WEBVTT - Surveillance: Debt Crisis Coming, Roubini Says 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.800 and of course on the Bloomberg terminal right now. And 0:00:30.840 --> 0:00:33.599 this is a joy because he has retired from New 0:00:33.680 --> 0:00:38.959 York University, where he provided shocking value over over two decades. 0:00:39.280 --> 0:00:42.320 Nor Robini is a little busy. He's writing a book 0:00:42.360 --> 0:00:44.239 that will do better than good. The movie rights have 0:00:44.280 --> 0:00:47.000 already been sold before the book has been written. With 0:00:47.120 --> 0:00:50.640 Macro Associates and co CEO of the boom bus dot Com, 0:00:50.720 --> 0:00:53.400 Dr Robini joins us this morning, Norielle, I want to 0:00:53.440 --> 0:00:55.000 go right to the heart of it. You say it 0:00:55.080 --> 0:00:59.320 differently than Lawrence Summers. We have stagflation. We also have 0:00:59.440 --> 0:01:03.279 debt on top of it. You're looking at your stagflationary 0:01:03.400 --> 0:01:07.399 debt crisis. Is it here? It's on his way here. 0:01:08.319 --> 0:01:11.600 I agree with Red, agree with Larry Summers and many 0:01:11.680 --> 0:01:14.400 others who worried that they're going to be overheating because 0:01:14.400 --> 0:01:17.680 we have a loose monitor and fiscal policy, and that 0:01:17.720 --> 0:01:20.760 could lead to inflation. But I have the second worry 0:01:21.000 --> 0:01:22.959 and the third worry. The second word is that in 0:01:23.000 --> 0:01:27.560 addition to agree the men becoming excessive, we're gonna suffer 0:01:27.640 --> 0:01:30.920 supply bottlenecks. And those supply bottlenecks are not the shorter 0:01:31.080 --> 0:01:36.480 ones driven by say unemployment benefits. Have identified nine forces 0:01:36.520 --> 0:01:39.480 that are much more secular that like in the seventies, 0:01:39.480 --> 0:01:44.080 are present negative global supply shops that reduced potential growth, 0:01:44.360 --> 0:01:47.200 increase the cost of production, and we lose monitoring and 0:01:47.520 --> 0:01:50.680 fiscal policy and lead not only to inflation but also 0:01:50.720 --> 0:01:54.480 to start flation. The combination of inflation and recession like 0:01:54.520 --> 0:01:56.360 we had the in SEVENI is when you have to 0:01:56.600 --> 0:01:59.120 oil shops. And on top of it, compared to the 0:01:59.200 --> 0:02:03.120 seventh is now that racials private the public are much higher. 0:02:03.440 --> 0:02:06.360 So at that time when the FED went and fund 0:02:06.400 --> 0:02:09.799 the inflation with Bolker, we had the severe double deep persession, 0:02:09.880 --> 0:02:12.520 but we did not have at that crisis after the 0:02:12.600 --> 0:02:15.280 g f C where the that crisis, but we had 0:02:15.320 --> 0:02:18.560 low inflation because there was a negative demand shock. So 0:02:18.600 --> 0:02:21.320 we could have the wars of stagflation of the seventies 0:02:21.360 --> 0:02:24.400 and wars of that crisis after the Gypsy nor I 0:02:24.440 --> 0:02:26.800 want to go back to your restumbul in the old world. 0:02:26.840 --> 0:02:28.919 I want to go back to Genoa and Venice, when 0:02:29.000 --> 0:02:33.760 John Farrell's ancestors were doing battle with the huge industrial 0:02:33.919 --> 0:02:39.239 changes of that time, the Furtune Center for Okay, that's 0:02:39.280 --> 0:02:46.560 your carrying scenorial. We have seen over time historic change. 0:02:46.960 --> 0:02:50.799 How does America do secular stagnation when we have a 0:02:50.840 --> 0:02:55.520 tech juggernaut like we're observing right now with Apple, Amazon, 0:02:55.680 --> 0:02:59.160 Google and that, how do we bring their excellence over 0:02:59.240 --> 0:03:03.239 to the America an experience. Well, even Larry Summers who 0:03:03.320 --> 0:03:08.040 was worried about secular stagnation, now where is about inflation? 0:03:08.880 --> 0:03:12.480 The trouble is that we're facing a whole eight problems 0:03:12.680 --> 0:03:15.920 from a political contibue in terms of a gridlock, not 0:03:16.040 --> 0:03:18.080 just in US, but those in other parts of the world, 0:03:18.120 --> 0:03:20.440 because there are lots of people who are left behind, 0:03:20.919 --> 0:03:23.960 and whether they're voting for Trump, they're voting for Democrats 0:03:24.040 --> 0:03:26.680 or voting in Europe for published part of the right 0:03:26.720 --> 0:03:31.000 and the left that against the globalization, that against the technology, 0:03:31.080 --> 0:03:34.160 that against hyper digitalization. But we also live in the 0:03:34.160 --> 0:03:36.920 world in which, as I pointed out, I worried that 0:03:37.000 --> 0:03:40.240 in spite of technology, maybe as it there's been the 0:03:40.320 --> 0:03:43.480 last twenty years a force for deflation, there are other 0:03:43.600 --> 0:03:47.120 forces that are gonna be staculationary. They're gonna be reducing 0:03:47.160 --> 0:03:51.200 potential growth and increased cost of production because of inequality. 0:03:51.280 --> 0:03:54.720 We have the globalization where protection is and everybody wants 0:03:54.720 --> 0:03:57.280 to defend their own firms and workers who are going 0:03:57.320 --> 0:04:01.560 to now see balkanizations of global supply change and they're 0:04:01.560 --> 0:04:05.280 is shoring of manufacturing from low cost China to US 0:04:05.400 --> 0:04:08.880 and Europe. We're now having agent of population not only 0:04:09.000 --> 0:04:12.160 US Europe. Advanced ecolomies are also in key emerging market 0:04:12.200 --> 0:04:17.120 like China, Korea, East Asia, Russia were restricting migration now 0:04:17.160 --> 0:04:20.960 increasingly from south to north, and migration was something that 0:04:21.040 --> 0:04:24.560 kept a lead on wage pressures in advanced economies. We're 0:04:24.600 --> 0:04:27.320 gonna have this discovering between US and China because of 0:04:27.400 --> 0:04:29.840 this Cold War becoming colder. There's a risk of the 0:04:29.920 --> 0:04:34.400 houtward decappening on technology and trade data, information, the Internet, 0:04:34.440 --> 0:04:39.040 financial flaws. Global climate change is also stack freationary. Look 0:04:39.040 --> 0:04:42.040 at what's happening with lack of water. Even in California, 0:04:42.320 --> 0:04:45.520 one third of all vegetables two thirds of all fruits 0:04:45.520 --> 0:04:49.039 and nuts are producing in California, and now they don't 0:04:49.080 --> 0:04:51.680 have water, and the farms were water rights, rather sell 0:04:51.720 --> 0:04:56.200 it for something else. Whenever shocked to say food prices pandemics, 0:04:56.720 --> 0:05:00.320 they're gonna recurring or imply self reliance or countries on 0:05:00.400 --> 0:05:04.479 their own domestic supply. Cyber attacks are leading again the 0:05:04.520 --> 0:05:08.960 disruption of production when they occur, or the firms will 0:05:09.000 --> 0:05:11.800 have to spend hundreds of billions of dollars to try 0:05:11.839 --> 0:05:14.760 to reduce the risk of cyber attacks. And that's going 0:05:14.839 --> 0:05:17.680 to be another there's so much to get through to 0:05:17.680 --> 0:05:20.960 the final point. If your parent inequality and the parties 0:05:20.960 --> 0:05:23.920 are gonna be pro worker grow, union, grow wages and 0:05:23.960 --> 0:05:26.000 so on. And that's what I put upward pressure on 0:05:26.040 --> 0:05:28.400 wages because I wasn't I was going to be able 0:05:28.400 --> 0:05:30.520 to cut you off there because you were in full flow. No, 0:05:30.720 --> 0:05:32.440 I'll just take a breath just for a second, just 0:05:32.480 --> 0:05:34.080 want to frame what you're saying, because I think it's 0:05:34.120 --> 0:05:37.920 so important. You're making a supply side call on the economy. Here. 0:05:37.960 --> 0:05:40.080 A lot of people believe that we'll get this supply 0:05:40.160 --> 0:05:42.800 side response as the year grows older, that people will 0:05:42.839 --> 0:05:45.480 start to come back to the workforce from September onwards. 0:05:45.600 --> 0:05:47.479 You're saying that's not going to develop in the way 0:05:47.520 --> 0:05:50.480 people anticipate. Can we put some numbers on this, No, 0:05:50.640 --> 0:05:54.080 real the participation rate in America, the degree to you 0:05:54.080 --> 0:05:56.599 think it will recover, things like that, Just work through 0:05:56.600 --> 0:05:58.960 it with us. Well, you know, I do believe that 0:05:59.000 --> 0:06:03.440 there are some term supply vocalnects, and maybe in the 0:06:03.520 --> 0:06:07.719 labor market, unemployment benefits, the lack of childcare, the fact 0:06:07.760 --> 0:06:11.200 that schools and not reopened may have led some workers 0:06:11.279 --> 0:06:14.120 not wanted to return to the labor market. That could 0:06:14.200 --> 0:06:18.039 upper pressure. But in my view, even when those short 0:06:18.160 --> 0:06:22.000 term factors go away, I just described nine factors that 0:06:22.040 --> 0:06:24.120 have not include with the short term, have to do 0:06:24.200 --> 0:06:26.599 with the medium term. Each one of them is a 0:06:26.640 --> 0:06:30.160 negative supply shock, and it's a medium term in particularly 0:06:30.160 --> 0:06:34.159 the last one. The battlesh against inequality implies that in 0:06:34.200 --> 0:06:37.279 the past, within at the protection of labor. But now 0:06:37.320 --> 0:06:39.880 look at the first when three trillion all the last 0:06:39.920 --> 0:06:44.160 year care program of Physical Stimus, then billion in December 0:06:44.480 --> 0:06:47.839 the first Biden Plan one point nine trillion, when mostly 0:06:47.839 --> 0:06:52.440 to what workers unemployed, partial employed, those left behind, rightly so, 0:06:52.640 --> 0:06:55.440 because there is so much inequality, then do otherwise. But 0:06:55.560 --> 0:06:59.240 that puts the labor in a situation of strength right now, 0:06:59.320 --> 0:07:03.480 given them my sick transfer, you can afford waiting longer 0:07:03.560 --> 0:07:06.520 before you get a lousy job or a burger flipping job. 0:07:06.800 --> 0:07:10.200 And that tilS the balance of power between labor and capital, 0:07:10.480 --> 0:07:12.840 and a distribution is going to be not like in 0:07:12.880 --> 0:07:15.320 the past, from labor to capital, but from capital they 0:07:15.400 --> 0:07:18.840 let's pick those are neal term friends, this is really 0:07:18.840 --> 0:07:22.760 really important. Last they shift away from capital and a leverage, 0:07:22.800 --> 0:07:26.600 shifting towards labor. That's a huge effort of this administration, 0:07:26.600 --> 0:07:28.800 and that pretty open about it. Yeah, the idea here 0:07:29.040 --> 0:07:31.720 is that the veterans are perhaps isn't helping things along. 0:07:31.800 --> 0:07:33.440 New Yal. We just have about a minute left, and 0:07:33.480 --> 0:07:36.040 I'm wondering what the FED can do in this circumstance. 0:07:36.080 --> 0:07:38.920 It's driven by so many other factors, whether it's supply 0:07:39.040 --> 0:07:42.040 bottlenecks or rejiggering of the labor market. What can I 0:07:42.040 --> 0:07:45.880 actually do to forestall the sac flationary push. Well, my 0:07:46.040 --> 0:07:48.000 view is that the FED, that like all the same 0:07:48.040 --> 0:07:50.720 from banks, are in a debt trap. Then if you 0:07:50.800 --> 0:07:53.080 do and then if you don't, because if I'm right 0:07:53.120 --> 0:07:58.600 about overheating and stacculation. They should be tightening policy sooner 0:07:58.760 --> 0:08:01.640 and get out of tape in right now to avoid 0:08:01.640 --> 0:08:04.240 inflation getting out of control. But if they were to 0:08:04.320 --> 0:08:07.320 try to do that, even the stocks of debts that 0:08:07.320 --> 0:08:10.240 are much haireher now than ten twenty thirty years ago, 0:08:10.480 --> 0:08:13.040 private and public, then you let a crush in the 0:08:13.080 --> 0:08:16.120 bond market, a crush in the debt market, a crushing 0:08:16.160 --> 0:08:18.360 the stock market. You're not gonna have a double deeper 0:08:18.440 --> 0:08:21.440 session like the early eighties. You're gonna have actually a depression. 0:08:21.880 --> 0:08:24.760 Between doing that and the latter choice of keep on 0:08:24.800 --> 0:08:29.559 monetizing large physical death is its and letting inflation gradually rise. 0:08:29.960 --> 0:08:32.480 The latter choice is gonna be by the fault, the 0:08:32.520 --> 0:08:35.600 one they're gonna choose, and therefore inflation is gonna come back, 0:08:35.760 --> 0:08:37.840 and then seculation is gonna come back. So it's not 0:08:37.880 --> 0:08:39.959 as if the fact is evil. We are in a 0:08:40.120 --> 0:08:42.880 debt trap. We're not just in physical dominance today. We're 0:08:42.880 --> 0:08:46.079 in the debt trap because private and public that are excessive, 0:08:46.360 --> 0:08:48.680 and its central bank is trapped and they're not gonna 0:08:48.679 --> 0:08:51.720 be able to exit this unconventional monetar epology, and this 0:08:51.800 --> 0:08:54.120 because the markets and the garments are crushed. This is 0:08:54.160 --> 0:08:56.240 being so depressing. I always have to tell everybody that 0:08:56.240 --> 0:08:58.400 you're actually a really happy guy. I always have to 0:08:58.400 --> 0:09:02.680 telephone after the interviews concluded that Rabini now usually smiles Tom, 0:09:02.720 --> 0:09:05.080 He's a happy guy, a wife, and these inns happy 0:09:06.080 --> 0:09:09.120 at least the future. It's gonna catch up. You sound 0:09:09.160 --> 0:09:11.640 like Lisa. You back soon. It's gonna hear from your 0:09:11.640 --> 0:09:13.640 self as always, great to have you back in New York. 0:09:13.679 --> 0:09:16.880 Nom repeating there the CEO of Rabini Macro associate to 0:09:16.920 --> 0:09:27.400 the co CEO of Boom Bust dot com right now, 0:09:27.760 --> 0:09:33.160 Joe Stiglets on our fixation on secular stagnation, Professor Stiglets, 0:09:33.160 --> 0:09:36.760 this goes back to Alvin Hanson and on to Laurence Summers. 0:09:37.000 --> 0:09:41.760 And you say, no, no, no, it's not secular stagnation. 0:09:42.200 --> 0:09:46.920 It's a complete focus, a fetishism on growth. Explained to 0:09:47.000 --> 0:09:51.960 us why secular stagnation is off the mark. Well, the 0:09:52.120 --> 0:09:56.400 idea of secular stagnation was that there was something wrong 0:09:56.760 --> 0:10:03.200 with the economy such that even zero interest rates you 0:10:03.280 --> 0:10:07.120 could not maintain full employment. And that led to the 0:10:07.200 --> 0:10:14.200 idea that uh the zero lower bound. It was the 0:10:14.840 --> 0:10:20.720 inability to get interest rates negative that prevented an economic recovery. 0:10:21.640 --> 0:10:25.160 My view has always been that the reason the economy 0:10:25.360 --> 0:10:30.160 was weak and say the period after the Great Recession, 0:10:30.760 --> 0:10:33.880 was that we did not have enough fiscal support. It 0:10:34.000 --> 0:10:38.280 wasn't anything about secular stechnation. It was about a policy failure. 0:10:39.080 --> 0:10:42.640 In that particular case, President Obama could not get the 0:10:42.679 --> 0:10:47.920 support from the Republicans of a sufficient fiscal stimulus to 0:10:48.040 --> 0:10:52.120 get the economy back into a robust recovery. And so 0:10:52.640 --> 0:10:58.120 UH today with President Biden, we've shown that if you 0:10:58.240 --> 0:11:02.120 give enough fiscal stimulus, you can get a strong economy. 0:11:02.440 --> 0:11:06.600 The real question facing us today is where we will 0:11:06.880 --> 0:11:10.080 be able to get my call the second nose UH, 0:11:10.240 --> 0:11:14.920 the broader pages on infrastructure, family care, and so forth, 0:11:15.559 --> 0:11:20.880 that both be at mass shop support and a supply support. 0:11:21.120 --> 0:11:23.959 So that's a political debate that will have for another time. 0:11:24.120 --> 0:11:27.400 You own the little G and economics a complete focus 0:11:27.679 --> 0:11:30.560 on the growth rate. With the new debt and deficit 0:11:30.679 --> 0:11:34.280 build up that we have and Laurence Summer's legitimate concerns 0:11:34.280 --> 0:11:38.760 over secular stagnation, do we risk too low of a 0:11:38.920 --> 0:11:44.040 growth rate which destabilizes our belief in paying off debt 0:11:44.120 --> 0:11:48.439 and reducing the deficit. We the i m F in 0:11:48.559 --> 0:11:53.760 next UH World Economic Outlook w e O, which just 0:11:53.920 --> 0:11:58.679 came out, actually said that if the Biden Plan is adopted, 0:11:59.080 --> 0:12:02.200 that went ahead to make projections assuming that it would be, 0:12:02.520 --> 0:12:07.199 our growth would be seven percent this year and over 0:12:07.600 --> 0:12:11.760 four percent next year. So they like me, are confident 0:12:12.240 --> 0:12:18.040 that if we give the right UH support to the economy, 0:12:18.200 --> 0:12:21.839 we will have growth, and that growth will enable us 0:12:22.320 --> 0:12:26.720 UH to be in a good position UH to repay 0:12:26.760 --> 0:12:31.760 the debt and will sustain UH. You know, these investments 0:12:32.080 --> 0:12:35.640 will provide the basis of growth over the longer time. 0:12:36.440 --> 0:12:40.360 Professor Stiglett's we've been in a perpetual low inflation environment. 0:12:40.400 --> 0:12:42.480 You were talking about that as the new normal, and 0:12:42.559 --> 0:12:46.320 basically you're blaming a policy failure on the fiscal front 0:12:46.640 --> 0:12:49.640 as the reason why. Going forward though, to shape our 0:12:49.679 --> 0:12:52.280 inflation debate, how much do we have to look at 0:12:52.320 --> 0:12:55.200 the supply chain disruptions that we're hearing from almost every 0:12:55.240 --> 0:12:59.760 company that reports earnings this season. You know, the market 0:12:59.840 --> 0:13:03.360 is quite good in steering the economy when there's a 0:13:03.400 --> 0:13:06.840 small adjustment. We want a little bit more cars, We 0:13:06.920 --> 0:13:11.079 want bigger cars, smaller cars, We're always going through these 0:13:11.160 --> 0:13:14.679 kinds of adjustments, but we've been through an experience that, 0:13:15.679 --> 0:13:19.520 other than times of war, we've never been through where 0:13:19.640 --> 0:13:24.840 you transform shut down large parts of the economy, and 0:13:24.880 --> 0:13:27.520 the economy the market doesn't do a very good job 0:13:27.920 --> 0:13:34.360 in these very sudden transformations transitions. So yes, I am 0:13:34.360 --> 0:13:38.640 not surprised that we are seeing lots of bottlenecks. I 0:13:38.679 --> 0:13:42.680 actually have enough confidence in the market that most of 0:13:42.679 --> 0:13:45.640 these bottlenecks will be overcome. You know, you saw that 0:13:45.720 --> 0:13:49.839 in the case of UH Timber prices went way up 0:13:49.960 --> 0:13:53.800 and then came way down. Is there any fundamental reason 0:13:54.080 --> 0:13:58.920 why the market economy can produce as many cars as 0:13:59.000 --> 0:14:03.880 Americans want to buy? Absolutely, we were complaining before about 0:14:04.080 --> 0:14:07.160 lack of demand for our cars. So of course there's 0:14:07.200 --> 0:14:11.680 going to be some hiccups as we restart the economy. 0:14:11.720 --> 0:14:16.480 But the question is is there any fundamental reason that 0:14:16.559 --> 0:14:20.960 we should expect this to be other than transist? Is transitory? 0:14:21.200 --> 0:14:22.760 And I think the answer is no. And I think 0:14:22.760 --> 0:14:24.640 that's where the I am mep is. That's where the 0:14:24.680 --> 0:14:28.280 fet is. I think that's where all those who are 0:14:28.440 --> 0:14:32.720 not get other than those who are trying to UH 0:14:32.840 --> 0:14:35.680 oppose the kinds of measures that are that are being 0:14:35.720 --> 0:14:38.840 proposed to get the economy back on strow. Yeah, but 0:14:38.840 --> 0:14:41.520 there are some things that have changed. There's a reduction 0:14:41.520 --> 0:14:44.360 in the emphasis and globalization. There's been a de globalization 0:14:44.440 --> 0:14:46.960 that some people have pointed to. There's also in it 0:14:47.440 --> 0:14:49.320 on the margin, has been a bit of a shift 0:14:49.400 --> 0:14:53.680 toward labor away from employee employers, which sought for example, 0:14:53.720 --> 0:14:57.600 Boeing restraining itself from firing certain employees because they didn't 0:14:57.600 --> 0:15:00.240 want to worry about rehiring them when they need did 0:15:00.280 --> 0:15:03.040 them earlier this morning that announcement came out. I mean, 0:15:03.080 --> 0:15:04.720 what do you say to all of these shifts that 0:15:04.720 --> 0:15:08.520 they're not necessarily fundamentally changing the character in a way 0:15:08.560 --> 0:15:13.440 that could alter the path of inflation to a higher tilt. Uh. 0:15:14.080 --> 0:15:18.000 The there will be some increases in prices in the 0:15:18.040 --> 0:15:20.520 process of that kind of adjustment, But let me stay 0:15:20.560 --> 0:15:22.640 on the on the second point you made, for instance, 0:15:23.080 --> 0:15:28.720 that the profit margins have been so high that they 0:15:28.720 --> 0:15:35.680 can easily be absorbed without uh increasing prices. That uh, 0:15:35.720 --> 0:15:39.080 you know, it's one of the one of the disconcerting 0:15:39.120 --> 0:15:43.240 things happened in the United States over the last uh 0:15:43.400 --> 0:15:48.360 fifteen twenty years has been decreased in the share of labor, 0:15:48.880 --> 0:15:52.960 and a correction to increase the share of labor would 0:15:52.960 --> 0:15:59.000 actually be welcome and can be absorbed without any significant 0:16:00.040 --> 0:16:05.400 in UH in in prices side of globalization. Uh, there's 0:16:05.400 --> 0:16:08.200 going to be some adjustments, but particularly in our trade 0:16:08.240 --> 0:16:13.000 relations with China. But remember there are many other emerging 0:16:13.080 --> 0:16:18.120 markets out there are many developing countries, and UH, if 0:16:18.160 --> 0:16:21.040 we import a little bit less from China, a little 0:16:21.040 --> 0:16:24.280 bit more from Vietnam, do we really think that that's 0:16:24.320 --> 0:16:27.880 going to have a big back on the course of 0:16:27.920 --> 0:16:32.160 inflation over a significant period of time. I don't know, 0:16:32.880 --> 0:16:35.240 Joe Stiglets. I hate to tell you, but it's been 0:16:35.280 --> 0:16:38.680 thirteen years since you and I talked about your courage 0:16:38.720 --> 0:16:43.360 to write a book with Linda Billness on Iraq intangentially 0:16:43.560 --> 0:16:49.240 on Afghanistan. Folks, the three Trillion Dollar War was hugely controversial, 0:16:49.600 --> 0:16:51.880 except everybody had to shut up and read it. That's 0:16:51.880 --> 0:16:55.320 what you did with Stiglets and Billmus Joe Stiglets, could 0:16:55.360 --> 0:17:00.280 you please comment after this incredibly important book about are 0:17:00.360 --> 0:17:05.640 leaving Afghanistan and the reports that we may leave Iraq, Well, 0:17:05.680 --> 0:17:09.000 you know, when we wrote the book, Uh, the three 0:17:09.040 --> 0:17:15.280 trillion dollar war highlighted the economic costs of that war. 0:17:16.600 --> 0:17:19.640 Our own estimates were that the number was greater than 0:17:19.680 --> 0:17:23.240 three trillion, but we wanted to be on the very 0:17:23.280 --> 0:17:28.359 conservative side. We now have the evidence. Uh, the cost 0:17:28.960 --> 0:17:36.320 just two for healthcare and for uh pay for our 0:17:36.400 --> 0:17:40.200 veterans who are coming back itself is in the order 0:17:40.240 --> 0:17:43.600 of men to an excess of a couple of trillion dollars. So, 0:17:43.720 --> 0:17:48.040 in fact, it has turned out that our estimates were 0:17:48.160 --> 0:17:53.639 as we intended them to be, vastly conservative. Uh. And UH, 0:17:53.960 --> 0:17:56.800 so that we focus on the cost of the war, 0:17:58.119 --> 0:18:00.680 I think, uh, the other side, and of course it 0:18:00.720 --> 0:18:04.080 is the benefit of the war. And I'm afraid that 0:18:04.200 --> 0:18:08.480 was negative. So that in that h if we look 0:18:08.520 --> 0:18:13.760 at that whole episode, Uh, we destabilized the Middle East. 0:18:14.440 --> 0:18:18.679 We didn't do what we did what President Bush claimed 0:18:18.680 --> 0:18:23.600 we were going to do, which was at the extra Marketoe. Professor, 0:18:23.760 --> 0:18:25.800 always appreciate your time, So got to catch up. Don't 0:18:25.840 --> 0:18:28.840 be a stranger. Let's talk soon. Joseph Stickley's the Columbia 0:18:28.920 --> 0:18:31.840 University professor of economics and of course no Val Price 0:18:32.000 --> 0:18:41.240 winning economist. The cyclical story the ad revenue is really 0:18:41.320 --> 0:18:43.760 kicked in in a massive way, big tech delivering some 0:18:43.800 --> 0:18:48.200 big money. Cross Mark Global Investment Chief investment Officer Bob 0:18:48.240 --> 0:18:51.480 I mentioned YouTube revenue up by more than year on 0:18:51.640 --> 0:18:54.560 year over at YouTube just one unit of the overall 0:18:54.600 --> 0:18:57.040 company that is Alphabet. Now, Bob, I just wonder from 0:18:57.040 --> 0:18:59.680 your perspective, how difficult is it to tell a client, yeah, 0:18:59.720 --> 0:19:03.760 we own them, we don't own those names. I'd be 0:19:04.040 --> 0:19:06.800 a disappointed situation if I had to tell my client that. 0:19:06.920 --> 0:19:09.960 Thankfully we do. But I think the question is what 0:19:10.200 --> 0:19:13.280 happens from here, And you've all been alluding to it. 0:19:13.760 --> 0:19:16.919 That is, we're having amazing corporate earnings in the second quarter, 0:19:17.520 --> 0:19:20.440 but almost definitionally in the back half of this year, 0:19:20.480 --> 0:19:25.240 earnings growth is going to decelerate. Markets love when economic 0:19:25.240 --> 0:19:28.960 and earnings growth accelerate, not so keen on deceleration. The 0:19:29.040 --> 0:19:32.080 numbers will still be good, as you folks know, but 0:19:32.200 --> 0:19:34.760 not as good. And then you bring in all the 0:19:34.800 --> 0:19:38.320 other factors like his inflation, transitory or not. And I 0:19:38.359 --> 0:19:41.400 think it's just not smooth light, it's not straight up. 0:19:41.400 --> 0:19:44.520 It's bumpier from here, Bob Doll At cross Mark, the 0:19:44.600 --> 0:19:47.200 game is to extrapolate out with a vision out one 0:19:47.280 --> 0:19:49.919 year two years, five years, ten years. We talked to 0:19:49.960 --> 0:19:52.920 the great Steve auth about this in the last hour. 0:19:53.240 --> 0:19:56.200 Give me the courage of Robert Dahl right now? How 0:19:56.320 --> 0:20:00.760 far out are you looking to believe in the reppellations 0:20:00.800 --> 0:20:04.960 of Apple, Amazon, and for that matter McDonald's. Yeah, A 0:20:05.000 --> 0:20:07.000 lot of it has to do not so much what 0:20:07.040 --> 0:20:09.919 the companies are doing. They're doing great, they're adapting, to 0:20:10.000 --> 0:20:12.840 use the words you've all been using so far this morning, 0:20:13.080 --> 0:20:17.600 and that's good news. The problem is what happens to 0:20:17.800 --> 0:20:21.639 the valuation the multiples if and as and I think 0:20:21.680 --> 0:20:26.080 it's as interest rates creep higher, that's the trick. The 0:20:26.119 --> 0:20:30.399 company's businesses are good, they're solid. Uh, they're coming back. 0:20:30.480 --> 0:20:33.280 They've figured out how to adapt in a in a 0:20:33.359 --> 0:20:36.440 slightly different world than we've been in. So it's more 0:20:36.480 --> 0:20:40.000 about valuations than can the companies execute. Bob, what are 0:20:40.040 --> 0:20:42.480 the scenarios that you're looking at that could actually cause 0:20:42.560 --> 0:20:45.320 that to happen, for interest rates to finally creep higher 0:20:45.320 --> 0:20:47.879 as so many expect. Well, you allude to it a 0:20:47.880 --> 0:20:51.480 minute ago, Lisa. Inflation. Is it transitory or not? My 0:20:51.600 --> 0:20:53.919 guess is some is, but not all of it. So 0:20:54.000 --> 0:20:57.040 we have some inflation that's transitory. Some that's caused by 0:20:57.119 --> 0:21:01.040 supply shortages which hopefully get fixed for too long, but 0:21:01.240 --> 0:21:04.959 some is real. The era of zero two percent inflation, 0:21:05.400 --> 0:21:08.680 in my view, is over, and as a result, we're 0:21:08.680 --> 0:21:12.359 gonna have to use to a little inflation, um, you know, 0:21:12.520 --> 0:21:16.040 not high single digits, but enough that there's a different 0:21:16.119 --> 0:21:20.160 valuation parameter. So far, the markets have not agreed with that. 0:21:20.200 --> 0:21:24.359 The markets have said inflations transitory. Ten your treasuries at 0:21:25.440 --> 0:21:29.000 is a okay, and pe ratios where they are. We'll 0:21:29.040 --> 0:21:32.040 see if that continues. I hope I'm wrong. I hope 0:21:32.080 --> 0:21:36.240 inflation is totally transitory, and then they'll be, uh, you know, 0:21:36.280 --> 0:21:38.679 onward and upward. Let's say you're right, let's put some 0:21:38.760 --> 0:21:40.680 numbers on it. You said not high single digits. What 0:21:40.720 --> 0:21:42.520 are you looking for, Bob, something like three or three 0:21:42.560 --> 0:21:44.159 and a half those kind of levels to persist. And 0:21:44.200 --> 0:21:46.040 if that's the case, what do you want to own 0:21:46.160 --> 0:21:49.520 in this Secony market? Yeah? I think it's three issue, 0:21:49.600 --> 0:21:52.280 or let's call it a three issues opposed to you know, 0:21:52.400 --> 0:21:56.080 one to two. That doesn't sound like a big difference, John, 0:21:56.160 --> 0:21:59.000 but you know it is when it comes to valuation 0:21:59.040 --> 0:22:01.439 and interests or so where do I want to be? 0:22:02.160 --> 0:22:07.200 I think the counter trend move has been higher bonds, 0:22:07.320 --> 0:22:12.600 lower yields, growth stocks, defensive stocks. That's counter trend. I 0:22:12.640 --> 0:22:17.200 think you use that period we're experiencing now to beef 0:22:17.280 --> 0:22:21.399 up on your cyclical exposure. You trimm duration if you 0:22:21.480 --> 0:22:25.440 haven't already done it. The US, and increasingly the global 0:22:25.480 --> 0:22:28.680 economy is in pretty good shape. We're gonna get good 0:22:29.080 --> 0:22:32.639 economic news, good earnings news, and a little bit of inflation, 0:22:32.960 --> 0:22:35.399 which to me means slightly higher interest rates. What's the 0:22:35.480 --> 0:22:38.919 frothiness now, Bob dolld the exuberance? I mean, is this 0:22:39.000 --> 0:22:43.119 a legit bullmarkers that's still unloved? Oh, it's it's it 0:22:43.280 --> 0:22:46.560 is legit. You know, the sentiment numbers have moved up significantly. 0:22:46.600 --> 0:22:49.800 They're not an onerous territory, but we've got to keep 0:22:49.840 --> 0:22:52.560 our eye on it. Look, I think that part of 0:22:52.600 --> 0:22:55.199 the argument is the Tina argument. If I want to 0:22:55.200 --> 0:22:57.480 get out of stocks, where am I gonna go? Cash 0:22:57.560 --> 0:23:01.159 doesn't give me anything. Bonds I think a risky and 0:23:01.240 --> 0:23:04.280 so in traditional asset class, I just stick with my equities. 0:23:04.640 --> 0:23:06.680 Find a question from maype up just quickly. I've asked 0:23:06.720 --> 0:23:08.800 a couple of people this question over the last couple 0:23:08.840 --> 0:23:10.760 of weeks. I'll ask it of you. What do you 0:23:10.760 --> 0:23:12.879 want to winn into year end? The nasty called the Russell? 0:23:13.359 --> 0:23:16.840 What would your preference index the Russell into your end? 0:23:16.880 --> 0:23:22.760 More cyclicality there um and lower valuations compared to the NASDA. Interesting? 0:23:22.880 --> 0:23:25.320 So can we put out a banner that Bob Dalson's 0:23:25.359 --> 0:23:29.959 sell Apple. I don't think we can do own the Russell. 0:23:30.520 --> 0:23:34.879 So I still own Apple, just less than I used to. 0:23:34.880 --> 0:23:39.560 Tom Kine Roulette is always tough across my global investment 0:23:39.600 --> 0:23:46.960 chief investment officers right now, and this is a joy 0:23:47.000 --> 0:23:50.080 out of Edinburgh and of course the prestigious residency at 0:23:50.080 --> 0:23:54.120 the Universe of Chicago. In emergency medicine, but far more, 0:23:54.200 --> 0:23:57.680 bak De Hansauti of Johns Hopkins has done the world 0:23:57.720 --> 0:24:01.199 tour of really difficult as diseases. When you show up 0:24:01.240 --> 0:24:03.679 in Ghana, when you show up in Nepal, well, it's 0:24:03.680 --> 0:24:07.679 a different medicine than what we have in America. Dr Hansauti, 0:24:08.000 --> 0:24:12.080 welcome what comes after the delta variant virology? One oh 0:24:12.080 --> 0:24:15.600 one told me these things keep changing to s pro 0:24:15.840 --> 0:24:19.120 like you look at the delta variant is a pathway 0:24:19.160 --> 0:24:21.600 to what's coming down the road a year or two 0:24:21.680 --> 0:24:27.280 years out. So unless we decrease the amount of circulating virus, yes, 0:24:27.400 --> 0:24:30.000 it is likely that the virus will continue to mutate 0:24:30.560 --> 0:24:34.000 and there will be an echo lambda and future variants 0:24:34.000 --> 0:24:38.520 that will be more transmissible, more variant than those that predecessors. 0:24:39.000 --> 0:24:41.280 So then how do we approach that, I mean from 0:24:41.280 --> 0:24:44.439