WEBVTT - Bloomberg Wall Street Week: October 14, 2022 0:00:00.520 --> 0:00:03.760 This is Bloomberg Wall Street Week. We turn our attention 0:00:03.880 --> 0:00:07.120 to the markets this week. U s CPI never's reinforcing 0:00:07.160 --> 0:00:10.639 concerns about inflation. The financial stories that chiep are worth 0:00:10.720 --> 0:00:13.480 a really different reaction to Mark. It's more indications of 0:00:13.640 --> 0:00:16.239 just how hot the U. S. Economy really is. Through 0:00:16.239 --> 0:00:19.520 the eyes of the most influential voices Larry Summers, the 0:00:19.560 --> 0:00:22.439 former Streatory Secretary, Katherine Keening, CEO of d n Y 0:00:22.600 --> 0:00:26.160 Moms Sam's l Sharmon and founder of Equatic Group Investment. 0:00:26.200 --> 0:00:30.280 In Bloomberg wool Street Week with David Weston from Bloomberg Radio, 0:00:31.000 --> 0:00:34.839 Searching in Vain, for solid ground in an escalating Russian war, 0:00:34.920 --> 0:00:38.680 in Ukraine in a troubled global economy, and goodness knows 0:00:38.680 --> 0:00:42.080 in the British authorities economic management. This is Bloomberg Wall 0:00:42.080 --> 0:00:46.440 Street Week. I'm David Weston. This week special contributor Larry 0:00:46.479 --> 0:00:50.400 Summers of Harvard on the potential next shoe to drop economically. 0:00:51.159 --> 0:00:55.880 I doubt we've seen the last mine UH go off. 0:00:55.920 --> 0:00:57.960 Some of them may be in the private sector. I 0:00:58.000 --> 0:01:01.960 think more of them may be a national and former 0:01:02.000 --> 0:01:06.039 New Jersey governor and EPA administrator Christine Todd Whitman on 0:01:06.120 --> 0:01:10.360 a path forward on nuclear energy. Nuclear and play a 0:01:10.480 --> 0:01:14.160 huge role at least in the transition from fossil fuels 0:01:14.240 --> 0:01:31.120 to renewables. Global Wall Street It's spent the week trying 0:01:31.160 --> 0:01:33.959 to get its footing after things only got worse in 0:01:34.120 --> 0:01:37.920 Ukraine as Russian missiles rained down across the country and 0:01:38.000 --> 0:01:40.920 NATO chief Yen Stollenberg had to reassure us the things 0:01:40.959 --> 0:01:46.440 weren't about to go nuclear. Russian knows that the nuclear 0:01:46.520 --> 0:01:51.200 war channep won I must never be fall. The I 0:01:51.400 --> 0:01:53.640 m F, for at least its economic projections and its 0:01:53.680 --> 0:01:56.800 chief economists were warned that a global recession just maybe looming. 0:01:57.560 --> 0:02:00.880 What we see is about a third of global economy 0:02:01.120 --> 0:02:05.720 is going to be experiencing the contraction this year on next. 0:02:06.240 --> 0:02:09.320 And if that weren't enough, President Biden told CNN recession 0:02:09.360 --> 0:02:12.840 may come specifically to the United States. I don't think 0:02:12.840 --> 0:02:14.560 there will be a recession. If it is, it will 0:02:14.560 --> 0:02:18.200 be a very slight recession. And then then the CPI 0:02:18.320 --> 0:02:21.680 numbers came in hotter than expected, with the headline numbers 0:02:21.720 --> 0:02:25.639 still up at eight point and core accelerating the six 0:02:25.680 --> 0:02:29.720 point six percent year over year. It is not a 0:02:29.720 --> 0:02:32.839 good picture here. Those who were thinking that inflation might 0:02:32.919 --> 0:02:37.040 drop off fairly quickly are going to be disappointed by 0:02:37.160 --> 0:02:39.840 the numbers here. In the meantime, over in Great Britain, 0:02:39.880 --> 0:02:42.239 we had a week of financial turmoil, with a very 0:02:42.240 --> 0:02:44.600 public battle between the Bank of England and Prime Minister 0:02:44.639 --> 0:02:47.680 Trust's government, which ended up with a new Chancellor of 0:02:47.720 --> 0:02:50.520 the Exchequer and her giving up on more of her 0:02:50.560 --> 0:02:54.400 controversial budget. I want to be honest, this is difficult, 0:02:55.160 --> 0:02:57.440 but we will get through this storm and we will 0:02:57.440 --> 0:03:01.000 deliver the strong and sustained grace that can transform the 0:03:01.040 --> 0:03:05.200 prosperity of our country for generations to come. But the 0:03:05.240 --> 0:03:08.320 surprises weren't all bad this week, at least not for 0:03:08.320 --> 0:03:11.480 former FED chair Ben Bernanke, who was awakened to learn 0:03:11.520 --> 0:03:14.400 that he shares with two others the Nobel Prize for 0:03:14.440 --> 0:03:19.280 Economics this year. It was completely unexpected. My wife and 0:03:19.280 --> 0:03:20.760 I shut off our cell phones when we went to 0:03:20.800 --> 0:03:24.520 bed last night, not thinking about this issue um and 0:03:24.600 --> 0:03:27.240 it was our daughter in Chicago who was finally contacted 0:03:27.280 --> 0:03:29.520 and called us on the landline to inform us that 0:03:29.520 --> 0:03:35.040 this this had happened, And the markets had just as 0:03:35.080 --> 0:03:37.240 hard a time as the rest of us finding its footing, 0:03:37.280 --> 0:03:40.600 with the SMP swinging five points between big losses and 0:03:40.720 --> 0:03:44.000 big gains. On Thursday alone, after the CPI numbers came 0:03:44.000 --> 0:03:48.280 out for the week, the SMP was down one, the 0:03:48.360 --> 0:03:51.080 NASDAG down over a three percent, and yield on the 0:03:51.120 --> 0:03:53.840 tenure was up over thirteen basis points to close the 0:03:53.880 --> 0:03:57.640 week just above four teples. Sort out a wild week 0:03:57.640 --> 0:04:00.320 in the markets. We welcome now Joe and Phoene, partner 0:04:00.360 --> 0:04:04.240 in Advisor's Capital Management, and Lizanne Sanders, chief investment strategist 0:04:04.240 --> 0:04:06.560 at charl Schwab. So welcome back both of you to 0:04:06.600 --> 0:04:08.840 Wall Street. Let me start with you, Luzenne, what happened 0:04:08.840 --> 0:04:10.600 this week? I feel like we hit by a mack truck. 0:04:12.040 --> 0:04:15.200 So I think it was probably mostly technical the reversal 0:04:15.280 --> 0:04:18.880 that we saw yesterday. On an inter day basis, in 0:04:18.960 --> 0:04:21.960 the first part of the day, you did see the swoon. 0:04:22.040 --> 0:04:27.600 Take the SMP two below seventeen. And I'm not a technician, 0:04:27.760 --> 0:04:31.960 but that level was important because it was the retracement 0:04:32.200 --> 0:04:36.120 of the post pandemic move higher, and and that probably 0:04:36.279 --> 0:04:40.200 kicked in a combination of buying head just being taken off, 0:04:40.800 --> 0:04:43.839 some short covering, and that fed on itself through the 0:04:43.920 --> 0:04:46.680 end of the day. Maybe you could point to the 0:04:46.800 --> 0:04:49.760 move down and yields yesterday, the move down in the dollar, 0:04:49.960 --> 0:04:53.039 but that could also help to explain today's weakness too, 0:04:53.040 --> 0:04:56.080 because you saw reversals there. So Joanna fairmoun A noise. 0:04:56.120 --> 0:04:57.720 I think it's fair to say in the equity markets 0:04:57.720 --> 0:04:59.840 there but on Friday, actually they gave up pretty much 0:04:59.839 --> 0:05:03.320 every they got back on Thursday. So when you net net, 0:05:03.360 --> 0:05:05.440 when you get through it all, what did we learn 0:05:05.520 --> 0:05:07.640 this week that should affect the markets over the longer term, 0:05:07.960 --> 0:05:09.200 You know, Dave, But I think what we learned is 0:05:09.240 --> 0:05:11.279 that there's still a lot of risks out there facing 0:05:11.360 --> 0:05:13.240 the future of the global economy, not just here in 0:05:13.240 --> 0:05:15.560 the US. And those two price reports we got, the 0:05:15.560 --> 0:05:17.920 p p I and the c p I reinforce the 0:05:18.000 --> 0:05:19.760 view that inflation is going to be a really hard 0:05:19.800 --> 0:05:22.400 challenge for the Fed to solve. But it also seems 0:05:22.440 --> 0:05:25.520 to have removed any wiggle room that people think the 0:05:25.560 --> 0:05:28.360 Fed has. They're they're really gonna have to be adamant 0:05:28.360 --> 0:05:31.120 about raising rates, try to constrain liquidity, try to discourage 0:05:31.120 --> 0:05:33.520 consumer demand in order for inflation to get under control. 0:05:33.960 --> 0:05:35.479 There's not a lot of room for them to do 0:05:35.560 --> 0:05:37.680 anything but raizor rates now for the next at least 0:05:37.680 --> 0:05:41.039 couple of meetings. The market finally perhaps is digesting that. 0:05:42.520 --> 0:05:44.599 There's a lot of talk about me sorry, go ahead please. Yeah. 0:05:45.240 --> 0:05:49.719 I think joins absolutely right. And I think there have 0:05:49.839 --> 0:05:52.800 been these moments where it seems like, whether it's in 0:05:52.839 --> 0:05:55.719 reaction to things going on in the UK, that the 0:05:55.760 --> 0:05:59.400 markets almost cheering for are looking for some sort of 0:05:59.400 --> 0:06:04.400 financial system accident because of the messaging from the FED, 0:06:04.560 --> 0:06:07.839 from Powell that they're not going to step in because 0:06:07.839 --> 0:06:11.200 of financial market weakness across any of the asset markets, 0:06:11.320 --> 0:06:15.760 or just volatility, but financial system and stability maybe what 0:06:15.960 --> 0:06:19.680 could bring the fedback in. But even in a situation 0:06:19.760 --> 0:06:22.560 like that, what they may do is use the tool 0:06:22.600 --> 0:06:26.800 of their balance sheet or repo facilities versus doing a 0:06:26.920 --> 0:06:30.640 pivot anytime soon on rates. And I'm not sure that's 0:06:30.640 --> 0:06:34.120 been fully digested by the market yet. Yeah, there could 0:06:34.120 --> 0:06:37.200 be certainly more digested to come, particularly because the risks 0:06:37.200 --> 0:06:40.320 that are out there are really unusual. You know, it's 0:06:40.320 --> 0:06:43.040 not just the inflation problem, right, The US has a 0:06:43.120 --> 0:06:46.800 labor shortage born of the pandemic, born of early retirees, 0:06:46.839 --> 0:06:49.920 born of a lack of legal migration immigration into the US. 0:06:50.640 --> 0:06:52.719 Joan Peony and Lisia and Saunders will be staying with 0:06:52.760 --> 0:06:54.080 us as we're trying to figure out what to do 0:06:54.160 --> 0:06:56.760 with our money in these turbulent times. It's gonna have 0:06:56.800 --> 0:07:08.720 backs on Wall stere week on Bloomberg. Well, this was 0:07:08.760 --> 0:07:11.080 the week when Wall Street got much of what it 0:07:11.160 --> 0:07:15.120 had been asking for and then decided, quite characteristically, that 0:07:15.200 --> 0:07:19.720 it didn't like it. The economy is simmering down as requested. 0:07:20.160 --> 0:07:23.480 Industrial production took its worst fall in more than a year, 0:07:24.080 --> 0:07:29.200 business inventories are rising ominously, and the Housing Industries Trade 0:07:29.240 --> 0:07:34.040 Association said its members were virtually out of business. That, 0:07:34.200 --> 0:07:36.240 of course, was Lewis Rocks around Wall Street. Wee back 0:07:37.640 --> 0:07:40.200 or not forty one years ago now, when all the 0:07:40.240 --> 0:07:43.360 markets wanted was a slowing economy and the lower interest 0:07:43.440 --> 0:07:45.559 rates that they thought would come with that. The big 0:07:45.600 --> 0:07:48.520 movie that week was a romantic comedy you may not 0:07:48.600 --> 0:07:51.960 remember it with Burt Reynolds named Paternity, and the number 0:07:52.000 --> 0:07:55.200 one song was Arthur's theme from that Dudley Moore film 0:07:55.280 --> 0:07:58.480 named Arthur. Now the problems are very different, as interest 0:07:58.560 --> 0:08:00.560 rates are on the way up, not down, and the 0:08:00.560 --> 0:08:03.560 economy is still very robust by most measures, still with 0:08:03.680 --> 0:08:05.880 us or joe An Feeny of Advisor's Capital Management and 0:08:05.960 --> 0:08:08.880 Liz Anne Saunders of Charles Swab, So, Joeann, let me 0:08:08.920 --> 0:08:10.280 come to you. The question is what do we do 0:08:10.320 --> 0:08:12.160 with our money in this world? Where does it make 0:08:12.200 --> 0:08:16.200 sense to invest with this much Volati's much uncertainty. It's 0:08:16.240 --> 0:08:18.600 really been challenging time for investors, and it really depends 0:08:18.640 --> 0:08:21.720 what sort of time frame you have as an investor. 0:08:22.040 --> 0:08:25.280 You know, if if you're in retirement, what you probably 0:08:25.320 --> 0:08:27.400 need is some assurance that you're going to going to 0:08:27.440 --> 0:08:29.040 be able to get the cash flow you need off 0:08:29.040 --> 0:08:31.080 of your portfolio. And so one of the things we've 0:08:31.120 --> 0:08:32.800 done for for our clients in that kind of a 0:08:32.840 --> 0:08:37.320 situation is to create portfolios with above average dividendields on 0:08:37.360 --> 0:08:39.560 the one side. And now as bond yields are rising 0:08:39.640 --> 0:08:42.640 and we've kept our duration relatively short, we've been able 0:08:42.679 --> 0:08:45.560 to let bonds mature and then re up at higher yields. So, 0:08:45.840 --> 0:08:48.520 you know, one area to go to is some relatively 0:08:48.559 --> 0:08:50.839 stable companies, whether it's a General Mills or an ab 0:08:50.960 --> 0:08:53.840 V or you know, some of the others in consumer 0:08:53.880 --> 0:08:57.120 staples and in energy that have you know, dividendnields in 0:08:57.120 --> 0:08:59.400 the four or five six percent range, and that way 0:08:59.400 --> 0:09:01.120 they can still get that income and they can ride 0:09:01.120 --> 0:09:03.920 out the volatility and the stock prices and wait this out. 0:09:04.080 --> 0:09:06.560 And then that gives our clients a fair bit of comfort. 0:09:06.800 --> 0:09:09.320 But you know, it hasn't been easy really for anybody, 0:09:09.320 --> 0:09:12.840 but that's one way to deal with the volatility. Luzanne, 0:09:12.880 --> 0:09:15.760 what are you recommending these days? Well, first of all, 0:09:15.760 --> 0:09:18.640 I absolutely agree with Joanne that there's no there's no 0:09:18.679 --> 0:09:20.960 cookie cutter answer to a question like that. It really 0:09:21.000 --> 0:09:23.880 does depend on who the investor is, their risk tolerance 0:09:24.000 --> 0:09:28.240 or past experience, their time horizon, whether they're financial risk tolerance, 0:09:28.240 --> 0:09:30.960 and their emotional risk tolerance, whether there's a narrow gap 0:09:31.000 --> 0:09:33.319 between the two or a wide gap between the two. 0:09:33.360 --> 0:09:36.439 But I think we're in a part of the market 0:09:36.600 --> 0:09:40.199 cycle right now where you want to actually focus on fundamentals. 0:09:40.200 --> 0:09:42.439 And I know that sounds trite and sounds what we're 0:09:42.440 --> 0:09:45.520 always supposed to do, but gone are the days where 0:09:45.559 --> 0:09:48.439 you could look at segments of the market, components of 0:09:48.559 --> 0:09:51.480 say big tech, and look at it monolithically make an 0:09:51.480 --> 0:09:54.920 assumption that they're all going to go up simultaneously. There's 0:09:54.960 --> 0:09:57.400 much more differentiation in the market right now, and I'd 0:09:57.440 --> 0:10:02.320 say look for where things our dear from a macro perspective. 0:10:02.440 --> 0:10:06.320 So we have declining earnings revisions in the aggregate, so 0:10:06.840 --> 0:10:10.840 look for the factor around positive earning to revisions positive 0:10:10.880 --> 0:10:13.960 earning surprise. We know we're in a rising interest rate environment, 0:10:14.080 --> 0:10:18.760 so companies with strong balance sheets, low debt, high cash flow, 0:10:18.840 --> 0:10:23.559 strong free cash flow, um low lower volatility. It's just 0:10:23.640 --> 0:10:26.880 kind of a quality wrapper and I think that's the 0:10:26.920 --> 0:10:29.640 best type of approach in this environment. And then the 0:10:29.720 --> 0:10:33.640 last thing we've suggested for those investors who can do it, 0:10:33.679 --> 0:10:36.880 If you were a re balancer based on the calendar, 0:10:37.559 --> 0:10:40.400 maybe instead of doing it once a year, once a quarter, 0:10:40.840 --> 0:10:44.880 let your portfolio and the volatility associated with dictate the 0:10:45.000 --> 0:10:49.080 timing of of taking advantage of the volatility by you know, 0:10:49.160 --> 0:10:52.959 adding into weakness, trimming into strength relative to your overall 0:10:53.400 --> 0:10:57.480 strategic asset allocation. Joan, What about the possibility of fixed 0:10:57.480 --> 0:10:59.280 income at this point. I mean, for a long time 0:10:59.280 --> 0:11:00.760 and you didn't want to be in bonds given what 0:11:00.800 --> 0:11:03.360 we're going to bonds, but those yields have really come up. 0:11:03.360 --> 0:11:06.360 They're yielding something now and they do generate cash. It's 0:11:06.360 --> 0:11:08.880 sort of like dividends, right, yeah, absolutely right. You know 0:11:09.120 --> 0:11:12.920 we're getting in the order of six plus percent in 0:11:12.920 --> 0:11:17.120 in yields in our all investment grade UH fixed income solution. 0:11:17.520 --> 0:11:19.800 And when you pair that within a balanced strategy with 0:11:19.880 --> 0:11:23.040 the equity front, you know, you can generate a pretty 0:11:23.120 --> 0:11:25.760 nice cash flow for clients. Um. And so if you 0:11:25.840 --> 0:11:28.920 keep duration short and you're really careful about selecting credit 0:11:29.000 --> 0:11:31.679 quality because credit spreads have widened here, so you want 0:11:31.679 --> 0:11:33.520 to be careful that you're not adding risk to the 0:11:33.520 --> 0:11:35.439 side of your portfolio that it's supposed to be sort 0:11:35.440 --> 0:11:38.400 of the suspenders on the pants, right to provide more stability. 0:11:38.720 --> 0:11:40.720 And so that's one thing we've done and it's helped 0:11:40.720 --> 0:11:42.520 our clients feel a lot more comfortable in this kind 0:11:42.559 --> 0:11:44.679 of environment. Listen, are you do the point yet where 0:11:44.679 --> 0:11:48.240 you'd consider duration that is going longer duration from EIX income? So, 0:11:48.440 --> 0:11:51.160 my my colleague Cathy Jones has a regular guest on 0:11:51.520 --> 0:11:55.240 on Bloomberg. She's our fixed incomes strategists, and in the 0:11:55.520 --> 0:11:59.400 sort of four ish per set range we have suggested 0:11:59.480 --> 0:12:02.800 you can't that are lengthening duration. But I agree with 0:12:02.880 --> 0:12:05.839 everything that Joanne said too, I think there are finally 0:12:05.840 --> 0:12:08.760 opportunity and we've gone from a from a TINA environment. 0:12:08.800 --> 0:12:12.920 There is no alternative to TIA. There is an alternative, 0:12:13.080 --> 0:12:16.080 and there's income and fixed income again, and there's strategies, 0:12:16.120 --> 0:12:19.080 a bit more active strategies that you can employ to 0:12:19.160 --> 0:12:23.600 take advantage of this move up in yields. Even well 0:12:23.679 --> 0:12:27.520 down the duration spectrum, you're actually generating a yield. If 0:12:27.559 --> 0:12:31.080 inflation ever came down, Um, we might actually have positive 0:12:31.080 --> 0:12:33.040 really yields. We're not quite there yet, but I think 0:12:33.080 --> 0:12:34.920 we'll get there. Well, you know, Lisiyne, I want to 0:12:34.920 --> 0:12:36.679 pick up. That was exactly the point I was going 0:12:36.720 --> 0:12:39.359 to make is the challenges that inflation is so high 0:12:39.520 --> 0:12:42.120 that even if you're getting those appealing yields on fixed income, 0:12:42.120 --> 0:12:45.280 you're still losing purchasing power. And so that's why we, 0:12:45.360 --> 0:12:47.480 you know, continue to counsel if if the client has 0:12:47.640 --> 0:12:50.959 appropriate risk tolerances and the time horizon, the equity side 0:12:50.960 --> 0:12:53.680 can help you offset the cost of inflation. You know, 0:12:53.760 --> 0:12:56.000 for example, one of the stocks in one of these 0:12:56.000 --> 0:12:58.600 portfolios is McDonald's. Now, what you want is to find 0:12:58.600 --> 0:13:00.520 a company like that that has good cash so that 0:13:00.600 --> 0:13:03.320 can continue to pay its dividend, but more importantly, even 0:13:03.400 --> 0:13:05.800 can raise its dividend year after year, and they just 0:13:05.840 --> 0:13:08.320 announced this week a tem percent increase in their dividend. 0:13:08.559 --> 0:13:11.320 So you're being compensated more than compensated for that cost 0:13:11.360 --> 0:13:13.559 of inflation. It wrote in the persame power of your money, 0:13:13.720 --> 0:13:15.280 and that's something that you're more likely to get on 0:13:15.280 --> 0:13:16.960 the equity side than you are on the on the 0:13:17.000 --> 0:13:19.280 fixed income side. What are earnings? We are in earning 0:13:19.280 --> 0:13:21.079 season now, we had the first four banks come out 0:13:21.080 --> 0:13:23.559 this week of their earnings. Is there possibly that could 0:13:23.559 --> 0:13:27.079 help the investor right now to the up side. It's possible. 0:13:27.120 --> 0:13:29.480 I think The rub though, is that even if we 0:13:29.720 --> 0:13:34.200 end reporting season with um some sort of positive beat rate, 0:13:34.559 --> 0:13:38.520 we have to recognize that estimates have been coming down 0:13:38.679 --> 0:13:41.240 since the April May period of time, both for the 0:13:41.280 --> 0:13:45.120 second half of two and the first half of three, 0:13:45.240 --> 0:13:47.600 so it has been a lowered bar and much like 0:13:47.679 --> 0:13:51.200 the second quarter, we're still early, but expectations are that 0:13:51.480 --> 0:13:54.960 energy pretty much as all the earnings growth. So consensus 0:13:55.040 --> 0:13:57.360 right now, once the quarter is all said and done 0:13:57.400 --> 0:13:59.480 a month from an hour or so, you'll have three 0:13:59.480 --> 0:14:02.400 percent over alls and p earnings growth be exclude energy 0:14:02.720 --> 0:14:06.559 that goes down to minus three percent, and that's if 0:14:06.600 --> 0:14:09.960 that's the case, that would be worse than the second quarter. 0:14:10.000 --> 0:14:12.480 And I think the path of least resistance for estimates 0:14:12.920 --> 0:14:16.520 is still down. I'd also say really important to watch 0:14:16.679 --> 0:14:19.680 and listen in earning season, not just for did you 0:14:19.720 --> 0:14:22.560 beat your numbers or your profit margins. What's your profit 0:14:22.600 --> 0:14:25.640 margin outlook if you're a multinational company, the impact of 0:14:25.640 --> 0:14:29.080 the incredibly strong dollar, whether you're hedging it or not. 0:14:29.240 --> 0:14:31.160 The impact of inflation, whether you have a lot of 0:14:31.200 --> 0:14:33.880 fixed costs or variable costs, what your labor costs are. 0:14:34.360 --> 0:14:36.920 So I think it's a lot of the details under 0:14:36.960 --> 0:14:39.640 the surface that a matter as much as just the 0:14:39.680 --> 0:14:42.560 top line reading. Thank you so much to joe Anfini 0:14:42.640 --> 0:14:46.160 and listen. Siders. Great to have you with us. Coming up. 0:14:46.440 --> 0:14:49.680 If we're really serious about getting to zero emissions, experts 0:14:49.680 --> 0:14:52.800 say expanded nuclear power has to be part of the plan. 0:14:53.400 --> 0:14:56.320 We'll talk about the challenges and the opportunities with Christine 0:14:56.360 --> 0:15:01.320 Todd Whitman, former administrator of the Environmental Protection Agency. This 0:15:01.520 --> 0:15:14.720 is Wall Street Week on Bloomberg Net. Zero emissions. It's 0:15:14.720 --> 0:15:18.480 a lofty goal, but times a wasting just ask John Kerry, 0:15:18.520 --> 0:15:23.440 President Biden's Special Climate Envoy. Many companies are making promises 0:15:23.520 --> 0:15:27.640 to be net zero by but the reality is unless 0:15:27.720 --> 0:15:32.440 you do enough between now and you can't hit zero. 0:15:33.480 --> 0:15:36.120 And if we're really going to get there, Bill Gates says, 0:15:36.160 --> 0:15:39.360 the math makes a pretty compelling case for nuclear power. 0:15:39.640 --> 0:15:42.400 You get a million times much energy peraction. I should 0:15:42.400 --> 0:15:47.040 do burning hydrocarbons, and so it's very advantaged if you 0:15:47.160 --> 0:15:51.080 do the design right. Nuclear physicist and former Energy Secretary 0:15:51.240 --> 0:15:54.720 Ernest Monies says it won't get done without a public 0:15:54.880 --> 0:15:57.480 private partnership. I think what we need to see is 0:15:57.600 --> 0:16:01.520 governments moving together with the fine ancial sector and with 0:16:01.680 --> 0:16:07.000 the equipment providers to get new power plants over the 0:16:07.000 --> 0:16:10.760 finish line. But partnership, we're not convincing the public about 0:16:10.840 --> 0:16:14.640 safety may remain an issue given high profile accidents like Fukushima, 0:16:14.720 --> 0:16:17.280 Japan in two thousand eleven, when an earthquake led to 0:16:17.320 --> 0:16:21.320 a disaster at the plant, causing tens of thousands of evacuations. 0:16:21.520 --> 0:16:24.560 All the nuclear power plants in this country, they operate 0:16:24.600 --> 0:16:28.360 really on this precipice of normal routine operation on one 0:16:28.400 --> 0:16:31.840 side and catastrophic accident on the other, and that's it's 0:16:31.920 --> 0:16:34.680 it's unclear exactly when kind of you'll fall to one 0:16:34.720 --> 0:16:37.320 side or the other, but it's certainly possible. So the 0:16:37.400 --> 0:16:39.840 question is what will it take, how safe it can be, 0:16:40.240 --> 0:16:43.160 and how soon can we get there? Even for some 0:16:43.280 --> 0:16:47.200 who initially opposed the idea but now embrace it. Given 0:16:47.200 --> 0:16:50.200 this challenge we face today and given the progress for 0:16:50.280 --> 0:16:56.480 fourth generation nuclear, go for it. And again of some 0:16:56.480 --> 0:16:59.160 answers these very important questions, we turned out to Christine 0:16:59.200 --> 0:17:01.920 Todd Whitman. She is president of Whitman Strategies. She is, 0:17:01.960 --> 0:17:03.760 of course, the former governor of the state of New 0:17:03.800 --> 0:17:06.159 Jersey and the former administrator of the e p A. 0:17:06.400 --> 0:17:08.280 So welcome to Wall Street Week. It's really good to 0:17:08.320 --> 0:17:11.040 have you with this governor. You've dealt with nuclear energy 0:17:11.080 --> 0:17:14.199 for years now, So give us your sense of the 0:17:14.400 --> 0:17:18.280 role of nuclear energy potentially in getting to net zero. Well, 0:17:18.280 --> 0:17:20.680 I think nuclear and play a huge role at least 0:17:20.720 --> 0:17:25.600 in the transition from fossil fuels to renewables. Renewables are 0:17:25.640 --> 0:17:29.960 not yet base energy. Their peak shaving and we're seven society, 0:17:30.000 --> 0:17:31.520 as is the rest of the world. The world is, 0:17:32.920 --> 0:17:35.840 and nuclear is the only form of base power that 0:17:35.960 --> 0:17:41.119 releases no regulated pollutants or greenhouse gases, wireless producing power. 0:17:41.960 --> 0:17:46.159 And we have an an incredible safety record here in 0:17:46.240 --> 0:17:49.720 this country on nuclear and actually with a few obviously 0:17:50.160 --> 0:17:55.240 very huge exceptions being Chernobyl and what happened in Fukushima Daishi, 0:17:56.080 --> 0:17:59.359 overall worldwide it's been it's been safe and getting safe 0:17:59.359 --> 0:18:02.119 for all the time. Mean, the US Nuclear Regulatory Commission 0:18:02.280 --> 0:18:07.600 is considered the gold standard on regulatory oversight of nuclear reactors. 0:18:08.080 --> 0:18:10.760 I don't think, given costs and time, that we're going 0:18:10.840 --> 0:18:13.560 to see any more large reactors built in this country. 0:18:13.560 --> 0:18:16.320 Certainly they are being built in China, They're being built 0:18:16.359 --> 0:18:18.320 around the world, and we can certainly play a part 0:18:18.480 --> 0:18:22.640 in developing the parts for those reactors. But I see 0:18:22.680 --> 0:18:25.240 the future for nuclear right now being in the small 0:18:25.320 --> 0:18:28.520 modular reactors. Nuclear is actually one of the few things 0:18:28.560 --> 0:18:31.639 that really don't have emissions that can be taken to scale. 0:18:31.640 --> 0:18:34.320 I think something like energy United States and generated by 0:18:35.080 --> 0:18:38.320 in France, right And you know, you saw an example 0:18:38.359 --> 0:18:41.480 of what happens when you take nuclear offline when California 0:18:41.840 --> 0:18:46.240 took the Santino Frey nuclear reactor offline, their emissions went 0:18:46.320 --> 0:18:48.720 up and the cost of their energy went up. I mean, 0:18:48.800 --> 0:18:52.399 it was totally counter to everything that they were hoping 0:18:52.440 --> 0:18:55.520 to achieve in my mind. And so what I found 0:18:55.600 --> 0:18:58.159 over time is that you if you have an opportunity 0:18:58.200 --> 0:19:00.760 to talk to people and answer they're in real questions. 0:19:00.800 --> 0:19:03.560 I mean, it's it's normal to have questions about the 0:19:03.600 --> 0:19:06.080 safety and you should ask them. But the answers are 0:19:06.119 --> 0:19:08.760 really good, and they're based on our history. You can 0:19:08.800 --> 0:19:11.760 prove that in fact, these things work, and once you 0:19:11.880 --> 0:19:14.080 do that with people, they get much more comfortable with 0:19:14.119 --> 0:19:16.400 the idea of nuclear It's just that for so long, 0:19:17.000 --> 0:19:19.680 um it's been used as frankly a fundraiser a lot 0:19:19.680 --> 0:19:22.280 and a lot of times for the environmental groups, and 0:19:22.400 --> 0:19:25.240 we need to get the public to understand. Particularly with 0:19:25.359 --> 0:19:28.560 the new small modular reactors that are built in a 0:19:28.600 --> 0:19:32.280 contained facility, they can be placed on site, they're much 0:19:32.320 --> 0:19:36.359 safer technology, they are much safer way to produce the 0:19:36.440 --> 0:19:41.840 nuclear energy. So overall they are really I believe, have 0:19:42.040 --> 0:19:45.359 the potential to make a huge difference, particularly if you 0:19:45.400 --> 0:19:50.000 think about the rural parts of America where you're not 0:19:50.160 --> 0:19:52.800 on the grid or you're not close to the grid. 0:19:53.600 --> 0:19:57.200 You can take a small modular reactor and provide power 0:19:57.200 --> 0:20:01.160 for an entire town or an entire bi business. So 0:20:01.280 --> 0:20:04.639 they have a lot of potential there. So let's pursue 0:20:04.680 --> 0:20:06.520 that question of safety because that is on a lot 0:20:06.560 --> 0:20:08.800 of people's minds without a doubt. And as you've mentioned, 0:20:08.800 --> 0:20:12.360 we've had some horrific instances. Is the issue with safety 0:20:12.400 --> 0:20:14.840 that people don't realize that actually the tracker is quite 0:20:14.840 --> 0:20:18.280 good for nuclear or is it technological developments such as 0:20:18.520 --> 0:20:21.320 as you're referring to small module reactors. Now. I think 0:20:21.359 --> 0:20:24.359 it's because people just don't know, they don't understand. I mean, 0:20:24.400 --> 0:20:26.320 I get a lot of questions I used to in 0:20:26.359 --> 0:20:29.959 the past about well, what about the spent rods? And 0:20:29.960 --> 0:20:32.120 first of all, I tell them from all that when 0:20:32.240 --> 0:20:33.919 the time when we had a hundred and two nuclear 0:20:33.960 --> 0:20:36.560 reactors in this country, and you took all those spent 0:20:36.640 --> 0:20:39.160 rods and you put them in one place, you'd fill 0:20:39.240 --> 0:20:40.920 up one foot fall field to the height of the 0:20:40.960 --> 0:20:43.400 goal posts. They might have gotten slightly above that now 0:20:43.400 --> 0:20:47.600 because this was data from several years ago, but the 0:20:47.680 --> 0:20:50.919 point being, it's not this massive thing the size of 0:20:50.920 --> 0:20:54.159 the state of Vermont. Okay. Governor, thank you so very 0:20:54.240 --> 0:20:56.639 much for being with us. Really appreciate this. Former Governor 0:20:56.840 --> 0:21:02.000 Christine Todd Women. Now with Whitman's strategy coming up, we 0:21:02.040 --> 0:21:04.080 wrap up the week with our special contributor to Larry 0:21:04.119 --> 0:21:08.800 Summers of Harvard. That's next on Wall Street Week on Bloomberg. 0:21:16.560 --> 0:21:18.840 This is Wall Street Week. I'm David Weston. Welcome once 0:21:18.840 --> 0:21:20.960 again our very special contributor to Wall Street Week. He 0:21:21.080 --> 0:21:23.919 is Larry Summers of Harvard. So, Larry, we got the 0:21:23.960 --> 0:21:26.880 CPI numbers in that we've waited for this week, and boy, 0:21:26.960 --> 0:21:30.280 they came in hot and expected. It's been doing this repeatedly. Now, 0:21:30.400 --> 0:21:33.240 what do you read in these numbers? Not so much 0:21:33.280 --> 0:21:38.320 hotter than I expected. Inflation has got a lot of momentum. 0:21:38.400 --> 0:21:41.600 The best single measures to look at for inflation is 0:21:41.640 --> 0:21:45.439 a kind of super core measure, which is wages. Or 0:21:45.480 --> 0:21:51.160 you couldn't look at the median component of inflation. They've 0:21:51.200 --> 0:21:57.200 just been running strong for a long time and not decelerating. 0:21:57.720 --> 0:22:02.000 So I think Team Transitory is engaged in a lot 0:22:02.080 --> 0:22:07.440 of uh, wishful thinking. And I must say that I'm 0:22:07.480 --> 0:22:12.560 struck by the hypocrisy of some friends of mine like 0:22:12.640 --> 0:22:17.080 Paul Krugman, who are very quick now to focus on 0:22:17.200 --> 0:22:23.000 housing and the fact that the private indusserise lead the 0:22:23.080 --> 0:22:27.639