonna go with the John 297 00:16:16,760 --> 00:16:21,560 Speaker 1: emails in from Capri and says asked Dudley about drag Bill, Dudley, 298 00:16:21,600 --> 00:16:24,320 Speaker 1: you would be on the short list of technocrats that 299 00:16:24,360 --> 00:16:27,240 Speaker 1: would take over the American government if we were in 300 00:16:27,360 --> 00:16:31,080 Speaker 1: political crisis. We all know that. I mean, you Secretary 301 00:16:31,160 --> 00:16:34,560 Speaker 1: yelling Mr Brannankey, Dr Brannankey, and and and the rest. 302 00:16:34,880 --> 00:16:38,280 Speaker 1: Bill Dudley, what is your perspective on what drag is 303 00:16:38,320 --> 00:16:42,120 Speaker 1: being asked to do? How do guys like you turn 304 00:16:42,200 --> 00:16:48,080 Speaker 1: into politicians? Is it doable? Well? Mario Draggy is extraordinarily skilled, 305 00:16:48,160 --> 00:16:51,640 Speaker 1: not just as a commist but also as a diplomat, 306 00:16:52,040 --> 00:16:54,320 Speaker 1: So he has the I think the political skills to 307 00:16:54,840 --> 00:16:57,680 Speaker 1: actually take out political position. You know. I think you 308 00:16:57,720 --> 00:17:00,960 Speaker 1: saw that in terms of how he handled the European 309 00:17:01,000 --> 00:17:04,320 Speaker 1: Central Bank during the European crisis. Uh, you know what, 310 00:17:04,880 --> 00:17:06,800 Speaker 1: We'll do whatever it takes. And that was and it 311 00:17:06,840 --> 00:17:08,840 Speaker 1: will be enough. And that was a very very important 312 00:17:08,880 --> 00:17:12,960 Speaker 1: Stephen that showed I think that a lot of sensitivity 313 00:17:13,000 --> 00:17:14,680 Speaker 1: to the political side of things. So I think if 314 00:17:14,720 --> 00:17:18,240 Speaker 1: he were, you know, put in power in Italy to 315 00:17:18,280 --> 00:17:21,240 Speaker 1: try to, you know, be a party of unity, I 316 00:17:21,280 --> 00:17:23,320 Speaker 1: think you'd be effective in that job. But that's probably 317 00:17:23,320 --> 00:17:26,000 Speaker 1: because who he is as a person, not because he 318 00:17:26,080 --> 00:17:29,240 Speaker 1: is a former central banker. A paradigm shift, and Tom 319 00:17:29,280 --> 00:17:32,480 Speaker 1: Bill is absolutely right. If you think back when Tricia 320 00:17:32,640 --> 00:17:36,080 Speaker 1: left and drug stepped up, Tricia had been hiking rates 321 00:17:36,119 --> 00:17:38,600 Speaker 1: a couple of times over the previous few years. I 322 00:17:38,600 --> 00:17:40,600 Speaker 1: think my memory serves correct our way, and I think 323 00:17:40,640 --> 00:17:44,199 Speaker 1: again in and then drug came on board, and the 324 00:17:44,240 --> 00:17:46,800 Speaker 1: idea of taking rates negative at the ECB, at a 325 00:17:46,880 --> 00:17:50,240 Speaker 1: large central bank like that, wasn't really in the conversation 326 00:17:50,280 --> 00:17:52,760 Speaker 1: at all, Tom. The idea of buying corporate credit wasn't 327 00:17:52,800 --> 00:17:55,480 Speaker 1: really in the conversation. The idea of getting Germany to 328 00:17:55,520 --> 00:17:58,239 Speaker 1: come along for the ride, and by softeign debt not 329 00:17:58,320 --> 00:18:00,440 Speaker 1: part of the conversation. Bill it was apparent on shift. 330 00:18:00,480 --> 00:18:02,720 Speaker 1: And I'm just wonder in your mind whether we have 331 00:18:02,880 --> 00:18:07,000 Speaker 1: taken this too far at central banks. Well, we won't 332 00:18:07,000 --> 00:18:09,679 Speaker 1: know for a while, but clearly the central banks have 333 00:18:09,760 --> 00:18:15,400 Speaker 1: done extraordinary things to support economic activity during an extraordinary pandemic. 334 00:18:15,880 --> 00:18:17,919 Speaker 1: And how this plays out in the long run, you know, 335 00:18:17,960 --> 00:18:19,920 Speaker 1: it's really you know, as they say, too soon to 336 00:18:19,960 --> 00:18:22,520 Speaker 1: tell the economist and you though, do you think you 337 00:18:22,560 --> 00:18:25,440 Speaker 1: sacrifice the dynamism of an economy when the central bank 338 00:18:25,480 --> 00:18:27,680 Speaker 1: takes a bigger role in the white has done well? 339 00:18:27,720 --> 00:18:28,959 Speaker 1: I do think we have to worry a little bit 340 00:18:28,960 --> 00:18:31,840 Speaker 1: about you know, very very low interest rates, basically you know, 341 00:18:31,920 --> 00:18:34,760 Speaker 1: keeping companies afloat that probably shouldn't be afloat. You know, 342 00:18:34,760 --> 00:18:37,639 Speaker 1: there's a so called zombie companies because that can actually 343 00:18:37,680 --> 00:18:40,920 Speaker 1: interfere with the real allocation of capital from bad uses 344 00:18:40,960 --> 00:18:43,640 Speaker 1: to better uses. So we'll have to see how it goes. 345 00:18:43,680 --> 00:18:45,399 Speaker 1: I mean the good news is the u AS economy 346 00:18:45,480 --> 00:18:48,880 Speaker 1: is pretty dyna dynamic, uh, and so capital does sort 347 00:18:48,920 --> 00:18:51,480 Speaker 1: of moved to its best use. So I would say 348 00:18:51,520 --> 00:18:53,359 Speaker 1: at this point, I'm not that worried about it. But 349 00:18:53,960 --> 00:18:56,080 Speaker 1: you know, again, we've never done we've never done this before. 350 00:18:57,040 --> 00:18:58,919 Speaker 1: We don't have any experience in terms of what the 351 00:18:59,000 --> 00:19:01,160 Speaker 1: recovery will actually look like. So I think it's really 352 00:19:01,200 --> 00:19:03,960 Speaker 1: premature to be be able to say, oh, geez, I 353 00:19:04,040 --> 00:19:06,040 Speaker 1: know this is gonna work. Bill, just real quick, care 354 00:19:06,080 --> 00:19:07,879 Speaker 1: before we let you go, How do you view the 355 00:19:07,880 --> 00:19:09,960 Speaker 1: games top saga that we've seen over the past couple 356 00:19:10,000 --> 00:19:13,800 Speaker 1: of weeks. Was this evidence of froth? Well, I don't know. 357 00:19:13,960 --> 00:19:17,280 Speaker 1: You know, I don't know if it's evidence of froth. 358 00:19:17,480 --> 00:19:19,520 Speaker 1: I think it was bad judgment. I mean, you know, 359 00:19:19,960 --> 00:19:22,679 Speaker 1: you really shouldn't buy assets when they're well above their 360 00:19:22,960 --> 00:19:26,280 Speaker 1: intrinsic value. If you do that, you're probably going to 361 00:19:26,320 --> 00:19:29,040 Speaker 1: lose money eventually, because eventually there's going to be more 362 00:19:29,040 --> 00:19:31,880 Speaker 1: sellers than buyers. I mean to make money in game 363 00:19:31,880 --> 00:19:34,760 Speaker 1: stock when it's selling it two hundred dollars of share. 364 00:19:35,160 --> 00:19:36,720 Speaker 1: The only way you're gonna make money is if there's 365 00:19:37,119 --> 00:19:39,920 Speaker 1: there's other people to come in behind you to buy 366 00:19:39,960 --> 00:19:42,040 Speaker 1: the stock at even and push it to even higher levels. 367 00:19:42,240 --> 00:19:45,720 Speaker 1: That seems like not a very sound proposition when when 368 00:19:45,960 --> 00:19:48,080 Speaker 1: you know the intrinsic value of the company is much lower. 369 00:19:48,800 --> 00:19:50,960 Speaker 1: Great to catch up, as always, come back soon. Bill Dunting, 370 00:19:51,000 --> 00:19:54,320 Speaker 1: that bloom bag opinion columnist and former New York Fed president, 371 00:19:58,960 --> 00:20:01,520 Speaker 1: the Dirty Little Secret votes because the cell side is 372 00:20:01,520 --> 00:20:04,920 Speaker 1: not only about price targets and enthusiasm about up here 373 00:20:05,000 --> 00:20:07,680 Speaker 1: down there, but it's about the density of the note. 374 00:20:07,720 --> 00:20:11,800 Speaker 1: Thomas Forte is a d A. Davidson in rights, brilliantly 375 00:20:11,960 --> 00:20:15,720 Speaker 1: thick notes about the details of a company. Tom Forte, 376 00:20:15,800 --> 00:20:17,800 Speaker 1: thanks for joining us. I want to go right to 377 00:20:17,880 --> 00:20:21,640 Speaker 1: your thoughts on third party where you notice this new 378 00:20:21,720 --> 00:20:25,359 Speaker 1: dominance of third party Explain to our audience while you 379 00:20:25,400 --> 00:20:30,320 Speaker 1: have a persistent buy off the dominance of Amazon embracing 380 00:20:30,480 --> 00:20:35,600 Speaker 1: in other sellers. So if you think about and the 381 00:20:35,640 --> 00:20:40,000 Speaker 1: importance of third party sales on Amazon, it's more profitable 382 00:20:40,440 --> 00:20:45,280 Speaker 1: when businesses and individuals sell products on Amazon than when 383 00:20:45,320 --> 00:20:49,880 Speaker 1: Amazon sells the products itself. Additionally, I think it puts 384 00:20:49,920 --> 00:20:54,000 Speaker 1: a lot of the antitrust heat off of the company. 385 00:20:54,119 --> 00:20:56,520 Speaker 1: I still think there is very significant But if you 386 00:20:56,520 --> 00:20:59,560 Speaker 1: look at Tom for example, when they reported their Black 387 00:20:59,600 --> 00:21:02,919 Speaker 1: Friday Cyber Monday sales, they focused on the amount of 388 00:21:02,920 --> 00:21:08,080 Speaker 1: money third party sellers made selling on Amazon, not Amazon itself. 389 00:21:08,359 --> 00:21:11,840 Speaker 1: I think it's very important Tom. This raises regulatory risk, 390 00:21:11,880 --> 00:21:13,480 Speaker 1: though in a big way. If you think about the 391 00:21:13,480 --> 00:21:17,360 Speaker 1: big railway railway bearers, they were utilities, they were necessities. 392 00:21:17,520 --> 00:21:20,320 Speaker 1: This becomes the same thing, the same argument that any 393 00:21:20,359 --> 00:21:23,800 Speaker 1: company has to join forces with Amazon and use its 394 00:21:23,840 --> 00:21:27,160 Speaker 1: infrastructure in order to get ahead. What kind of regulatory 395 00:21:27,280 --> 00:21:31,760 Speaker 1: risk does this type of dominance create. The good news 396 00:21:31,840 --> 00:21:35,639 Speaker 1: for Amazon in that regard is Walmart is starting to 397 00:21:35,680 --> 00:21:39,560 Speaker 1: step up its game in terms of marketplaces, Target is 398 00:21:39,160 --> 00:21:43,399 Speaker 1: still very well behind, so Amazon can show that there 399 00:21:43,440 --> 00:21:47,439 Speaker 1: are now more marketplaces that sellers can offer their products on. 400 00:21:47,960 --> 00:21:52,480 Speaker 1: But I do think the challenge for anti competitive against 401 00:21:52,480 --> 00:21:55,760 Speaker 1: Amazon is how can they prove consumer harm? How can 402 00:21:55,800 --> 00:21:59,720 Speaker 1: they prove that this third party effort by Amazon is 403 00:22:00,040 --> 00:22:02,480 Speaker 1: using prices to the consumer. And I think that will 404 00:22:02,520 --> 00:22:05,879 Speaker 1: be a challenge as far as antitrust action goes against 405 00:22:05,880 --> 00:22:08,879 Speaker 1: Amazon something. Do you think bezel stepping aside take some 406 00:22:08,960 --> 00:22:10,840 Speaker 1: heat off them a little bit on the regulatary side. 407 00:22:12,320 --> 00:22:17,080 Speaker 1: I think putting Andy Jesse head of their largest services 408 00:22:17,119 --> 00:22:22,080 Speaker 1: effort AWS instead of Jeff Wilkie, who announced his retirement 409 00:22:22,160 --> 00:22:25,720 Speaker 1: last year and was head of retail, does take some 410 00:22:25,840 --> 00:22:28,800 Speaker 1: heat off because Amazon again can tell the story of 411 00:22:29,119 --> 00:22:33,280 Speaker 1: we're enabling individuals and businesses to make money selling an 412 00:22:33,320 --> 00:22:37,320 Speaker 1: Amazon rather than we're making all this money ourselves selling 413 00:22:37,320 --> 00:22:39,800 Speaker 1: our own products. To tell me the optic shift is 414 00:22:39,840 --> 00:22:44,639 Speaker 1: the strategy. The strategy does not shift. I think this 415 00:22:44,720 --> 00:22:49,000 Speaker 1: was a declaration by Amazon that they're warmly embracing services. 416 00:22:49,080 --> 00:22:52,520 Speaker 1: So I think about cloud computing services. Andy Jesse has 417 00:22:52,560 --> 00:22:55,640 Speaker 1: led that effort since two thousand six launch. I think 418 00:22:55,680 --> 00:22:59,520 Speaker 1: about services in retail, enabling people to sell an Amazon 419 00:22:59,800 --> 00:23:03,440 Speaker 1: if they want, delivery services, offering us to advertising services 420 00:23:03,480 --> 00:23:06,879 Speaker 1: and then healthcare in the future. Amazon pharmacy, in my opinion, 421 00:23:06,920 --> 00:23:10,600 Speaker 1: is only the beginning. Okay, well, let's let's double barrel 422 00:23:10,680 --> 00:23:14,960 Speaker 1: this time for to day pharmacy and advertising. Nobody's talking 423 00:23:15,000 --> 00:23:18,480 Speaker 1: about and they're smaller they're off the radar, their single 424 00:23:18,560 --> 00:23:24,000 Speaker 1: digit rounding yarrors. How do they become double digit success? Okay, 425 00:23:24,000 --> 00:23:27,080 Speaker 1: so let's talk about healthcare. I look at two internal 426 00:23:27,080 --> 00:23:30,320 Speaker 1: initiatives by the company, COVID night team testing for employees 427 00:23:30,680 --> 00:23:34,840 Speaker 1: and health clinics for employees families. Those could eventually become 428 00:23:35,240 --> 00:23:40,360 Speaker 1: customer facing broader initiatives. Advertising on Amazon is very important. 429 00:23:40,640 --> 00:23:44,680 Speaker 1: They have their Roku type service, IMDbTV, they have their 430 00:23:44,680 --> 00:23:49,080 Speaker 1: streaming Thursday Night football, and they have advertising within their 431 00:23:49,119 --> 00:23:52,000 Speaker 1: e commerce platform. And I think that will continue to 432 00:23:52,040 --> 00:23:55,560 Speaker 1: grow over time. Investors will look at Amazon and advertising 433 00:23:55,880 --> 00:23:58,359 Speaker 1: the way we used to look at ABC, CBS, Fox 434 00:23:58,920 --> 00:24:03,680 Speaker 1: as far as a must buy for everyone, including retailers 435 00:24:03,680 --> 00:24:06,800 Speaker 1: to advertise on Amazon. You already see Coals advertising on 436 00:24:06,880 --> 00:24:10,600 Speaker 1: Amazon as an example. Meanwhile, going forward, there's a question 437 00:24:10,640 --> 00:24:13,119 Speaker 1: of how much more of a threat Amazon is to 438 00:24:13,200 --> 00:24:16,879 Speaker 1: the Microsoft Oracles, Google's given the fact that Andy Jazzy 439 00:24:16,920 --> 00:24:19,240 Speaker 1: is likely to put that much more emphasis on a 440 00:24:19,440 --> 00:24:21,879 Speaker 1: w S. Do you think that that threat is getting 441 00:24:21,880 --> 00:24:23,560 Speaker 1: baked into markets or do you think that people are 442 00:24:23,600 --> 00:24:26,840 Speaker 1: kind of underplaying it right now? Excellent question and the 443 00:24:26,880 --> 00:24:30,520 Speaker 1: most important data point yesterday, other than Amazon reporting profits, 444 00:24:30,560 --> 00:24:34,120 Speaker 1: there were twice expectations was the very significant operating lass 445 00:24:34,160 --> 00:24:37,040 Speaker 1: Google reported for its cloud computing effort. So I do 446 00:24:37,160 --> 00:24:40,879 Speaker 1: think that Microsoft is a real challenge for Amazon. But 447 00:24:40,920 --> 00:24:43,280 Speaker 1: to the extent maybe that they can throw it off Google, 448 00:24:43,640 --> 00:24:45,760 Speaker 1: that would be a huge long term win for the company. 449 00:24:45,920 --> 00:24:49,959 Speaker 1: You sticking at in on fifty tone, Yes, all right, 450 00:24:50,560 --> 00:24:53,600 Speaker 1: just skin, don't let them come on, Tom, just Tom. 451 00:24:53,640 --> 00:24:57,520 Speaker 1: We need a price target raise right now, seriously. Okay, Tom, Well, 452 00:24:57,560 --> 00:24:59,840 Speaker 1: when the cash flows higher, the price target will go up. 453 00:25:00,000 --> 00:25:03,040 Speaker 1: There we go unless stay, Unless they announced that something 454 00:25:03,119 --> 00:25:06,159 Speaker 1: happened sales wise over the last hours. I don't have 455 00:25:06,240 --> 00:25:09,680 Speaker 1: evidence of higher. We're asking everybody whose name is Tom, 456 00:25:09,680 --> 00:25:11,320 Speaker 1: what do you think of Brady in the Super Bowl? 457 00:25:11,440 --> 00:25:13,080 Speaker 1: Lisa's in love of them. What do you think you're 458 00:25:13,119 --> 00:25:16,640 Speaker 1: gonna give Brady some love? I think that I respect 459 00:25:16,640 --> 00:25:19,040 Speaker 1: Brady the way I respected Michael Jordan as a Chicago 460 00:25:19,160 --> 00:25:23,680 Speaker 1: sports fan, uh and never underestimate him. But Patrick Mahomes 461 00:25:23,840 --> 00:25:27,040 Speaker 1: is amazing, and it breaks my heart the Chicago Bears 462 00:25:27,320 --> 00:25:33,159 Speaker 1: picture Binsky over Mahomes. There we go there. I mean, 463 00:25:33,200 --> 00:25:37,280 Speaker 1: that's why forty is just so large on Amazon. Tom, 464 00:25:37,320 --> 00:25:38,480 Speaker 1: Thank you? Do you want to get from d I 465 00:25:38,560 --> 00:25:46,239 Speaker 1: Dins and senior research analysts Christian Bitterley joins us our 466 00:25:46,760 --> 00:25:49,640 Speaker 1: private She's been listening to all of this talk here, 467 00:25:49,680 --> 00:25:52,480 Speaker 1: and what it really comes down to is a rationalization 468 00:25:52,560 --> 00:25:55,159 Speaker 1: of the walls of worry out there, the driver market higher. 469 00:25:55,400 --> 00:25:58,360 Speaker 1: Christian Bitterly, very simply here in your really bright note, 470 00:25:58,760 --> 00:26:01,720 Speaker 1: you talk about the walls of cash, the horde, the 471 00:26:01,800 --> 00:26:06,760 Speaker 1: pile of cash that's out there. How big is the pile? Yeah, 472 00:26:06,880 --> 00:26:09,359 Speaker 1: So this is I mean, it's really interesting because we 473 00:26:09,440 --> 00:26:11,879 Speaker 1: hear all these stories about kind of the exuberance in 474 00:26:11,920 --> 00:26:15,440 Speaker 1: the market, retail investors pouring into the market, but one 475 00:26:15,440 --> 00:26:18,560 Speaker 1: of the trends that we've been watching really closely is 476 00:26:18,600 --> 00:26:20,879 Speaker 1: a lot of cash on the sidelines. We see this 477 00:26:21,040 --> 00:26:24,400 Speaker 1: from our investors and you can There's really two things 478 00:26:24,440 --> 00:26:26,520 Speaker 1: that I think are important to note when you're talking 479 00:26:26,560 --> 00:26:30,080 Speaker 1: about some of the conservativism out there. So right now, 480 00:26:30,160 --> 00:26:34,560 Speaker 1: it's about fient of US financial household assets are in cash. 481 00:26:34,920 --> 00:26:36,880 Speaker 1: So when you go into different segments, this is about 482 00:26:36,880 --> 00:26:40,880 Speaker 1: thet of certain portfolios held in cash. And what we're 483 00:26:40,880 --> 00:26:43,439 Speaker 1: having we're having conversations with our clients right now about 484 00:26:43,640 --> 00:26:46,600 Speaker 1: strategic cash holding. What do you need in terms of 485 00:26:46,640 --> 00:26:49,320 Speaker 1: strategic cash. There isn't a right answer, as this is 486 00:26:49,359 --> 00:26:53,000 Speaker 1: a very personal question, but what we're finding is people 487 00:26:53,000 --> 00:26:56,680 Speaker 1: are basically taking that amount, that strategic amount, and multiplying 488 00:26:56,680 --> 00:26:59,800 Speaker 1: it by ten times. So when you add up right 489 00:26:59,840 --> 00:27:02,760 Speaker 1: now now the amount of cash sitting in money market 490 00:27:02,800 --> 00:27:06,879 Speaker 1: funds across retail and institutional, it gets you to around 491 00:27:06,920 --> 00:27:10,480 Speaker 1: twenty five of the S and P five market capitalization. 492 00:27:11,000 --> 00:27:13,399 Speaker 1: So there is a lot of cash sitting on the 493 00:27:13,440 --> 00:27:16,840 Speaker 1: sidelines that quite honestly has been a hangover from the 494 00:27:16,880 --> 00:27:19,840 Speaker 1: global financial crisis. This is this is cash that has 495 00:27:19,880 --> 00:27:21,879 Speaker 1: been out there for quite some time, and the savings 496 00:27:21,960 --> 00:27:24,000 Speaker 1: rate has gone up and is about twice as much 497 00:27:24,000 --> 00:27:26,199 Speaker 1: as the average over the past decade, I believe. I 498 00:27:26,240 --> 00:27:28,920 Speaker 1: was just looking at some statistics this morning, Kristen. When 499 00:27:28,920 --> 00:27:30,920 Speaker 1: your clients call you up and they say, yeah, we 500 00:27:31,000 --> 00:27:33,920 Speaker 1: hear what you're saying about investing in risk here assets 501 00:27:33,920 --> 00:27:36,960 Speaker 1: and stocks, and yet what just happened with game Stop. 502 00:27:37,000 --> 00:27:40,159 Speaker 1: Does this indicate some sort of instability that could cause 503 00:27:40,440 --> 00:27:44,000 Speaker 1: broader ripples? What do you tell them? So, I think 504 00:27:44,000 --> 00:27:45,879 Speaker 1: there's two different things. I think one we have to 505 00:27:45,880 --> 00:27:48,320 Speaker 1: look at the state of the economy, and then two 506 00:27:48,359 --> 00:27:51,080 Speaker 1: we have to look at. Do fundamentals matter? So state 507 00:27:51,119 --> 00:27:54,120 Speaker 1: of the economy, as you just mentioned, we have personal 508 00:27:54,160 --> 00:27:57,080 Speaker 1: balance sheets are in good shape, right, so two times 509 00:27:57,160 --> 00:27:59,720 Speaker 1: the average saving rate is what we saw last year, 510 00:28:00,160 --> 00:28:04,480 Speaker 1: so around people have been restructuring their balance sheets, they've 511 00:28:04,480 --> 00:28:08,480 Speaker 1: been refinancing mortgages. So you have the individual in a 512 00:28:08,560 --> 00:28:11,480 Speaker 1: really good shape. And in terms of the economy, obviously 513 00:28:11,520 --> 00:28:14,480 Speaker 1: the biggest risk is COVID, but we're anticipating rates of 514 00:28:14,560 --> 00:28:18,480 Speaker 1: around five percent g VP growth over the next two years, 515 00:28:18,560 --> 00:28:21,960 Speaker 1: and that is really remarkable. The other question is really 516 00:28:21,960 --> 00:28:24,720 Speaker 1: around market volatility, right, So one is are we in 517 00:28:24,760 --> 00:28:28,119 Speaker 1: good shape from an economic standpoint, from a cash standpoint, 518 00:28:28,200 --> 00:28:32,239 Speaker 1: from an individual standpoint, yes, do fund demouncials matter? I 519 00:28:32,240 --> 00:28:35,120 Speaker 1: think that's a resounding yes. But that does not mean 520 00:28:35,600 --> 00:28:38,000 Speaker 1: that technicals don't drive the market in the short term. 521 00:28:38,400 --> 00:28:40,840 Speaker 1: And now we have technicals to think about in terms 522 00:28:40,840 --> 00:28:43,760 Speaker 1: of option volumes. Look at the records that we broke 523 00:28:43,800 --> 00:28:48,200 Speaker 1: in January, which obviously means leverage and these scenarios, while 524 00:28:48,200 --> 00:28:51,440 Speaker 1: they're short lives, are becoming more frequent, I think for 525 00:28:51,480 --> 00:28:55,000 Speaker 1: a variety of reasons. So the first is democratization of 526 00:28:55,040 --> 00:28:58,280 Speaker 1: the stock market, which honestly is fantastic. One of the 527 00:28:58,280 --> 00:29:01,160 Speaker 1: biggest reasons for wealth inequality the fact that wealthy people 528 00:29:01,160 --> 00:29:04,400 Speaker 1: own the majority of financial assets, and we want more 529 00:29:04,440 --> 00:29:07,840 Speaker 1: people to invest, not less. But the thing is is 530 00:29:07,840 --> 00:29:11,760 Speaker 1: there's obviously a difference between investing, speculation and trading. The 531 00:29:11,840 --> 00:29:14,800 Speaker 1: other considerations are also we have a plunge in the 532 00:29:14,840 --> 00:29:18,080 Speaker 1: cost of trading, which makes higher turnover. This is becoming 533 00:29:18,080 --> 00:29:22,240 Speaker 1: more frictionless to the average investor time and capital COVID nineteen. 534 00:29:22,400 --> 00:29:24,640 Speaker 1: The work from home, we have more screen time, which 535 00:29:24,640 --> 00:29:26,720 Speaker 1: means more time paying to attention to the market, to 536 00:29:26,800 --> 00:29:29,760 Speaker 1: more time trading, and there's often more leverage in the 537 00:29:29,840 --> 00:29:32,880 Speaker 1: system due to this options activity. So I think the 538 00:29:33,040 --> 00:29:36,040 Speaker 1: answer is fundamentals absolutely do matter. There are areas to 539 00:29:36,120 --> 00:29:39,000 Speaker 1: invest in the market, but we expect higher volatility and 540 00:29:39,040 --> 00:29:41,320 Speaker 1: don't ignore some of these technical pressures which are going 541 00:29:41,320 --> 00:29:44,520 Speaker 1: to be here to stay. John, what are fundamentals right now? 542 00:29:45,160 --> 00:29:47,560 Speaker 1: I'm serious, Like, what fundamentals are we even talking about 543 00:29:47,600 --> 00:29:50,840 Speaker 1: it a certain point, Yes, Tom, I totally disagree. I 544 00:29:50,840 --> 00:29:54,200 Speaker 1: think fundamentals are huge, but which fundamentals? I mean, how 545 00:29:54,240 --> 00:29:57,000 Speaker 1: do you even evaluate price to earnings when you talk 546 00:29:57,040 --> 00:29:59,760 Speaker 1: about yields as low as they are a serious question. Well, 547 00:29:59,760 --> 00:30:01,560 Speaker 1: this is for Kristan, but you can't do it off 548 00:30:01,560 --> 00:30:03,800 Speaker 1: a sharp ratio because you don't know where the risk 549 00:30:03,880 --> 00:30:06,200 Speaker 1: free return is. You have to plug in John a 550 00:30:06,280 --> 00:30:10,160 Speaker 1: fictional number. Christian, you get fund a work please? Yeah, 551 00:30:10,240 --> 00:30:13,440 Speaker 1: So I think fundamentals. Where where do we find fundamentals 552 00:30:13,440 --> 00:30:16,040 Speaker 1: and how are we thinking about that in portfolio construction. 553 00:30:16,120 --> 00:30:18,800 Speaker 1: So the number one area where this comes into play 554 00:30:18,960 --> 00:30:22,280 Speaker 1: is what we're calling overcoming financial repressions. So this idea 555 00:30:22,320 --> 00:30:25,160 Speaker 1: that yields are low for longer right racer or low 556 00:30:25,200 --> 00:30:27,720 Speaker 1: free longer, and that means that you have your average 557 00:30:27,760 --> 00:30:31,200 Speaker 1: investor looking at like a sixty forty portfolio that's not 558 00:30:31,240 --> 00:30:33,800 Speaker 1: going to achieve their objectives. So that has to move 559 00:30:33,880 --> 00:30:36,760 Speaker 1: up the risk spectrum in terms of the seventy thirty. 560 00:30:36,840 --> 00:30:39,320 Speaker 1: And this is where fundamentals are super critical. So an 561 00:30:39,360 --> 00:30:42,920 Speaker 1: area of the market where fundamentals look good from an 562 00:30:43,040 --> 00:30:46,480 Speaker 1: entry point and also historical fundamentals are really strong is 563 00:30:46,520 --> 00:30:50,920 Speaker 1: an area like global dividend growers. So returning our focus 564 00:30:50,960 --> 00:30:55,280 Speaker 1: to global companies with strong three cash flow generation, strong 565 00:30:55,360 --> 00:30:58,320 Speaker 1: balance sheets, you're basically achieving a yield of three to 566 00:30:58,440 --> 00:31:02,480 Speaker 1: four percent, which given we're rate star is very attractive. 567 00:31:02,840 --> 00:31:05,200 Speaker 1: And then when you think of the underperformance and some 568 00:31:05,320 --> 00:31:07,440 Speaker 1: of this mean reversion that we talked about in market, 569 00:31:07,920 --> 00:31:10,400 Speaker 1: these thoughts have lagged because of all of the high 570 00:31:10,400 --> 00:31:14,040 Speaker 1: flying COVID winners that have really benefited from that momentum. 571 00:31:14,120 --> 00:31:16,680 Speaker 1: So that's an area where I think you're achieving attractive 572 00:31:16,720 --> 00:31:19,800 Speaker 1: yields and you're also there's a strong fundamental story that 573 00:31:19,880 --> 00:31:22,360 Speaker 1: these companies are strong. And here to say Kristin Greits, 574 00:31:22,360 --> 00:31:25,120 Speaker 1: catch up, Christin Bidley, Death Off City Private. Thank you. 575 00:31:25,160 --> 00:31:29,320 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 576 00:31:29,360 --> 00:31:34,680 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 577 00:31:34,760 --> 00:31:39,000 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 578 00:31:39,000 --> 00:31:43,240 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg Radio.