1 00:00:00,160 --> 00:00:03,360 Speaker 1: This is Bloomberg Wall Street Week. What's the state of 2 00:00:03,400 --> 00:00:06,360 Speaker 1: corporate governance? The deficit is a real issue. The US 3 00:00:06,400 --> 00:00:09,800 Speaker 1: economy continues to send mixed signals to the financial stories 4 00:00:09,800 --> 00:00:12,680 Speaker 1: that cheap our world fed action to con concerns over 5 00:00:12,760 --> 00:00:16,240 Speaker 1: dollar liquidity and encouraging China data. The five hundred wealthiest 6 00:00:16,239 --> 00:00:18,360 Speaker 1: people in the world. Through the eyes of the most 7 00:00:18,480 --> 00:00:22,520 Speaker 1: influential voices Larry Summers, the former Treasury Secretary, star Ward CEO, 8 00:00:22,640 --> 00:00:26,360 Speaker 1: Kevin Johnson sec Chairman j Clayton. Bloomberg wool Street Week 9 00:00:26,480 --> 00:00:30,480 Speaker 1: with David Weston from Bloomberg Radio, Up, Up, and away. 10 00:00:30,760 --> 00:00:33,680 Speaker 1: As the economy starts to come back, bringing jobs with it, 11 00:00:33,920 --> 00:00:36,560 Speaker 1: and the U s it's new records in COVID vaccines. 12 00:00:36,920 --> 00:00:40,360 Speaker 1: What's not to like? This is Bloomberg Wall Street Week. 13 00:00:40,440 --> 00:00:44,160 Speaker 1: I'm David Weston. So an investment world where so much 14 00:00:44,240 --> 00:00:46,479 Speaker 1: seems to be going so right. What do you do 15 00:00:46,520 --> 00:00:50,240 Speaker 1: if you're looking for some distress, some distress somewhere. That's 16 00:00:50,240 --> 00:00:53,640 Speaker 1: the question we put to a claim distress investor and author, 17 00:00:53,800 --> 00:00:56,920 Speaker 1: Howard Marks of oak Tree Capital Management. Well, that's a 18 00:00:56,960 --> 00:01:01,760 Speaker 1: great question, uh begs an easy answer. Uh. One answer 19 00:01:01,840 --> 00:01:06,000 Speaker 1: is that we're active providing solutions to companies that want 20 00:01:06,040 --> 00:01:10,280 Speaker 1: to recapitalize their balance sheet, change their debt structure in 21 00:01:10,319 --> 00:01:15,240 Speaker 1: some way, or just add additional liquidity. Not distress situations, 22 00:01:15,280 --> 00:01:19,399 Speaker 1: but UH, there are cases where there's an appetite for 23 00:01:19,680 --> 00:01:24,440 Speaker 1: credit and uh and the market doesn't make it available. Uh. 24 00:01:24,480 --> 00:01:29,120 Speaker 1: We are active around the globe, and there is more 25 00:01:29,200 --> 00:01:32,280 Speaker 1: to do in Asia and in Europe than there is 26 00:01:32,319 --> 00:01:36,400 Speaker 1: in the United States. UM, and UH you know there. 27 00:01:36,440 --> 00:01:41,280 Speaker 1: I think we distinguish ourselves as investors UH by what 28 00:01:41,360 --> 00:01:45,119 Speaker 1: we do when our strategy is not in great favor. 29 00:01:45,840 --> 00:01:48,320 Speaker 1: Every strategy goes in and out of favor, and this 30 00:01:48,400 --> 00:01:52,240 Speaker 1: is the time to uh try to be resourceful and 31 00:01:52,320 --> 00:01:56,040 Speaker 1: yet maintain our standards. It's very challenging, no, no doubt 32 00:01:56,080 --> 00:01:59,240 Speaker 1: about Howard. Look back for a moment you had your 33 00:01:59,320 --> 00:02:01,000 Speaker 1: year end. No, that sort of went through it and 34 00:02:01,000 --> 00:02:03,040 Speaker 1: as I say, it was a remarkable downturn and then 35 00:02:03,080 --> 00:02:05,840 Speaker 1: snap back up right away to make money. You had 36 00:02:05,880 --> 00:02:08,600 Speaker 1: to move really fast. About a year ago, right now, 37 00:02:08,639 --> 00:02:10,520 Speaker 1: I know that you had raised I think a record 38 00:02:10,520 --> 00:02:13,359 Speaker 1: amount of capital Ktree Capital Management at the time. Could 39 00:02:13,400 --> 00:02:14,720 Speaker 1: you get the money out the door put it to 40 00:02:14,720 --> 00:02:18,800 Speaker 1: work fast enough? The fund we raised was actually raised 41 00:02:18,880 --> 00:02:24,120 Speaker 1: on July one, so the greatest opportunities were passed. We 42 00:02:24,240 --> 00:02:28,760 Speaker 1: used the opportunities that arose in UH, primarily in March, 43 00:02:28,840 --> 00:02:31,520 Speaker 1: somewhat carried over into April and May. We used to 44 00:02:31,600 --> 00:02:35,520 Speaker 1: complete the investment of our prior fund. So we had 45 00:02:35,560 --> 00:02:39,880 Speaker 1: a fund that was about invested UH at the beginning 46 00:02:39,919 --> 00:02:44,320 Speaker 1: of and we got it fully invested. UH. That was 47 00:02:44,560 --> 00:02:48,639 Speaker 1: that was the best of the buying. The market has rebounded, 48 00:02:48,680 --> 00:02:51,000 Speaker 1: The economy is in the process I think of rebounding 49 00:02:51,040 --> 00:02:52,720 Speaker 1: with the markable speed. At the same time, it's not 50 00:02:52,800 --> 00:02:56,280 Speaker 1: even it's uneven. So let's talk about some of those disparities, 51 00:02:56,320 --> 00:02:58,960 Speaker 1: particularly things like travel and leisure. Are there still some 52 00:02:59,000 --> 00:03:01,959 Speaker 1: opportunities there APPS, because that seems to be lagging behind 53 00:03:02,000 --> 00:03:04,400 Speaker 1: a lot of the rest of the economy. Yes. Well, 54 00:03:04,440 --> 00:03:07,359 Speaker 1: you know the easy calls, the things that are obviously 55 00:03:07,400 --> 00:03:12,399 Speaker 1: going to rebound. UH. They're not fully back to where 56 00:03:12,440 --> 00:03:15,480 Speaker 1: they were in times of prosperity in terms of their UH, 57 00:03:15,639 --> 00:03:20,040 Speaker 1: in terms of the investment opportunities subsiding, but they are 58 00:03:20,600 --> 00:03:24,200 Speaker 1: if it's clear they're coming back, they're treated as certainly 59 00:03:24,280 --> 00:03:28,400 Speaker 1: coming back. UH. And to to get to higher returns 60 00:03:28,440 --> 00:03:31,280 Speaker 1: these days, you have to be willing to extend credit 61 00:03:31,320 --> 00:03:33,919 Speaker 1: to somebody who's not clearly coming back. Are there any 62 00:03:33,919 --> 00:03:37,400 Speaker 1: sectors you're still avoiding at this point? No, we are 63 00:03:37,480 --> 00:03:41,280 Speaker 1: open to anything. I mean, our our our style usually 64 00:03:41,360 --> 00:03:45,800 Speaker 1: constrains us, for example, to not do technology. Uh, But 65 00:03:45,960 --> 00:03:49,200 Speaker 1: other than that, we're wide open. Howard, it strikes me 66 00:03:49,240 --> 00:03:51,280 Speaker 1: that one of the things that's different from anything I 67 00:03:51,320 --> 00:03:53,000 Speaker 1: think I've ever seen, maybe any of us ever seen, 68 00:03:53,040 --> 00:03:55,840 Speaker 1: is the degree to which the government, both on fiscal 69 00:03:55,920 --> 00:03:59,800 Speaker 1: and monetary policy, is intervening in the marketplace. Is that 70 00:04:00,080 --> 00:04:02,640 Speaker 1: sort of a dampener on your business in the sense that, 71 00:04:02,840 --> 00:04:05,040 Speaker 1: for example, when it comes to distress debt, you've got 72 00:04:05,080 --> 00:04:06,960 Speaker 1: a lot of zombie companies I read. I think it's 73 00:04:06,960 --> 00:04:09,520 Speaker 1: like the public and traded companies in the United States 74 00:04:09,560 --> 00:04:12,200 Speaker 1: right now. Our zombie companies do not generate enough cash 75 00:04:12,520 --> 00:04:15,320 Speaker 1: to pay off their dad. Does that really make it 76 00:04:15,360 --> 00:04:18,200 Speaker 1: more difficult for some of like oak Tree? No? That well, 77 00:04:18,240 --> 00:04:21,479 Speaker 1: that's no, that's the that's ensured. That's the kind of 78 00:04:21,680 --> 00:04:26,120 Speaker 1: situation that prevents opportunities to us. Uh. If companies have 79 00:04:26,200 --> 00:04:30,680 Speaker 1: no problems, no exigencies, Uh, then then the distress investor 80 00:04:30,720 --> 00:04:33,200 Speaker 1: doesn't have any problems and any act anything to do. 81 00:04:33,839 --> 00:04:40,560 Speaker 1: So we we we take companies which are in extremists, 82 00:04:40,560 --> 00:04:44,440 Speaker 1: are producing bad news where the future doesn't look so great. 83 00:04:44,720 --> 00:04:47,160 Speaker 1: And if we can buy those securities at the right 84 00:04:47,240 --> 00:04:53,600 Speaker 1: price uh, which means a price that overestimates the problems. 85 00:04:53,680 --> 00:04:57,599 Speaker 1: That's how you make money as an investor. So we 86 00:04:57,640 --> 00:04:59,960 Speaker 1: don't shy away from difficulties. But isn't there a price 87 00:05:00,080 --> 00:05:02,839 Speaker 1: support under those companies if I can put it that way, 88 00:05:02,880 --> 00:05:06,680 Speaker 1: Because essentially money is free, they can borrow more money 89 00:05:06,720 --> 00:05:09,239 Speaker 1: even though they're losing money. They're not generally enough cash 90 00:05:09,279 --> 00:05:12,040 Speaker 1: again to pay service their debt. Doesn't that actually make 91 00:05:12,040 --> 00:05:14,000 Speaker 1: it more difficult to get the right price for you? 92 00:05:14,680 --> 00:05:17,400 Speaker 1: Yes it does, Yes it does. Uh. I mean the 93 00:05:17,480 --> 00:05:20,400 Speaker 1: right price for us is to be able to buy 94 00:05:20,400 --> 00:05:23,000 Speaker 1: things for less than their worth. That's our goal. We 95 00:05:23,120 --> 00:05:25,960 Speaker 1: need the cooperation from somebody who's willing to sell things 96 00:05:26,000 --> 00:05:29,200 Speaker 1: for less than their worth. Uh. And usually you get 97 00:05:29,240 --> 00:05:32,800 Speaker 1: that when when the asset holders feel urgency to sell. 98 00:05:33,279 --> 00:05:35,880 Speaker 1: What about currency? Where are you on the US dollar? 99 00:05:35,960 --> 00:05:38,440 Speaker 1: How much is that factor into your decisions? Because there 100 00:05:38,440 --> 00:05:40,720 Speaker 1: are a lot of taking We don't take an opinion 101 00:05:40,720 --> 00:05:43,440 Speaker 1: on currency. One of the six tenants of Oak Tree's 102 00:05:43,440 --> 00:05:46,440 Speaker 1: investment philosophy is that our decisions are not guided by 103 00:05:46,600 --> 00:05:50,200 Speaker 1: macro forecasts. So you don't worry about long term weakness 104 00:05:50,200 --> 00:05:54,520 Speaker 1: of the dollar. Well, I worry about it, uh for 105 00:05:54,560 --> 00:05:57,359 Speaker 1: other reasons, not in saying, well will I invest in 106 00:05:57,400 --> 00:06:00,960 Speaker 1: this thing which is in pounds or rupees or a 107 00:06:01,040 --> 00:06:04,320 Speaker 1: minby or patios or something like that, and not tactically 108 00:06:04,360 --> 00:06:06,960 Speaker 1: like that. But you know, I mean it's a concern. 109 00:06:07,760 --> 00:06:10,880 Speaker 1: Uh what what the you the way the US is 110 00:06:10,920 --> 00:06:15,200 Speaker 1: behaving the visa be the dollar. Uh, but on the 111 00:06:15,240 --> 00:06:17,680 Speaker 1: other hand, not clear what one does about it. That 112 00:06:17,800 --> 00:06:20,520 Speaker 1: was Howard Marks, co founder and co chairman of oak 113 00:06:20,600 --> 00:06:23,919 Speaker 1: Tree Capital Management. Coming up, we can beat our Wall 114 00:06:23,960 --> 00:06:27,080 Speaker 1: Street Week round table of a Sani Bechelists from Rock 115 00:06:27,120 --> 00:06:31,000 Speaker 1: Creek and Mona Mahajan of Alliance to find out where 116 00:06:31,040 --> 00:06:35,080 Speaker 1: the investment opportunities are in this land of plenty. That's 117 00:06:35,120 --> 00:06:43,360 Speaker 1: next down Wall Street Week on Bloomberg. This is Bloomberg 118 00:06:43,400 --> 00:06:47,840 Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. Everything 119 00:06:47,920 --> 00:06:50,440 Speaker 1: is coming up roses for investors, it appears, at least 120 00:06:50,440 --> 00:06:52,839 Speaker 1: this week. The question is where are the opportunities and 121 00:06:52,839 --> 00:06:54,560 Speaker 1: for that matter, where are the threats? In all of 122 00:06:54,560 --> 00:06:56,880 Speaker 1: this and to answer that question, we're conveting our very 123 00:06:56,880 --> 00:06:59,880 Speaker 1: special Wall Street Week round table right now of Asani 124 00:07:00,040 --> 00:07:02,159 Speaker 1: USh Lost. She is the founder and CEO of Rock 125 00:07:02,160 --> 00:07:05,000 Speaker 1: Creek and Mona Mahudgen. She is the U S investment 126 00:07:05,000 --> 00:07:08,839 Speaker 1: strategist for Alliance. Thank you both for being here, Welcome back. 127 00:07:09,160 --> 00:07:11,480 Speaker 1: Gonna let me start with you. I talk about opportunity 128 00:07:11,480 --> 00:07:16,120 Speaker 1: and threats. I used to do a swat analysis, you know, strengths, weaknesses, opportunities, 129 00:07:16,160 --> 00:07:19,080 Speaker 1: threats and business plans. Take the opportunity and threats for 130 00:07:19,200 --> 00:07:21,600 Speaker 1: a U S investor right now in this market, given 131 00:07:21,600 --> 00:07:24,840 Speaker 1: the fact that everything looks pretty good. Yeah, absolutely, Look, 132 00:07:24,880 --> 00:07:27,560 Speaker 1: it's been a phenomenal market really in many ways across 133 00:07:27,600 --> 00:07:30,360 Speaker 1: asset classes. In our view, that's been driven by two 134 00:07:30,400 --> 00:07:32,960 Speaker 1: key themes this year. The first theme is clearly this 135 00:07:33,120 --> 00:07:35,880 Speaker 1: rotation we're seeing, at least in the equity space um 136 00:07:35,880 --> 00:07:38,560 Speaker 1: from growth into the more value oriented sectors at least 137 00:07:38,560 --> 00:07:41,400 Speaker 1: on a year to date basis, and really since November 138 00:07:41,440 --> 00:07:43,480 Speaker 1: of last year. You know, keep in mind, last November 139 00:07:43,560 --> 00:07:46,320 Speaker 1: we saw presidential elections, we saw the approval of our 140 00:07:46,360 --> 00:07:50,840 Speaker 1: first vaccines, and when you look at sectors like energy, financials, 141 00:07:50,880 --> 00:07:57,720 Speaker 1: industrials up nearly set plus since that time. The second theme, 142 00:07:57,760 --> 00:08:00,160 Speaker 1: of course, is this rise in rates. The ten has 143 00:08:00,200 --> 00:08:04,680 Speaker 1: gone from point nine one now also supportive of some 144 00:08:04,720 --> 00:08:06,800 Speaker 1: of those value sectors and putting a little bit pressure 145 00:08:06,840 --> 00:08:10,480 Speaker 1: on the growth sectors. UM. For us, the opportunity really 146 00:08:10,560 --> 00:08:14,040 Speaker 1: is we do see a continuation of the reopening trade. 147 00:08:14,080 --> 00:08:16,320 Speaker 1: We think there's at least one last leg to go 148 00:08:16,920 --> 00:08:19,200 Speaker 1: um and that really you know, the highest conviction areas 149 00:08:19,200 --> 00:08:22,280 Speaker 1: that we like there do include those that are leveraged 150 00:08:22,320 --> 00:08:24,840 Speaker 1: to higher rates. We think, you know, yields could continue 151 00:08:24,840 --> 00:08:27,080 Speaker 1: to grind higher and maybe a little bit choppy now, 152 00:08:27,120 --> 00:08:29,200 Speaker 1: but we see a two handle on the tenure at 153 00:08:29,240 --> 00:08:32,880 Speaker 1: some point. Uh. In that environment, we think financials continue 154 00:08:32,920 --> 00:08:36,440 Speaker 1: to do well. Certainly yield curve plays continue to do well, 155 00:08:36,480 --> 00:08:39,959 Speaker 1: such as steepeners um the reopening, the true reopening of 156 00:08:40,000 --> 00:08:42,880 Speaker 1: the US economy. We think those the areas that do 157 00:08:42,960 --> 00:08:45,360 Speaker 1: well in that environment are those that are levered to 158 00:08:45,400 --> 00:08:48,640 Speaker 1: better earnings growth like leisure travel, you know, think your 159 00:08:48,679 --> 00:08:51,480 Speaker 1: true reopening sectors and the final bucket we put in 160 00:08:51,520 --> 00:08:54,880 Speaker 1: that the opportunities is really those that are levered to 161 00:08:54,920 --> 00:08:57,880 Speaker 1: the new policy agenda. We're seeing so parts of the 162 00:08:57,920 --> 00:09:01,120 Speaker 1: infrastructure market parts of five G and cybersecurity that are 163 00:09:01,160 --> 00:09:05,199 Speaker 1: being lumped into infrastructure now. Now just quickly on the threats. UM, 164 00:09:05,240 --> 00:09:07,560 Speaker 1: As we are heading to the second half of this year, 165 00:09:07,920 --> 00:09:11,600 Speaker 1: we certainly are seeing some headwinds emerge. First and foremost, 166 00:09:11,800 --> 00:09:14,720 Speaker 1: we will at some point hit peak reopening growth here 167 00:09:14,720 --> 00:09:16,760 Speaker 1: in the US, probably in two Q or three Q 168 00:09:16,960 --> 00:09:19,640 Speaker 1: of this year. UM, we will have you know that 169 00:09:19,760 --> 00:09:24,240 Speaker 1: the highest growth rates we've seen probably in over a decade. UM. Secondly, 170 00:09:24,320 --> 00:09:27,200 Speaker 1: we are seeing, as we noted earlier, yields continue to 171 00:09:27,240 --> 00:09:30,960 Speaker 1: grind higher, driven by of course reopening, but also potentially inflation. 172 00:09:31,600 --> 00:09:33,560 Speaker 1: And you know, thirdly, I think we are looking at 173 00:09:33,600 --> 00:09:36,199 Speaker 1: a fed that at some point David will have to 174 00:09:36,280 --> 00:09:39,000 Speaker 1: come off of this crisis level accommodation. You know, they 175 00:09:39,000 --> 00:09:41,600 Speaker 1: said in the last press conference it's when they see 176 00:09:41,600 --> 00:09:43,920 Speaker 1: it in the data, not in the forecast. Well, that 177 00:09:44,000 --> 00:09:46,000 Speaker 1: data is certainly going to come to fruition in the 178 00:09:46,000 --> 00:09:48,520 Speaker 1: next couple of quarters. So keep in mind we've we've 179 00:09:48,520 --> 00:09:51,000 Speaker 1: had a great first half thus far. We might see 180 00:09:51,000 --> 00:09:53,560 Speaker 1: another leg higher in this value rotation, but at some 181 00:09:53,600 --> 00:09:56,640 Speaker 1: point we will consolidate those games. UM. Maybe it's seasonal, 182 00:09:56,679 --> 00:09:58,679 Speaker 1: maybe it's selling May and go away. Maybe not May 183 00:09:58,760 --> 00:10:00,760 Speaker 1: this year, but a little bit further out. But just 184 00:10:00,920 --> 00:10:03,199 Speaker 1: keep in mind those the tail headwinds in the second 185 00:10:03,200 --> 00:10:06,720 Speaker 1: half of this year may start to emerge. Sorry, Mona 186 00:10:06,800 --> 00:10:08,760 Speaker 1: really focused right into your backyard, at least part of 187 00:10:08,760 --> 00:10:12,000 Speaker 1: your backyard when she talked about investments leverage to policy 188 00:10:12,200 --> 00:10:14,960 Speaker 1: because you for a long time I talked about climate 189 00:10:15,000 --> 00:10:18,160 Speaker 1: and green investing asana. You've been a champion of that. 190 00:10:18,720 --> 00:10:21,120 Speaker 1: We certainly heard about the infrastructure plan two point two 191 00:10:21,120 --> 00:10:23,640 Speaker 1: five trillion, a lot of it directed towards climate issues. 192 00:10:23,920 --> 00:10:26,120 Speaker 1: That's an opportunity. At the same time, you need to 193 00:10:26,160 --> 00:10:27,679 Speaker 1: be a bit of a stock picker if you can 194 00:10:27,720 --> 00:10:30,720 Speaker 1: say that within that realm, not all climate projects are 195 00:10:30,720 --> 00:10:34,400 Speaker 1: created equally. Assume you're absolutely right, Davy, then I very 196 00:10:34,480 --> 00:10:37,640 Speaker 1: much agree with everything Mona said. I think added to 197 00:10:37,800 --> 00:10:41,480 Speaker 1: what she said on the infrastructure side that you just mentioned. 198 00:10:41,480 --> 00:10:43,679 Speaker 1: Whether it ends up being two point to five or 199 00:10:43,760 --> 00:10:45,840 Speaker 1: one point nine or one point six or you know, 200 00:10:45,880 --> 00:10:50,160 Speaker 1: somewhere in between, those numbers are quite huge, and even 201 00:10:50,160 --> 00:10:52,920 Speaker 1: if they get spent some of them more quickly, some 202 00:10:53,000 --> 00:10:55,520 Speaker 1: of them over time, they're going to have a more 203 00:10:55,840 --> 00:11:00,160 Speaker 1: growth oriented kind of impact on the overall, Econo ME 204 00:11:00,679 --> 00:11:03,600 Speaker 1: and what we're seeing as we are sitting here is 205 00:11:03,760 --> 00:11:08,880 Speaker 1: unbelievable amount of investments that are going into that intersection 206 00:11:09,040 --> 00:11:15,079 Speaker 1: of innovation, with e V innovation, with take with medicine innovation, 207 00:11:15,280 --> 00:11:18,080 Speaker 1: with some of the other trends that we've talked about, 208 00:11:18,160 --> 00:11:22,160 Speaker 1: but in particular climate related investments. So I think all 209 00:11:22,160 --> 00:11:25,440 Speaker 1: of them will be also impacting markets in a very 210 00:11:25,520 --> 00:11:29,200 Speaker 1: positive way. Sort of looking longer term, I agree with 211 00:11:29,280 --> 00:11:32,160 Speaker 1: Mono Tho that we will have some short term corrections 212 00:11:32,400 --> 00:11:35,760 Speaker 1: because you know, interest rates are historically low, even if 213 00:11:35,760 --> 00:11:38,560 Speaker 1: we had the kind of bond markets particether the long 214 00:11:38,679 --> 00:11:41,840 Speaker 1: end that we've had this year, we have been historically 215 00:11:41,880 --> 00:11:44,040 Speaker 1: at a very very low level of interest rates, and 216 00:11:44,080 --> 00:11:46,160 Speaker 1: people have got very used to that. Those of us 217 00:11:46,160 --> 00:11:48,480 Speaker 1: who've been around a few cycles know that it will 218 00:11:48,520 --> 00:11:51,240 Speaker 1: not last like this, and there will be some sort 219 00:11:51,240 --> 00:11:54,199 Speaker 1: of impact as inflation picks up even for a short 220 00:11:54,240 --> 00:11:57,680 Speaker 1: time UH and goes back to UM to lower levels 221 00:11:57,720 --> 00:12:00,760 Speaker 1: over longer term. On the interesstrar to the only last 222 00:12:00,760 --> 00:12:04,560 Speaker 1: point I want to make is that UM the need 223 00:12:04,640 --> 00:12:07,320 Speaker 1: for it is in the US, but also the need 224 00:12:07,360 --> 00:12:10,640 Speaker 1: for it is global. There is huge need if we're 225 00:12:10,640 --> 00:12:14,400 Speaker 1: going to meet our climate goals to make sure that 226 00:12:14,520 --> 00:12:18,040 Speaker 1: this infrastructure investments that we're talking about the US are 227 00:12:18,120 --> 00:12:22,679 Speaker 1: also carried through globly. Mono. One of the things that 228 00:12:22,720 --> 00:12:25,199 Speaker 1: we're reading about now is perhaps some risk coming from 229 00:12:25,200 --> 00:12:28,080 Speaker 1: the divergence we're seeing. Uh, the United States is really 230 00:12:28,120 --> 00:12:31,840 Speaker 1: going ahead full steam with vaccinations. China, if if anything, 231 00:12:32,080 --> 00:12:33,679 Speaker 1: doing better than we are on the only with the 232 00:12:33,800 --> 00:12:36,679 Speaker 1: with the COVID nigeene. Europe not so much, and goodness knows, 233 00:12:36,800 --> 00:12:39,400 Speaker 1: parts of the lower and middle income countries are lagging 234 00:12:39,400 --> 00:12:43,640 Speaker 1: behind MONA. Is that simply opportunity for US investors or 235 00:12:43,679 --> 00:12:45,640 Speaker 1: is there also some risk if the U s GE's 236 00:12:45,679 --> 00:12:48,240 Speaker 1: too far ahead of the rest of the world. Yeah. Absolutely. 237 00:12:48,280 --> 00:12:50,199 Speaker 1: You know, one of the themes that we're we're seeing 238 00:12:50,200 --> 00:12:52,760 Speaker 1: emerge again this year is this return to US what 239 00:12:52,840 --> 00:12:56,760 Speaker 1: we're calling exceptionalism. Uh. Certainly we have been ahead of Europe, 240 00:12:56,760 --> 00:12:59,640 Speaker 1: as you noted, in terms of the vaccine rollout and 241 00:12:59,679 --> 00:13:02,320 Speaker 1: really setting up nicely for a strong set of summer 242 00:13:02,360 --> 00:13:04,839 Speaker 1: months ahead of US. UM we're seeing this play out 243 00:13:04,840 --> 00:13:07,360 Speaker 1: in the markets as well. The US dollar many expected 244 00:13:07,440 --> 00:13:10,120 Speaker 1: to come into the year continuing to be weak. In fact, 245 00:13:10,200 --> 00:13:12,960 Speaker 1: we've seen stabilization and even an upward trend. The dollar 246 00:13:13,040 --> 00:13:16,600 Speaker 1: index is now up about three percent year to date. UM. Similarly, 247 00:13:16,800 --> 00:13:19,360 Speaker 1: in equity industries, you know, the SMP is now back 248 00:13:19,440 --> 00:13:22,319 Speaker 1: at the top of the pack. UM. Clearly there could 249 00:13:22,400 --> 00:13:24,520 Speaker 1: be a catch up trade, and it's one thing we're 250 00:13:24,559 --> 00:13:27,960 Speaker 1: thinking about now, especially as the US markets have run. 251 00:13:28,160 --> 00:13:29,880 Speaker 1: There could be a catch up trade from Europe to 252 00:13:29,920 --> 00:13:31,719 Speaker 1: be to be had here. You know, if they are 253 00:13:31,800 --> 00:13:35,120 Speaker 1: lagging just a few months behind us in this vaccine rollout, um, 254 00:13:35,160 --> 00:13:37,720 Speaker 1: we could see a real reopening of their economies and 255 00:13:37,760 --> 00:13:40,480 Speaker 1: maybe another quarter or two. Keep in mind, the European 256 00:13:40,480 --> 00:13:44,720 Speaker 1: industries are more levered to these value cyclical parts of 257 00:13:44,760 --> 00:13:47,160 Speaker 1: the market. Uh, they have a lot of bank exposure, 258 00:13:47,240 --> 00:13:51,200 Speaker 1: energy exposure, etcetera, industrials exposure, and so it is something 259 00:13:51,200 --> 00:13:54,120 Speaker 1: we're cognizant of and really thinking about. You know, China 260 00:13:54,160 --> 00:13:56,760 Speaker 1: and North Asia, as you noted, or ahead of us. 261 00:13:56,880 --> 00:13:59,880 Speaker 1: So perhaps their peak growth has already happened in the 262 00:14:00,040 --> 00:14:02,640 Speaker 1: last couple of quarters, and we're certainly seeing that reflected 263 00:14:02,640 --> 00:14:05,400 Speaker 1: in the marketplace as well as their industries have started 264 00:14:05,440 --> 00:14:07,800 Speaker 1: to roll over. So you know, over the next quarter 265 00:14:07,880 --> 00:14:10,000 Speaker 1: or two we are certainly seeing this this flight to 266 00:14:10,120 --> 00:14:13,199 Speaker 1: US assets both in the equity and bond market UM, 267 00:14:13,200 --> 00:14:16,000 Speaker 1: and that really has, uh, you know, been driven by 268 00:14:16,040 --> 00:14:19,520 Speaker 1: the fundamental story behind how the US is outperformed UM 269 00:14:19,520 --> 00:14:23,040 Speaker 1: from a vaccine and COVID perspective, but just being being 270 00:14:23,080 --> 00:14:26,120 Speaker 1: mindful that Europe could play catch up in the months ahead. Okay, 271 00:14:26,120 --> 00:14:28,080 Speaker 1: thank you so very much for our special Wall Street 272 00:14:28,080 --> 00:14:31,280 Speaker 1: Week round table of Sania Bachelists of Rock Creek, and 273 00:14:31,520 --> 00:14:35,600 Speaker 1: Monamahydgen of Alliance. Coming up. You may think you know 274 00:14:35,680 --> 00:14:38,640 Speaker 1: what cryptocurrency is all about, but Marty chap Is, a 275 00:14:38,720 --> 00:14:41,960 Speaker 1: Six Street Partners says it's not necessarily what you think 276 00:14:42,000 --> 00:14:44,960 Speaker 1: it is. That's next on Wall Street Week on Bloomberg. 277 00:14:50,160 --> 00:14:54,120 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 278 00:14:54,240 --> 00:14:58,440 Speaker 1: Bloomberg Radio. Wall Street. Central banks and retail investors have 279 00:14:58,680 --> 00:15:03,360 Speaker 1: one thing in common. They're growing interest in cryptocurrencies. According 280 00:15:03,400 --> 00:15:06,840 Speaker 1: to Coin Shares, inflows into crypto funds and products hit 281 00:15:06,880 --> 00:15:09,720 Speaker 1: a record four point five billion dollars in the first 282 00:15:09,800 --> 00:15:14,320 Speaker 1: quarter of this year. Here's Mike Novograts of Galaxy Investment Partners. 283 00:15:14,480 --> 00:15:17,480 Speaker 1: I think about there's a hundred hundred forty trillion dollars 284 00:15:17,520 --> 00:15:21,480 Speaker 1: of US wealth UM four hundred trillion dollars in global wells. 285 00:15:21,480 --> 00:15:23,160 Speaker 1: So we're now up to a one a half half 286 00:15:23,160 --> 00:15:26,000 Speaker 1: a percent of global wealth is in crypto, and that's growing. 287 00:15:26,040 --> 00:15:27,960 Speaker 1: I think it'll be a percent by the end of 288 00:15:27,960 --> 00:15:31,680 Speaker 1: the year. Bitcoin gets the most attention among its crypto peers, 289 00:15:31,960 --> 00:15:35,240 Speaker 1: but critics of digital currencies raise concerns about their structure 290 00:15:35,520 --> 00:15:38,400 Speaker 1: and their volatility. I don't completely buy the whole thing. 291 00:15:38,840 --> 00:15:41,400 Speaker 1: You're essentially saying that we're going to create a store 292 00:15:41,400 --> 00:15:45,080 Speaker 1: of value and a medium of exchange around something that 293 00:15:45,120 --> 00:15:48,120 Speaker 1: only exists inside of a computer somewhere. It's not a 294 00:15:48,120 --> 00:15:52,000 Speaker 1: physical asset that Steve Ratner of will It Advisors, and 295 00:15:52,080 --> 00:15:55,880 Speaker 1: here's n y U Stern School professor Neuriel Rubini Beatson 296 00:15:56,160 --> 00:15:58,960 Speaker 1: is not having any income, doesn't even use that, doesn't 297 00:15:58,960 --> 00:16:01,720 Speaker 1: have any quick the serdervice doesn't have a what's the 298 00:16:02,360 --> 00:16:06,120 Speaker 1: value is just the sellfulfilling bubble. Beyond bitcoin, it's the 299 00:16:06,200 --> 00:16:10,640 Speaker 1: underlying technology of blockchain that is attracting investor interest. According 300 00:16:10,680 --> 00:16:14,600 Speaker 1: to CB Insights, startups focusing on blockchain raised about two 301 00:16:14,600 --> 00:16:17,280 Speaker 1: point five billion dollars in just the first quarter of 302 00:16:17,320 --> 00:16:21,720 Speaker 1: this year, outpacing the amount raised in all of What 303 00:16:21,800 --> 00:16:25,520 Speaker 1: it's really doing is it's building an infrastructure to actually 304 00:16:25,600 --> 00:16:30,520 Speaker 1: transact on. That's Peter Krauss of Aperture Investors. Central banks 305 00:16:30,520 --> 00:16:33,440 Speaker 1: are also feeling the pressure to create their own central 306 00:16:33,480 --> 00:16:36,960 Speaker 1: bank digital currencies. A recent survey by the Bank for 307 00:16:37,000 --> 00:16:40,440 Speaker 1: International Settlements found that eighty six percent of central banks 308 00:16:40,440 --> 00:16:44,680 Speaker 1: are currently engaged, up from six in two thousand seventeen. 309 00:16:44,880 --> 00:16:47,360 Speaker 1: The motivation for central banks has been partly to guard 310 00:16:47,360 --> 00:16:51,480 Speaker 1: against the risk of financial exclusion or digital dollarization if 311 00:16:51,520 --> 00:16:56,280 Speaker 1: payments shift to privately controlled alternatives. Here's Financial Times editorial 312 00:16:56,280 --> 00:16:59,840 Speaker 1: board chair Jillian Tet what the Central Bank is essentially 313 00:17:00,000 --> 00:17:03,160 Speaker 1: want to do right now is a version of very well, 314 00:17:03,360 --> 00:17:06,520 Speaker 1: version of if you can't beat him, join them. Um. 315 00:17:06,520 --> 00:17:10,840 Speaker 1: They're almost trying to just intermediate the disintermediators. Marty Chavez 316 00:17:10,920 --> 00:17:13,840 Speaker 1: is someone who really knows his way around blockchain and 317 00:17:13,880 --> 00:17:17,680 Speaker 1: distributed ledgers. He's been part of Silicon Valley startups, He's 318 00:17:17,720 --> 00:17:20,399 Speaker 1: taught the course at Stanford, He's been the c i 319 00:17:20,560 --> 00:17:23,560 Speaker 1: O and then the chief financial officer of Goldman Sachs, 320 00:17:23,600 --> 00:17:26,520 Speaker 1: and now he's a senior advisor at six Street Partners. 321 00:17:26,800 --> 00:17:29,639 Speaker 1: And he says that digital currencies may ultimately hold the 322 00:17:29,720 --> 00:17:34,240 Speaker 1: key to global reserve currency dominance the way I would 323 00:17:34,240 --> 00:17:37,680 Speaker 1: look at it, and actually the whole class at at 324 00:17:37,680 --> 00:17:41,600 Speaker 1: Stanford GSB on exactly this topic how software eight finance 325 00:17:42,200 --> 00:17:46,520 Speaker 1: last spring and the courses one thesis which is that 326 00:17:46,920 --> 00:17:51,000 Speaker 1: the way finance is playing out, it's actually arrived. There 327 00:17:51,000 --> 00:17:54,200 Speaker 1: are all these old dichotomies. You're on the bi side 328 00:17:54,240 --> 00:17:57,000 Speaker 1: of you're on the cell side, your trader or salesperson 329 00:17:57,320 --> 00:18:00,520 Speaker 1: are you? And I t right, those categor stories are 330 00:18:00,560 --> 00:18:05,120 Speaker 1: all disappearing fast, and it's all becoming. You are a 331 00:18:05,119 --> 00:18:09,280 Speaker 1: producer of some banking and financial services and you've wrapped 332 00:18:09,359 --> 00:18:13,840 Speaker 1: them in a computer interface so called API, and then 333 00:18:13,880 --> 00:18:16,520 Speaker 1: you're consuming a p I s from lots of other people. 334 00:18:17,040 --> 00:18:20,120 Speaker 1: And if you're not a world class producer of these 335 00:18:20,160 --> 00:18:23,200 Speaker 1: a p I s around your products and services, you're 336 00:18:23,280 --> 00:18:26,080 Speaker 1: dead and you might just not know it yet. So 337 00:18:26,119 --> 00:18:28,840 Speaker 1: in that sense, I would I would say what Jamie 338 00:18:28,920 --> 00:18:32,440 Speaker 1: is saying, I agree with them, um, But it means 339 00:18:32,480 --> 00:18:37,640 Speaker 1: that banks have to get really great at digitizing and technology. 340 00:18:38,000 --> 00:18:41,240 Speaker 1: And also many banks, not all, have been great, and 341 00:18:41,280 --> 00:18:43,000 Speaker 1: they have been doing this for a long time. How 342 00:18:43,040 --> 00:18:45,520 Speaker 1: can the banks compete with some of these new startups 343 00:18:45,600 --> 00:18:47,199 Speaker 1: who can take a lot more risk and be a 344 00:18:47,200 --> 00:18:50,399 Speaker 1: lot more innovative a lot faster. Well, many banks have 345 00:18:50,440 --> 00:18:53,560 Speaker 1: been working on this for a long time. So for instance, 346 00:18:53,600 --> 00:18:55,679 Speaker 1: one of the one of the things that we worked 347 00:18:55,680 --> 00:18:59,600 Speaker 1: on very effectively at Goldman Sachs for years UM is 348 00:18:59,640 --> 00:19:03,080 Speaker 1: a group we call the Principal Strategic Investments. It was 349 00:19:03,200 --> 00:19:07,160 Speaker 1: in the trading division, and the ideas go out and 350 00:19:07,200 --> 00:19:12,560 Speaker 1: find these startups and sometimes collaborate with clients and and 351 00:19:12,680 --> 00:19:16,359 Speaker 1: also with competitors to create some of these startups and 352 00:19:16,440 --> 00:19:20,160 Speaker 1: participate early on in the cycle of innovation and become 353 00:19:20,200 --> 00:19:23,560 Speaker 1: an investor and the customer of the startups and learned 354 00:19:23,560 --> 00:19:26,840 Speaker 1: from them. That's been an incredibly successful journey for Goldman, 355 00:19:26,920 --> 00:19:29,040 Speaker 1: and other banks have done variants of it as well. 356 00:19:29,160 --> 00:19:31,880 Speaker 1: How do you address the builder by question and bye bye, 357 00:19:31,920 --> 00:19:34,560 Speaker 1: I guess I include aquahiers where you may be buying 358 00:19:34,560 --> 00:19:36,800 Speaker 1: a small company in part because the talent that you're 359 00:19:36,800 --> 00:19:38,720 Speaker 1: getting with it, but a lot of the software that 360 00:19:38,800 --> 00:19:42,280 Speaker 1: was needed simply didn't exist in the early nineties, and 361 00:19:42,359 --> 00:19:45,479 Speaker 1: so it was absolutely the right strategy then. But as 362 00:19:45,560 --> 00:19:49,320 Speaker 1: time passed, we we changed that strategy and realized that 363 00:19:49,440 --> 00:19:52,679 Speaker 1: was no longer working. UM, that the world had transformed. 364 00:19:52,720 --> 00:19:56,440 Speaker 1: That were cloud services, a p I s amazing new tools, 365 00:19:56,480 --> 00:19:58,720 Speaker 1: and the idea of building it all your own didn't 366 00:19:58,720 --> 00:20:01,840 Speaker 1: make any sense. And so the new the new waterfall 367 00:20:02,000 --> 00:20:05,320 Speaker 1: is first order business. We would like we would like 368 00:20:05,400 --> 00:20:08,320 Speaker 1: it to be an open source. We would like to 369 00:20:08,400 --> 00:20:13,240 Speaker 1: use software that's out there um freely available, and participate 370 00:20:13,280 --> 00:20:15,959 Speaker 1: in the creation of that open source. If that's not 371 00:20:16,000 --> 00:20:20,800 Speaker 1: gonna work, then the next position is, let's let's look 372 00:20:20,840 --> 00:20:24,399 Speaker 1: for some vendors and we want them to operate according 373 00:20:24,520 --> 00:20:28,320 Speaker 1: to universal standards. And so we can hold the vendors 374 00:20:28,359 --> 00:20:32,200 Speaker 1: to account on their reliability and cost and other things. 375 00:20:32,480 --> 00:20:35,040 Speaker 1: But if it doesn't work, we can switch to another provider, 376 00:20:35,240 --> 00:20:38,879 Speaker 1: same a p I. And then the last resort is 377 00:20:39,640 --> 00:20:42,160 Speaker 1: we would go build it ourselves. That was Martin Chavez 378 00:20:42,240 --> 00:20:44,960 Speaker 1: of Six Street Partners. Coming up, we wrap up the 379 00:20:45,040 --> 00:20:48,480 Speaker 1: week with our special contributor Larry Summers of Harvard. That's 380 00:20:48,520 --> 00:20:56,880 Speaker 1: next on Wall Street Week on Bloomberg. This is Bloomberg 381 00:20:56,920 --> 00:21:00,600 Speaker 1: Wall Street Week with David Weston from bloom Bird Radio. 382 00:21:00,840 --> 00:21:02,920 Speaker 1: We're going to complete the week, as we do every week, 383 00:21:02,920 --> 00:21:06,200 Speaker 1: with our special coternity Larry Summers of Harvard. Larry, Welcome, back. 384 00:21:06,240 --> 00:21:07,920 Speaker 1: Great to have you with us. I think a lot 385 00:21:07,960 --> 00:21:10,879 Speaker 1: of the week was given over to infrastructure, whatever that means. 386 00:21:10,960 --> 00:21:13,920 Speaker 1: President Biden has his two point two five trillion dollar plan, 387 00:21:14,320 --> 00:21:17,359 Speaker 1: a lot of semantics about what was included, what's not included, 388 00:21:17,560 --> 00:21:19,920 Speaker 1: And I want to you to address that as an economist, 389 00:21:19,920 --> 00:21:23,159 Speaker 1: how important is it to get clear but what infrastructure is? 390 00:21:23,160 --> 00:21:25,800 Speaker 1: Because President Biden said it's bridges and tunnel. Sure, it's 391 00:21:25,800 --> 00:21:27,960 Speaker 1: also broadband in it, but then he said it's anything 392 00:21:28,040 --> 00:21:30,240 Speaker 1: that enhances the life of the middle class. That seemed 393 00:21:30,240 --> 00:21:33,119 Speaker 1: a little broad. Look, what's most important is that we 394 00:21:33,200 --> 00:21:35,960 Speaker 1: make the investments as a country that we need to, 395 00:21:36,640 --> 00:21:40,240 Speaker 1: not what we call them. We need better bridges, we 396 00:21:40,280 --> 00:21:44,760 Speaker 1: need to expand broadband, we need to build more schools, 397 00:21:45,280 --> 00:21:49,120 Speaker 1: We need to make sure there's adequate housing for UH 398 00:21:49,400 --> 00:21:55,360 Speaker 1: low income families. The semantics really aren't so important. Frankly, 399 00:21:55,400 --> 00:21:59,919 Speaker 1: I'd have liked to see more traditional infrastructure in this package, 400 00:22:00,400 --> 00:22:04,080 Speaker 1: because I think we're decades behind, and I'm not sure 401 00:22:04,160 --> 00:22:07,280 Speaker 1: this is big enough to bring us to the forefront, 402 00:22:07,720 --> 00:22:12,280 Speaker 1: and I'm not sure there's enough really major, large scale 403 00:22:12,720 --> 00:22:17,360 Speaker 1: UH projects. He has eighty billion dollars to help amtracks 404 00:22:17,400 --> 00:22:23,320 Speaker 1: operating UH budget, but there are no major new UH systems, 405 00:22:23,359 --> 00:22:28,119 Speaker 1: so I'd have liked to see a bolder, bigger vision 406 00:22:28,640 --> 00:22:31,840 Speaker 1: on infrastructure. And the other thing I'd have liked to 407 00:22:31,880 --> 00:22:36,720 Speaker 1: see David is more discipline. Discipline to make sure we 408 00:22:36,800 --> 00:22:41,639 Speaker 1: procure in a cost effective way. God knows, the First 409 00:22:41,680 --> 00:22:45,280 Speaker 1: Avenue subway in New York costs seven times as much 410 00:22:45,359 --> 00:22:49,040 Speaker 1: per mile as the subway in Paris, and they're not 411 00:22:49,160 --> 00:22:54,399 Speaker 1: especially efficient UH in Paris. I'd have liked to see 412 00:22:54,840 --> 00:23:00,360 Speaker 1: more speed in implementation. I've talked many times at about 413 00:23:00,400 --> 00:23:03,600 Speaker 1: a bridge near my office at Harvard, three D foot 414 00:23:03,720 --> 00:23:06,920 Speaker 1: bridge that took them five and a half years to repair, 415 00:23:07,080 --> 00:23:10,560 Speaker 1: when you know Julius Caesar built much longer bridges in 416 00:23:10,960 --> 00:23:16,600 Speaker 1: UH nine days. And I'd have liked to see rigorous analysis, 417 00:23:16,640 --> 00:23:20,520 Speaker 1: and we may get that analysis that this spending is 418 00:23:20,560 --> 00:23:24,000 Speaker 1: going to be incremental. For example, there's no question we 419 00:23:24,040 --> 00:23:28,240 Speaker 1: should have electric charging stations across America and electric cars, 420 00:23:28,680 --> 00:23:31,480 Speaker 1: but we built gas stations without the government ever paying. 421 00:23:31,960 --> 00:23:34,320 Speaker 1: Does the government really need to pay as much as 422 00:23:34,440 --> 00:23:38,080 Speaker 1: is contained in this bill to get electric charging stations 423 00:23:39,040 --> 00:23:43,680 Speaker 1: across the country. So I think Democrats are completely right 424 00:23:43,800 --> 00:23:46,880 Speaker 1: on the need for much more resources. But I think 425 00:23:46,920 --> 00:23:52,000 Speaker 1: some Republicans have a point when they emphasize efficiency, when 426 00:23:52,040 --> 00:23:58,240 Speaker 1: they emphasize alacrity, and when they emphasize UH discipline in 427 00:23:58,880 --> 00:24:03,720 Speaker 1: UH setting the functions. But this is hugely important for 428 00:24:03,760 --> 00:24:07,840 Speaker 1: our economy. This is certainly worth UH in many of 429 00:24:07,880 --> 00:24:12,280 Speaker 1: the areas substantially more government borrowing. So it's hugely important 430 00:24:12,359 --> 00:24:14,439 Speaker 1: to get the money to do the investment, but it's 431 00:24:14,480 --> 00:24:16,320 Speaker 1: almost as important to make sure that it gets done 432 00:24:16,400 --> 00:24:18,879 Speaker 1: right or as close to right as possible. You've worked 433 00:24:18,880 --> 00:24:21,240 Speaker 1: at the top levels of government. Do we need to 434 00:24:21,280 --> 00:24:24,480 Speaker 1: rethink the way our government really administers itself in this sense? 435 00:24:24,800 --> 00:24:26,600 Speaker 1: When was the last time the US government spent two 436 00:24:26,600 --> 00:24:28,760 Speaker 1: point two five trillion dollars and did it the right way? 437 00:24:28,840 --> 00:24:32,320 Speaker 1: Can we have a rigorous system for return on investment, 438 00:24:32,320 --> 00:24:34,520 Speaker 1: which is what you do in a corporation, to say, okay, 439 00:24:34,520 --> 00:24:36,720 Speaker 1: well invest this money, but this is what we expect back. 440 00:24:36,880 --> 00:24:40,320 Speaker 1: I think we're gonna I think we need UH more 441 00:24:40,400 --> 00:24:45,400 Speaker 1: of that. Look, corporations don't have to negotiate their investment 442 00:24:45,480 --> 00:24:52,280 Speaker 1: plans with something that is analogous to UH the Congress UH. 443 00:24:52,560 --> 00:24:59,080 Speaker 1: Corporations don't have the complexity and the breadth of the program. 444 00:24:59,119 --> 00:25:02,840 Speaker 1: And by the way, David is you know, anyone who 445 00:25:03,000 --> 00:25:06,679 Speaker 1: studied the history, for example, of corporate high t systems 446 00:25:07,240 --> 00:25:09,919 Speaker 1: will know that there were a lot of white elephants 447 00:25:10,800 --> 00:25:18,160 Speaker 1: built hundreds of billions of dollars poured into UH nothingness. 448 00:25:18,200 --> 00:25:23,439 Speaker 1: So I think it's a mistake to venerate everything UH 449 00:25:23,760 --> 00:25:30,720 Speaker 1: the private sector touches. But yes, this should be a 450 00:25:30,800 --> 00:25:37,960 Speaker 1: huge UH priority in the design of UH all of this. 451 00:25:38,240 --> 00:25:43,679 Speaker 1: But of course more extensive review can be the enemy 452 00:25:43,760 --> 00:25:49,560 Speaker 1: of UH more alacrity, but more more, more speed. But 453 00:25:50,080 --> 00:25:54,320 Speaker 1: I think we with the right kind of administration UH 454 00:25:54,600 --> 00:25:57,920 Speaker 1: can do much better. Taking take an area like high 455 00:25:57,960 --> 00:26:02,919 Speaker 1: transmission IGH density power lines, the issue there is not 456 00:26:03,040 --> 00:26:06,320 Speaker 1: lack of money, it's lack of regulatory approval. And we 457 00:26:06,440 --> 00:26:09,199 Speaker 1: got to figure out how to get the states cooperating 458 00:26:09,280 --> 00:26:11,960 Speaker 1: so each state doesn't hold up all the other states 459 00:26:12,480 --> 00:26:17,359 Speaker 1: UH in UH that area. I'd like to see President 460 00:26:17,480 --> 00:26:23,480 Speaker 1: Biden talking more about the importance of doing it well 461 00:26:24,240 --> 00:26:31,000 Speaker 1: and acknowledging more UH some of UH the past failures. 462 00:26:31,560 --> 00:26:34,960 Speaker 1: On the other hand, I think there are some who 463 00:26:35,080 --> 00:26:39,240 Speaker 1: sees on the semantic issues, who sees on some of 464 00:26:39,280 --> 00:26:43,159 Speaker 1: the things UH that weren't great, who give the Pentagon 465 00:26:43,720 --> 00:26:49,200 Speaker 1: a complete pass on every failed weapons system. But if 466 00:26:49,240 --> 00:26:53,199 Speaker 1: some mass transit system in an urban area UH doesn't 467 00:26:53,240 --> 00:26:59,080 Speaker 1: work exactly right on schedule or overruns its cost, go 468 00:26:59,240 --> 00:27:02,879 Speaker 1: into a state of hysteria. And that's wrong. And so 469 00:27:02,920 --> 00:27:07,720 Speaker 1: I'd say to my friends in the Republicans side, let's 470 00:27:07,760 --> 00:27:11,480 Speaker 1: have some symmetry and what you're prepared to do with 471 00:27:11,560 --> 00:27:16,400 Speaker 1: respect to military procurement and what you're insisting on in 472 00:27:16,480 --> 00:27:19,399 Speaker 1: these areas. Larry another big story this week where the 473 00:27:19,440 --> 00:27:21,560 Speaker 1: i m F meetings, the Spring meetings of the i 474 00:27:21,720 --> 00:27:24,000 Speaker 1: m F, and it really underscores something we're watching, which 475 00:27:24,080 --> 00:27:27,040 Speaker 1: is increasing divergence around the world, both in terms of 476 00:27:27,040 --> 00:27:30,000 Speaker 1: the vaccination programs as well as in the economic growth. 477 00:27:30,160 --> 00:27:32,240 Speaker 1: We see it even between the United States and Europe 478 00:27:32,280 --> 00:27:33,760 Speaker 1: at this point, but then when you go to the 479 00:27:33,800 --> 00:27:36,560 Speaker 1: low and middle income countries, it is quite stark, both 480 00:27:36,600 --> 00:27:39,720 Speaker 1: on the vaccination rate and also the economy. What Cannon 481 00:27:39,760 --> 00:27:41,400 Speaker 1: should be done with this is something you've been talking 482 00:27:41,400 --> 00:27:44,640 Speaker 1: about for well over a year now. Look what we 483 00:27:44,960 --> 00:27:49,760 Speaker 1: understand better today than we did six months ago is 484 00:27:49,840 --> 00:27:53,080 Speaker 1: that this is going to be heavily about the ways 485 00:27:53,119 --> 00:27:57,200 Speaker 1: in which the virus does does or does not evolve. 486 00:27:57,920 --> 00:28:01,680 Speaker 1: If it stops evolving, we're gonna get this problem completely 487 00:28:01,760 --> 00:28:06,080 Speaker 1: under control. If it keeps evolving, it's going to become 488 00:28:06,520 --> 00:28:12,639 Speaker 1: an endemic problem. And evolution happens in proportion to how 489 00:28:12,720 --> 00:28:16,160 Speaker 1: much the virus is all over the world, And that 490 00:28:16,200 --> 00:28:22,360 Speaker 1: means uncontrolled COVID anywhere is a big threat to people everywhere. 491 00:28:23,160 --> 00:28:26,200 Speaker 1: And and this is a critical point that I've been 492 00:28:26,200 --> 00:28:29,280 Speaker 1: working on. We're gonna have one of these things every 493 00:28:29,280 --> 00:28:32,200 Speaker 1: decade or so. We're gonna have a threat like this 494 00:28:32,280 --> 00:28:35,679 Speaker 1: every decade or so, and we need an infrastructure to 495 00:28:35,760 --> 00:28:41,360 Speaker 1: make sure that we're constantly watching and ready to stop 496 00:28:41,400 --> 00:28:46,040 Speaker 1: it at its source. At the beginning, Okay, let's wrap 497 00:28:46,080 --> 00:28:48,320 Speaker 1: this up with a lightning quick ground of summer says. 498 00:28:48,520 --> 00:28:52,040 Speaker 1: Start off with the central bank Digital currencies much the 499 00:28:52,120 --> 00:28:54,640 Speaker 1: vogue right now. We've learned that most central banks are 500 00:28:54,680 --> 00:28:57,040 Speaker 1: working at digital currency. Five years from now, well, the 501 00:28:57,040 --> 00:28:59,880 Speaker 1: Federal Reserve have its own digital currency. I doubt it 502 00:29:00,000 --> 00:29:02,640 Speaker 1: will have a bunch of stuff with digital accounts, but 503 00:29:02,720 --> 00:29:06,000 Speaker 1: no real digital currency. We also heard this week from 504 00:29:06,160 --> 00:29:09,280 Speaker 1: Secretary Yell and Secretary Treasury yelling about coordinate with O E. 505 00:29:09,400 --> 00:29:13,200 Speaker 1: C D on a corporate minimum tax internationally. Is that 506 00:29:13,240 --> 00:29:16,120 Speaker 1: going to happen within the next year, bravo, And it's 507 00:29:16,160 --> 00:29:20,840 Speaker 1: gonna be as or more important than the next the 508 00:29:20,920 --> 00:29:25,120 Speaker 1: next trade agreement we reach with some other UH country. 509 00:29:25,160 --> 00:29:28,760 Speaker 1: This is the international integration issue of this moment. For 510 00:29:29,000 --> 00:29:31,120 Speaker 1: some of us living in New York, we got hit 511 00:29:31,200 --> 00:29:32,880 Speaker 1: with a big new tax. If you made a lot 512 00:29:32,880 --> 00:29:34,280 Speaker 1: of money in New York, you're gonna pay a lot 513 00:29:34,280 --> 00:29:36,400 Speaker 1: more taxes here. There's a lot of concerned about that, 514 00:29:36,440 --> 00:29:40,040 Speaker 1: individual stories about people moving away. But in the larger sense, 515 00:29:40,240 --> 00:29:42,560 Speaker 1: do you think this might affect the economy of New 516 00:29:42,640 --> 00:29:46,440 Speaker 1: York State? You deserve to pay more taxes. It should happen, 517 00:29:46,920 --> 00:29:49,480 Speaker 1: but New York City, New York City and New York 518 00:29:49,520 --> 00:29:56,240 Speaker 1: State can't do it alone without substantial consequences in this environment, 519 00:29:56,360 --> 00:30:02,160 Speaker 1: and I am very fearful that, particularly without federal deductibility, 520 00:30:02,240 --> 00:30:04,360 Speaker 1: this is going to do a lot of damage to 521 00:30:04,640 --> 00:30:08,120 Speaker 1: New York's tax base and settle off a downward spiral. 522 00:30:08,520 --> 00:30:11,080 Speaker 1: And finally, larry the big story from last week with Archias, 523 00:30:11,160 --> 00:30:14,600 Speaker 1: the sort of implosion of Archias. Should we expect within 524 00:30:14,640 --> 00:30:18,080 Speaker 1: the near future more regulation of family offices? I wouldn't 525 00:30:18,120 --> 00:30:22,360 Speaker 1: be surprised, but even more. I'd expect more more regulation 526 00:30:22,760 --> 00:30:28,720 Speaker 1: of prime broker lending to UH family offices. Uh. This 527 00:30:29,200 --> 00:30:33,120 Speaker 1: didn't but could have set off a really negative cascade 528 00:30:33,720 --> 00:30:38,920 Speaker 1: of forced selling and then forced liquidations on the LTCM model. 529 00:30:39,320 --> 00:30:43,040 Speaker 1: That didn't happen, but it could have, and we've got 530 00:30:43,040 --> 00:30:45,960 Speaker 1: to revisit those issues. Okay, many many thanks to our 531 00:30:46,000 --> 00:30:47,880 Speaker 1: special contribute here at Walls Sting week. He is Larry 532 00:30:47,920 --> 00:30:52,760 Speaker 1: Summers of Harvard. Finally, one more thought, getting more bees 533 00:30:52,880 --> 00:30:56,680 Speaker 1: with honey than with vinegar, especially if they're rich bees. 534 00:30:57,360 --> 00:30:59,680 Speaker 1: This week saw a lot of talk about taxing the 535 00:30:59,800 --> 00:31:03,760 Speaker 1: rich the United States, whether they're companies or they are people. 536 00:31:04,200 --> 00:31:06,640 Speaker 1: New York State is doing more than just talking about it. 537 00:31:07,000 --> 00:31:09,760 Speaker 1: After Governor Cuomo last year pleaded with the rich to 538 00:31:09,800 --> 00:31:12,640 Speaker 1: stay in New York. This week, the New York Governor 539 00:31:12,680 --> 00:31:15,720 Speaker 1: agreed to a budget slapping big new taxes on those 540 00:31:15,720 --> 00:31:18,480 Speaker 1: making over a million dollars, taxes that could raise the 541 00:31:18,520 --> 00:31:21,760 Speaker 1: marginal rate for the richest New Yorkers up over fifty two. 542 00:31:23,120 --> 00:31:25,600 Speaker 1: Only time is going to tell whether the state's ninety 543 00:31:25,720 --> 00:31:29,160 Speaker 1: billionaires or thirty millionaires vote with their feet because of 544 00:31:29,160 --> 00:31:32,000 Speaker 1: all these new taxes. But we are already seeing what 545 00:31:32,160 --> 00:31:35,040 Speaker 1: using a bit of honey instead may mean as the 546 00:31:35,120 --> 00:31:38,200 Speaker 1: Chinese government plans new tax bricks on the wealthy in 547 00:31:38,360 --> 00:31:41,080 Speaker 1: Hong Kong, seeking to make up for all those violent 548 00:31:41,120 --> 00:31:45,280 Speaker 1: demonstrations in the political crackdown, with the result that investment 549 00:31:45,320 --> 00:31:48,200 Speaker 1: managers have set up more than a hundred new companies 550 00:31:48,200 --> 00:31:51,600 Speaker 1: in recent months, and banks like Goldman Sachs, City Group, 551 00:31:51,760 --> 00:31:54,400 Speaker 1: Bank of America, and Morgan Stanley are ramping up their 552 00:31:54,440 --> 00:31:57,000 Speaker 1: staffing over there. None of which is to say that 553 00:31:57,000 --> 00:31:59,240 Speaker 1: those of us who have benefited from the boom markets 554 00:31:59,280 --> 00:32:02,480 Speaker 1: shouldn't pay our fair share, much less that we want 555 00:32:02,520 --> 00:32:05,880 Speaker 1: to trade off civil liberties for tax breaks. But we 556 00:32:06,000 --> 00:32:08,600 Speaker 1: do have to hope that the people making decisions keep 557 00:32:08,600 --> 00:32:13,160 Speaker 1: in mind that pesky law of unintended consequences. That does it. 558 00:32:13,280 --> 00:32:15,440 Speaker 1: For this episode of Wall Street Week, I'm David Weston. 559 00:32:15,600 --> 00:32:17,520 Speaker 1: This is Bloomberg. See you next week.