Speaker 1: This is Bloomberg Wall Street Week. We turn our attention
Speaker 1: to the markets this week. U s CPI never's reinforcing
Speaker 1: concerns about inflation. The financial stories that chiep are worth
Speaker 1: a really different reaction to Mark. It's more indications of
Speaker 1: just how hot the U. S. Economy really is. Through
Speaker 1: the eyes of the most influential voices Larry Summers, the
Speaker 1: former Streatory Secretary, Katherine Keening, CEO of d n Y
Speaker 1: Moms Sam's l Sharmon and founder of Equatic Group Investment.
Speaker 1: In Bloomberg wool Street Week with David Weston from Bloomberg Radio,
Speaker 1: Searching in Vain, for solid ground in an escalating Russian war,
Speaker 1: in Ukraine in a troubled global economy, and goodness knows
Speaker 1: in the British authorities economic management. This is Bloomberg Wall
Speaker 1: Street Week. I'm David Weston. This week special contributor Larry
Speaker 1: Summers of Harvard on the potential next shoe to drop economically.
Speaker 1: I doubt we've seen the last mine UH go off.
Speaker 1: Some of them may be in the private sector. I
Speaker 1: think more of them may be a national and former
Speaker 1: New Jersey governor and EPA administrator Christine Todd Whitman on
Speaker 1: a path forward on nuclear energy. Nuclear and play a
Speaker 1: huge role at least in the transition from fossil fuels
Speaker 1: to renewables. Global Wall Street It's spent the week trying
Speaker 1: to get its footing after things only got worse in
Speaker 1: Ukraine as Russian missiles rained down across the country and
Speaker 1: NATO chief Yen Stollenberg had to reassure us the things
Speaker 1: weren't about to go nuclear. Russian knows that the nuclear
Speaker 1: war channep won I must never be fall. The I
Speaker 1: m F, for at least its economic projections and its
Speaker 1: chief economists were warned that a global recession just maybe looming.
Speaker 1: What we see is about a third of global economy
Speaker 1: is going to be experiencing the contraction this year on next.
Speaker 1: And if that weren't enough, President Biden told CNN recession
Speaker 1: may come specifically to the United States. I don't think
Speaker 1: there will be a recession. If it is, it will
Speaker 1: be a very slight recession. And then then the CPI
Speaker 1: numbers came in hotter than expected, with the headline numbers
Speaker 1: still up at eight point and core accelerating the six
Speaker 1: point six percent year over year. It is not a
Speaker 1: good picture here. Those who were thinking that inflation might
Speaker 1: drop off fairly quickly are going to be disappointed by
Speaker 1: the numbers here. In the meantime, over in Great Britain,
Speaker 1: we had a week of financial turmoil, with a very
Speaker 1: public battle between the Bank of England and Prime Minister
Speaker 1: Trust's government, which ended up with a new Chancellor of
Speaker 1: the Exchequer and her giving up on more of her
Speaker 1: controversial budget. I want to be honest, this is difficult,
Speaker 1: but we will get through this storm and we will
Speaker 1: deliver the strong and sustained grace that can transform the
Speaker 1: prosperity of our country for generations to come. But the
Speaker 1: surprises weren't all bad this week, at least not for
Speaker 1: former FED chair Ben Bernanke, who was awakened to learn
Speaker 1: that he shares with two others the Nobel Prize for
Speaker 1: Economics this year. It was completely unexpected. My wife and
Speaker 1: I shut off our cell phones when we went to
Speaker 1: bed last night, not thinking about this issue um and
Speaker 1: it was our daughter in Chicago who was finally contacted
Speaker 1: and called us on the landline to inform us that
Speaker 1: this this had happened, And the markets had just as
Speaker 1: hard a time as the rest of us finding its footing,
Speaker 1: with the SMP swinging five points between big losses and
Speaker 1: big gains. On Thursday alone, after the CPI numbers came
Speaker 1: out for the week, the SMP was down one, the
Speaker 1: NASDAG down over a three percent, and yield on the
Speaker 1: tenure was up over thirteen basis points to close the
Speaker 1: week just above four teples. Sort out a wild week
Speaker 1: in the markets. We welcome now Joe and Phoene, partner
Speaker 1: in Advisor's Capital Management, and Lizanne Sanders, chief investment strategist
Speaker 1: at charl Schwab. So welcome back both of you to
Speaker 1: Wall Street. Let me start with you, Luzenne, what happened
Speaker 1: this week? I feel like we hit by a mack truck.
Speaker 1: So I think it was probably mostly technical the reversal
Speaker 1: that we saw yesterday. On an inter day basis, in
Speaker 1: the first part of the day, you did see the swoon.
Speaker 1: Take the SMP two below seventeen. And I'm not a technician,
Speaker 1: but that level was important because it was the retracement
Speaker 1: of the post pandemic move higher, and and that probably
Speaker 1: kicked in a combination of buying head just being taken off,
Speaker 1: some short covering, and that fed on itself through the
Speaker 1: end of the day. Maybe you could point to the
Speaker 1: move down and yields yesterday, the move down in the dollar,
Speaker 1: but that could also help to explain today's weakness too,
Speaker 1: because you saw reversals there. So Joanna fairmoun A noise.
Speaker 1: I think it's fair to say in the equity markets
Speaker 1: there but on Friday, actually they gave up pretty much
Speaker 1: every they got back on Thursday. So when you net net,
Speaker 1: when you get through it all, what did we learn
Speaker 1: this week that should affect the markets over the longer term,
Speaker 1: You know, Dave, But I think what we learned is
Speaker 1: that there's still a lot of risks out there facing
Speaker 1: the future of the global economy, not just here in
Speaker 1: the US. And those two price reports we got, the
Speaker 1: p p I and the c p I reinforce the
Speaker 1: view that inflation is going to be a really hard
Speaker 1: challenge for the Fed to solve. But it also seems
Speaker 1: to have removed any wiggle room that people think the
Speaker 1: Fed has. They're they're really gonna have to be adamant
Speaker 1: about raising rates, try to constrain liquidity, try to discourage
Speaker 1: consumer demand in order for inflation to get under control.
Speaker 1: There's not a lot of room for them to do
Speaker 1: anything but raizor rates now for the next at least
Speaker 1: couple of meetings. The market finally perhaps is digesting that.
Speaker 1: There's a lot of talk about me sorry, go ahead please. Yeah.
Speaker 1: I think joins absolutely right. And I think there have
Speaker 1: been these moments where it seems like, whether it's in
Speaker 1: reaction to things going on in the UK, that the
Speaker 1: markets almost cheering for are looking for some sort of
Speaker 1: financial system accident because of the messaging from the FED,
Speaker 1: from Powell that they're not going to step in because
Speaker 1: of financial market weakness across any of the asset markets,
Speaker 1: or just volatility, but financial system and stability maybe what
Speaker 1: could bring the fedback in. But even in a situation
Speaker 1: like that, what they may do is use the tool
Speaker 1: of their balance sheet or repo facilities versus doing a
Speaker 1: pivot anytime soon on rates. And I'm not sure that's
Speaker 1: been fully digested by the market yet. Yeah, there could
Speaker 1: be certainly more digested to come, particularly because the risks
Speaker 1: that are out there are really unusual. You know, it's
Speaker 1: not just the inflation problem, right, The US has a
Speaker 1: labor shortage born of the pandemic, born of early retirees,
Speaker 1: born of a lack of legal migration immigration into the US.
Speaker 1: Joan Peony and Lisia and Saunders will be staying with
Speaker 1: us as we're trying to figure out what to do
Speaker 1: with our money in these turbulent times. It's gonna have
Speaker 1: backs on Wall stere week on Bloomberg. Well, this was
Speaker 1: the week when Wall Street got much of what it
Speaker 1: had been asking for and then decided, quite characteristically, that
Speaker 1: it didn't like it. The economy is simmering down as requested.
Speaker 1: Industrial production took its worst fall in more than a year,
Speaker 1: business inventories are rising ominously, and the Housing Industries Trade
Speaker 1: Association said its members were virtually out of business. That,
Speaker 1: of course, was Lewis Rocks around Wall Street. Wee back
Speaker 1: or not forty one years ago now, when all the
Speaker 1: markets wanted was a slowing economy and the lower interest
Speaker 1: rates that they thought would come with that. The big
Speaker 1: movie that week was a romantic comedy you may not
Speaker 1: remember it with Burt Reynolds named Paternity, and the number
Speaker 1: one song was Arthur's theme from that Dudley Moore film
Speaker 1: named Arthur. Now the problems are very different, as interest
Speaker 1: rates are on the way up, not down, and the
Speaker 1: economy is still very robust by most measures, still with
Speaker 1: us or joe An Feeny of Advisor's Capital Management and
Speaker 1: Liz Anne Saunders of Charles Swab, So, Joeann, let me
Speaker 1: come to you. The question is what do we do
Speaker 1: with our money in this world? Where does it make
Speaker 1: sense to invest with this much Volati's much uncertainty. It's
Speaker 1: really been challenging time for investors, and it really depends
Speaker 1: what sort of time frame you have as an investor.
Speaker 1: You know, if if you're in retirement, what you probably
Speaker 1: need is some assurance that you're going to going to
Speaker 1: be able to get the cash flow you need off
Speaker 1: of your portfolio. And so one of the things we've
Speaker 1: done for for our clients in that kind of a
Speaker 1: situation is to create portfolios with above average dividendields on
Speaker 1: the one side. And now as bond yields are rising
Speaker 1: and we've kept our duration relatively short, we've been able
Speaker 1: to let bonds mature and then re up at higher yields. So,
Speaker 1: you know, one area to go to is some relatively
Speaker 1: stable companies, whether it's a General Mills or an ab
Speaker 1: V or you know, some of the others in consumer
Speaker 1: staples and in energy that have you know, dividendnields in
Speaker 1: the four or five six percent range, and that way
Speaker 1: they can still get that income and they can ride
Speaker 1: out the volatility and the stock prices and wait this out.
Speaker 1: And then that gives our clients a fair bit of comfort.
Speaker 1: But you know, it hasn't been easy really for anybody,
Speaker 1: but that's one way to deal with the volatility. Luzanne,
Speaker 1: what are you recommending these days? Well, first of all,
Speaker 1: I absolutely agree with Joanne that there's no there's no
Speaker 1: cookie cutter answer to a question like that. It really
Speaker 1: does depend on who the investor is, their risk tolerance
Speaker 1: or past experience, their time horizon, whether they're financial risk tolerance,
Speaker 1: and their emotional risk tolerance, whether there's a narrow gap
Speaker 1: between the two or a wide gap between the two.
Speaker 1: But I think we're in a part of the market
Speaker 1: cycle right now where you want to actually focus on fundamentals.
Speaker 1: And I know that sounds trite and sounds what we're
Speaker 1: always supposed to do, but gone are the days where
Speaker 1: you could look at segments of the market, components of
Speaker 1: say big tech, and look at it monolithically make an
Speaker 1: assumption that they're all going to go up simultaneously. There's
Speaker 1: much more differentiation in the market right now, and I'd
Speaker 1: say look for where things our dear from a macro perspective.
Speaker 1: So we have declining earnings revisions in the aggregate, so
Speaker 1: look for the factor around positive earning to revisions positive
Speaker 1: earning surprise. We know we're in a rising interest rate environment,
Speaker 1: so companies with strong balance sheets, low debt, high cash flow,
Speaker 1: strong free cash flow, um low lower volatility. It's just
Speaker 1: kind of a quality wrapper and I think that's the
Speaker 1: best type of approach in this environment. And then the
Speaker 1: last thing we've suggested for those investors who can do it,
Speaker 1: If you were a re balancer based on the calendar,
Speaker 1: maybe instead of doing it once a year, once a quarter,
Speaker 1: let your portfolio and the volatility associated with dictate the
Speaker 1: timing of of taking advantage of the volatility by you know,
Speaker 1: adding into weakness, trimming into strength relative to your overall
Speaker 1: strategic asset allocation. Joan, What about the possibility of fixed
Speaker 1: income at this point. I mean, for a long time
Speaker 1: and you didn't want to be in bonds given what
Speaker 1: we're going to bonds, but those yields have really come up.
Speaker 1: They're yielding something now and they do generate cash. It's
Speaker 1: sort of like dividends, right, yeah, absolutely right. You know
Speaker 1: we're getting in the order of six plus percent in
Speaker 1: in yields in our all investment grade UH fixed income solution.
Speaker 1: And when you pair that within a balanced strategy with
Speaker 1: the equity front, you know, you can generate a pretty
Speaker 1: nice cash flow for clients. Um. And so if you
Speaker 1: keep duration short and you're really careful about selecting credit
Speaker 1: quality because credit spreads have widened here, so you want
Speaker 1: to be careful that you're not adding risk to the
Speaker 1: side of your portfolio that it's supposed to be sort
Speaker 1: of the suspenders on the pants, right to provide more stability.
Speaker 1: And so that's one thing we've done and it's helped
Speaker 1: our clients feel a lot more comfortable in this kind
Speaker 1: of environment. Listen, are you do the point yet where
Speaker 1: you'd consider duration that is going longer duration from EIX income? So,
Speaker 1: my my colleague Cathy Jones has a regular guest on
Speaker 1: on Bloomberg. She's our fixed incomes strategists, and in the
Speaker 1: sort of four ish per set range we have suggested
Speaker 1: you can't that are lengthening duration. But I agree with
Speaker 1: everything that Joanne said too, I think there are finally
Speaker 1: opportunity and we've gone from a from a TINA environment.
Speaker 1: There is no alternative to TIA. There is an alternative,
Speaker 1: and there's income and fixed income again, and there's strategies,
Speaker 1: a bit more active strategies that you can employ to
Speaker 1: take advantage of this move up in yields. Even well
Speaker 1: down the duration spectrum, you're actually generating a yield. If
Speaker 1: inflation ever came down, Um, we might actually have positive
Speaker 1: really yields. We're not quite there yet, but I think
Speaker 1: we'll get there. Well, you know, Lisiyne, I want to
Speaker 1: pick up. That was exactly the point I was going
Speaker 1: to make is the challenges that inflation is so high
Speaker 1: that even if you're getting those appealing yields on fixed income,
Speaker 1: you're still losing purchasing power. And so that's why we,
Speaker 1: you know, continue to counsel if if the client has
Speaker 1: appropriate risk tolerances and the time horizon, the equity side
Speaker 1: can help you offset the cost of inflation. You know,
Speaker 1: for example, one of the stocks in one of these
Speaker 1: portfolios is McDonald's. Now, what you want is to find
Speaker 1: a company like that that has good cash so that
Speaker 1: can continue to pay its dividend, but more importantly, even
Speaker 1: can raise its dividend year after year, and they just
Speaker 1: announced this week a tem percent increase in their dividend.
Speaker 1: So you're being compensated more than compensated for that cost
Speaker 1: of inflation. It wrote in the persame power of your money,
Speaker 1: and that's something that you're more likely to get on
Speaker 1: the equity side than you are on the on the
Speaker 1: fixed income side. What are earnings? We are in earning
Speaker 1: season now, we had the first four banks come out
Speaker 1: this week of their earnings. Is there possibly that could
Speaker 1: help the investor right now to the up side. It's possible.
Speaker 1: I think The rub though, is that even if we
Speaker 1: end reporting season with um some sort of positive beat rate,
Speaker 1: we have to recognize that estimates have been coming down
Speaker 1: since the April May period of time, both for the
Speaker 1: second half of two and the first half of three,
Speaker 1: so it has been a lowered bar and much like
Speaker 1: the second quarter, we're still early, but expectations are that
Speaker 1: energy pretty much as all the earnings growth. So consensus
Speaker 1: right now, once the quarter is all said and done
Speaker 1: a month from an hour or so, you'll have three
Speaker 1: percent over alls and p earnings growth be exclude energy
Speaker 1: that goes down to minus three percent, and that's if
Speaker 1: that's the case, that would be worse than the second quarter.
Speaker 1: And I think the path of least resistance for estimates
Speaker 1: is still down. I'd also say really important to watch
Speaker 1: and listen in earning season, not just for did you
Speaker 1: beat your numbers or your profit margins. What's your profit
Speaker 1: margin outlook if you're a multinational company, the impact of
Speaker 1: the incredibly strong dollar, whether you're hedging it or not.
Speaker 1: The impact of inflation, whether you have a lot of
Speaker 1: fixed costs or variable costs, what your labor costs are.
Speaker 1: So I think it's a lot of the details under
Speaker 1: the surface that a matter as much as just the
Speaker 1: top line reading. Thank you so much to joe Anfini
Speaker 1: and listen. Siders. Great to have you with us. Coming up.
Speaker 1: If we're really serious about getting to zero emissions, experts
Speaker 1: say expanded nuclear power has to be part of the plan.
Speaker 1: We'll talk about the challenges and the opportunities with Christine
Speaker 1: Todd Whitman, former administrator of the Environmental Protection Agency. This
Speaker 1: is Wall Street Week on Bloomberg Net. Zero emissions. It's
Speaker 1: a lofty goal, but times a wasting just ask John Kerry,
Speaker 1: President Biden's Special Climate Envoy. Many companies are making promises
Speaker 1: to be net zero by but the reality is unless
Speaker 1: you do enough between now and you can't hit zero.
Speaker 1: And if we're really going to get there, Bill Gates says,
Speaker 1: the math makes a pretty compelling case for nuclear power.
Speaker 1: You get a million times much energy peraction. I should
Speaker 1: do burning hydrocarbons, and so it's very advantaged if you
Speaker 1: do the design right. Nuclear physicist and former Energy Secretary
Speaker 1: Ernest Monies says it won't get done without a public
Speaker 1: private partnership. I think what we need to see is
Speaker 1: governments moving together with the fine ancial sector and with
Speaker 1: the equipment providers to get new power plants over the
Speaker 1: finish line. But partnership, we're not convincing the public about
Speaker 1: safety may remain an issue given high profile accidents like Fukushima,
Speaker 1: Japan in two thousand eleven, when an earthquake led to
Speaker 1: a disaster at the plant, causing tens of thousands of evacuations.
Speaker 1: All the nuclear power plants in this country, they operate
Speaker 1: really on this precipice of normal routine operation on one
Speaker 1: side and catastrophic accident on the other, and that's it's
Speaker 1: it's unclear exactly when kind of you'll fall to one
Speaker 1: side or the other, but it's certainly possible. So the
Speaker 1: question is what will it take, how safe it can be,
Speaker 1: and how soon can we get there? Even for some
Speaker 1: who initially opposed the idea but now embrace it. Given
Speaker 1: this challenge we face today and given the progress for
Speaker 1: fourth generation nuclear, go for it. And again of some
Speaker 1: answers these very important questions, we turned out to Christine
Speaker 1: Todd Whitman. She is president of Whitman Strategies. She is,
Speaker 1: of course, the former governor of the state of New
Speaker 1: Jersey and the former administrator of the e p A.
Speaker 1: So welcome to Wall Street Week. It's really good to
Speaker 1: have you with this governor. You've dealt with nuclear energy
Speaker 1: for years now, So give us your sense of the
Speaker 1: role of nuclear energy potentially in getting to net zero. Well,
Speaker 1: I think nuclear and play a huge role at least
Speaker 1: in the transition from fossil fuels to renewables. Renewables are
Speaker 1: not yet base energy. Their peak shaving and we're seven society,
Speaker 1: as is the rest of the world. The world is,
Speaker 1: and nuclear is the only form of base power that
Speaker 1: releases no regulated pollutants or greenhouse gases, wireless producing power.
Speaker 1: And we have an an incredible safety record here in
Speaker 1: this country on nuclear and actually with a few obviously
Speaker 1: very huge exceptions being Chernobyl and what happened in Fukushima Daishi,
Speaker 1: overall worldwide it's been it's been safe and getting safe
Speaker 1: for all the time. Mean, the US Nuclear Regulatory Commission
Speaker 1: is considered the gold standard on regulatory oversight of nuclear reactors.
Speaker 1: I don't think, given costs and time, that we're going
Speaker 1: to see any more large reactors built in this country.
Speaker 1: Certainly they are being built in China, They're being built
Speaker 1: around the world, and we can certainly play a part
Speaker 1: in developing the parts for those reactors. But I see
Speaker 1: the future for nuclear right now being in the small
Speaker 1: modular reactors. Nuclear is actually one of the few things
Speaker 1: that really don't have emissions that can be taken to scale.
Speaker 1: I think something like energy United States and generated by
Speaker 1: in France, right And you know, you saw an example
Speaker 1: of what happens when you take nuclear offline when California
Speaker 1: took the Santino Frey nuclear reactor offline, their emissions went
Speaker 1: up and the cost of their energy went up. I mean,
Speaker 1: it was totally counter to everything that they were hoping
Speaker 1: to achieve in my mind. And so what I found
Speaker 1: over time is that you if you have an opportunity
Speaker 1: to talk to people and answer they're in real questions.
Speaker 1: I mean, it's it's normal to have questions about the
Speaker 1: safety and you should ask them. But the answers are
Speaker 1: really good, and they're based on our history. You can
Speaker 1: prove that in fact, these things work, and once you
Speaker 1: do that with people, they get much more comfortable with
Speaker 1: the idea of nuclear It's just that for so long,
Speaker 1: um it's been used as frankly a fundraiser a lot
Speaker 1: and a lot of times for the environmental groups, and
Speaker 1: we need to get the public to understand. Particularly with
Speaker 1: the new small modular reactors that are built in a
Speaker 1: contained facility, they can be placed on site, they're much
Speaker 1: safer technology, they are much safer way to produce the
Speaker 1: nuclear energy. So overall they are really I believe, have
Speaker 1: the potential to make a huge difference, particularly if you
Speaker 1: think about the rural parts of America where you're not
Speaker 1: on the grid or you're not close to the grid.
Speaker 1: You can take a small modular reactor and provide power
Speaker 1: for an entire town or an entire bi business. So
Speaker 1: they have a lot of potential there. So let's pursue
Speaker 1: that question of safety because that is on a lot
Speaker 1: of people's minds without a doubt. And as you've mentioned,
Speaker 1: we've had some horrific instances. Is the issue with safety
Speaker 1: that people don't realize that actually the tracker is quite
Speaker 1: good for nuclear or is it technological developments such as
Speaker 1: as you're referring to small module reactors. Now. I think
Speaker 1: it's because people just don't know, they don't understand. I mean,
Speaker 1: I get a lot of questions I used to in
Speaker 1: the past about well, what about the spent rods? And
Speaker 1: first of all, I tell them from all that when
Speaker 1: the time when we had a hundred and two nuclear
Speaker 1: reactors in this country, and you took all those spent
Speaker 1: rods and you put them in one place, you'd fill
Speaker 1: up one foot fall field to the height of the
Speaker 1: goal posts. They might have gotten slightly above that now
Speaker 1: because this was data from several years ago, but the
Speaker 1: point being, it's not this massive thing the size of
Speaker 1: the state of Vermont. Okay. Governor, thank you so very
Speaker 1: much for being with us. Really appreciate this. Former Governor
Speaker 1: Christine Todd Women. Now with Whitman's strategy coming up, we
Speaker 1: wrap up the week with our special contributor to Larry
Speaker 1: Summers of Harvard. That's next on Wall Street Week on Bloomberg.
Speaker 1: This is Wall Street Week. I'm David Weston. Welcome once
Speaker 1: again our very special contributor to Wall Street Week. He
Speaker 1: is Larry Summers of Harvard. So, Larry, we got the
Speaker 1: CPI numbers in that we've waited for this week, and boy,
Speaker 1: they came in hot and expected. It's been doing this repeatedly. Now,
Speaker 1: what do you read in these numbers? Not so much
Speaker 1: hotter than I expected. Inflation has got a lot of momentum.
Speaker 1: The best single measures to look at for inflation is
Speaker 1: a kind of super core measure, which is wages. Or
Speaker 1: you couldn't look at the median component of inflation. They've
Speaker 1: just been running strong for a long time and not decelerating.
Speaker 1: So I think Team Transitory is engaged in a lot
Speaker 1: of uh, wishful thinking. And I must say that I'm
Speaker 1: struck by the hypocrisy of some friends of mine like
Speaker 1: Paul Krugman, who are very quick now to focus on
Speaker 1: housing and the fact that the private indusserise lead the
Speaker 1: public induserise when the private industries are looking soft. But
Speaker 1: we're entirely unwilling to credit that argument or to pay
Speaker 1: attention to the private indusseries some months ago, when the
Speaker 1: private industries were obviously pointing to an acceleration of inflation.
Speaker 1: So I think we've gotta be uh, very very careful
Speaker 1: uh here if we want to be credible about containing inflation,
Speaker 1: how much momentum is built in inflation? And how can
Speaker 1: you tell? What are you looking at right now? They're
Speaker 1: telling you what happens in the fourth quarter and as
Speaker 1: we go into next year. I'm looking at core measures.
Speaker 1: I'm looking at super core measures that take housing out,
Speaker 1: take use cars out, in addition to taking food and
Speaker 1: energy out. I'm looking at the so called median inflation component,
Speaker 1: whatever product it is that's right in the middle. I'm
Speaker 1: looking at the so called trimmed mean that looks at
Speaker 1: the middle half of the distribution of product prices. And
Speaker 1: very crucially for me, I'm looking at wages um, which
Speaker 1: is a kind of super core measure because labor goes
Speaker 1: into everything, and all of those are saying that inflation
Speaker 1: is not really coming down very fast. If it's coming
Speaker 1: down at all, and that it's way above the two
Speaker 1: percent target or any acceptable level. Besides the CPI numbers,
Speaker 1: Larry a very big story throughout the week has been
Speaker 1: and continues to be great Britain, where you had the
Speaker 1: Bank of England come in with their emergency buying of
Speaker 1: long term guilts that is due to expire on Friday
Speaker 1: end of this At the same time we now have
Speaker 1: Liz Trust coming out and making some changes. Give us
Speaker 1: your take on what's going on in the British economy
Speaker 1: and more importantly the management of the British economy. Look,
Speaker 1: I think this is probably gonna be a textbook case
Speaker 1: of crisis creation followed by crisis UH mismanagement. UM. I'd
Speaker 1: be surprised if we were in the seventh inning of
Speaker 1: this particular set of challenges. UM. I have said before
Speaker 1: that people now, I think understand very clearly that when
Speaker 1: you do a military intervention, you should never give a
Speaker 1: sunset date when you're gonna leave, because it just emboldens
Speaker 1: the opposition. And I think something similar is true of
Speaker 1: last resort UH finance, where the kind of deadline in
Speaker 1: the Bank of England gave I think is asking for
Speaker 1: trouble uh down down the road. So I think we're
Speaker 1: gonna see more tremors, more aftershocks, more problems. Well exactly, Larry,
Speaker 1: I guess I'm asking the same as that we have
Speaker 1: global slowed on. I m F this week came out
Speaker 1: and said, we're looking at the global slow now at
Speaker 1: the same time we have central banks in development countries
Speaker 1: really all raising rates at the same time. What is
Speaker 1: the likelihood we're gonna see similar won't be the same,
Speaker 1: but similar sorts of problems elsewhere, particularly when it comes
Speaker 1: to very highly leveraged places and places that are more
Speaker 1: difficult to see. Some of the private credit, some of
Speaker 1: the non bank banks, I doubt we've seen the last
Speaker 1: mind uh go off. Some of them may be in
Speaker 1: the private sector. I think more of them may be international.
Speaker 1: You know, something that disappointed me at the I m
Speaker 1: F World Bank meetings this week was the number of
Speaker 1: countries who were reporting that they're having substantial difficulty in
Speaker 1: getting market access. And I must say, I'm sort of
Speaker 1: disappointed by a official sector people, people from the ministries
Speaker 1: of finance and the central banks who are talking about
Speaker 1: how we're gonna work with the private sector to catalyze
Speaker 1: trillions of dollars of finance for green transitions and all
Speaker 1: these countries, but don't seem to be doing anything about
Speaker 1: the fact that many of these countries can't even issue
Speaker 1: a bond UH today. So I think there's a whole
Speaker 1: set of very important challenges with respect to developing countries
Speaker 1: and emerging markets, and I'd have to say that I
Speaker 1: don't feel those challenges were really met UH this week.
Speaker 1: UH there's some fires burning and fire department is still
Speaker 1: mostly in the station. So as we speak to you,
Speaker 1: you are in Washington for those I m F World
Speaker 1: Bank meetings and the i f as. As a practical matter,
Speaker 1: you were very outspoken in the Project Syndicate piece, also
Speaker 1: actually speaking with David Malpass, the head of the World Bank,
Speaker 1: about the role of the World Bank right now on
Speaker 1: things like sustainability. What is going on there? Is the
Speaker 1: World Bank playing the role it should be playing and
Speaker 1: what should it be doing? No, I think it is
Speaker 1: um playing its usual roles in its usual UH way.
Speaker 1: And I think generally the economic crisis of the moment
Speaker 1: demands major changes in approach, just as the security crisis
Speaker 1: in Ukraine demanded major changes in approach and we're not
Speaker 1: really quite seeing it UH yet. The World Bank needs
Speaker 1: to be much more aggressive in the use of its
Speaker 1: balance sheet, and it also needs to get much more capital.
Speaker 1: And instead of having a fight about which of those
Speaker 1: two things is more important, we need to do both
Speaker 1: of them. Because the one mistake we're certain not to
Speaker 1: make is overinvesting in the green transition, and so we
Speaker 1: need to make sure we're doing everything we can UH
Speaker 1: to support that transition. So if there's a lack there, Larry,
Speaker 1: often that lack comes for a lack of leadership. Do
Speaker 1: we not have the leadership we need either from the
Speaker 1: United States Treasury, the White House or for them and
Speaker 1: at the World Bank? I mean, would you ever consider
Speaker 1: taking over that role? I think that we do need
Speaker 1: leadership that points towards UH larger changes in business as usual.
Speaker 1: Then we're seeing UH in the financial area, and I
Speaker 1: think there's some mistakes being made right now, at a
Speaker 1: very very difficult moment in Africa, at a very very
Speaker 1: difficult moment in UH, Latin America, at a very very
Speaker 1: difficult moment in parts of Asia. Larry, one piece of
Speaker 1: news which was actually really hit the markets, but has
Speaker 1: not gotten too much attention is what the United States
Speaker 1: did expect to semiconductors and China. The chips market really
Speaker 1: went down substantially. It took a lot of the tech
Speaker 1: with it at a time of so much difficulty globally.
Speaker 1: What are the possible effects of those sorts of trade actions,
Speaker 1: you know, the kind of large stale cut off on
Speaker 1: cooperation and semiconductors that the Biden administration announced. I don't
Speaker 1: think it's possible to pass an overall judgment on that
Speaker 1: without understanding the security risks that they saw, which depend
Speaker 1: on classified information which those of us on the outside
Speaker 1: don't have. Okay, thank you so much to Larry Summers
Speaker 1: are very special. Contribute here at Wall Street Week. Finally,
Speaker 1: one more thought. When money is no object, watch out,
Speaker 1: they say, the one with the most toys wins. And
Speaker 1: let's face it, toys usually cost money, and the bigger
Speaker 1: the toy, the more money it costs. Take for example,
Speaker 1: Jeff Beza's new yacht, the largest sailing yacht in the
Speaker 1: world at four hundred seventeen feet and costing upwards of
Speaker 1: five hundred million dollars, or Elon musk Agreen to plunk
Speaker 1: down forty four billion in dollars for the prize of
Speaker 1: owning Twitter, something most people think is worth a lot
Speaker 1: less than the price tag, that is, if he ends
Speaker 1: up paying it. So there's two options here. One, uh,
Speaker 1: you know, the deal falls apart and the stock that
Speaker 1: has been sort of artificially inflated is going to crash.
Speaker 1: Or if if things go the way Twitter want, then
Speaker 1: they get the guy in charge who you know, for
Speaker 1: the last three months has been saying that Twitter has
Speaker 1: been lying about its user bait. But what happens when
Speaker 1: you spare no expense, go all in, put all your
Speaker 1: chips on the table, and don't win your dream prize.
Speaker 1: Consider the case of Hillary Clinton's campaign spending one point
Speaker 1: four billion dollars on the two sixteen presidential race, substantially
Speaker 1: more than Donald Trump's sixty million dollars and coming up short.
Speaker 1: This is not exactly the speech at the Capitol I
Speaker 1: hoped to be giving after the election. More Poor Columbia
Speaker 1: pictures which Inn decided to make ishtar figuring anything with
Speaker 1: Dustin Hoffman and Warren Beatty just couldn't fail. But for
Speaker 1: some reason, a movie about two lounge singers involved in
Speaker 1: a coup in the made up country of Ish Tower
Speaker 1: didn't quite land with the audiences. Columbia lost around forty
Speaker 1: million dollars on the deal, almost a hundred million dollars
Speaker 1: adjusted for inflation today, and the dud established Ishtar as
Speaker 1: the synonym for box office flop. Is the oasis? Does
Speaker 1: this look like an oasis? Yeah? Look at the parts
Speaker 1: fell those vultures, And now we can add Steve Cohen
Speaker 1: to the list of those who went big and lost.
Speaker 1: The hugely successful hedge fund manager paid a round two
Speaker 1: point five billion dollars to buy the New York Mats
Speaker 1: and this year took it to number one at least
Speaker 1: in players salaries. But sad to say for fans of
Speaker 1: the Amazings, number one in payroll doesn't mean number one
Speaker 1: on the diamond. The team lost the third game of
Speaker 1: the wild Card playoff by a score of six to nothing.
Speaker 1: Was executing pitches and the wheels fell off. I don't
Speaker 1: know why. We just couldn't out a way to get
Speaker 1: some runs them off. That's going leaving Mr Cohen to
Speaker 1: spend the winter going back to first base and thinking
Speaker 1: hard about whether that two d and seventy eight million
Speaker 1: dollars in players sataries just maybe wasn't enough, they're going
Speaker 1: to get to this great point and they have all
Speaker 1: this momentum behind them, and then then they blow it.
Speaker 1: That's the Mets, that's Mets met singing. That does it.
Speaker 1: For this episode of Wall Street Week, I'm David Weston.
Speaker 1: This is Bloomberg. See you next week.