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Speaker 1: This is Bloomberg Wall Street Week. We turn our attention

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Speaker 1: to the markets this week. U s CPI members reinforcing

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Speaker 1: concerns about inflation. The financial stories that sheep are worth

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Speaker 1: a really different reaction to Mark. It's more indications of

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Speaker 1: just how hot the U. S economy really is through

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Speaker 1: the eyes of the most influential voices Larry Summers, the

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Speaker 1: former Treachery Secretary, Katherine Keening, CEO of v N y

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Speaker 1: mon Sam's l Sharmon and founder of Equatic Group Investment

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Speaker 1: in Bloomberg wool Street Week with David Weston from Bloomberg Radio.

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Speaker 1: Something for everyone in the August jobs report, with the

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Speaker 1: top line beating estimates, but the unemployment rate ticking higher

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Speaker 1: and European inflation hits a record high. This is Wall

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Speaker 1: Street Week. This week wool Street Week contribute to Larry

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Speaker 1: Summers on the Job's report, people have a tendency to

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Speaker 1: exaggerate how much favorable participation contributes to necessary disinflation and

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Speaker 1: Jessica Coldwell of Edmund's on the future of the electric

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Speaker 1: vehicle market. It finally feels like now we're kind of

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Speaker 1: on the cost of something big, So I think the

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Speaker 1: question here is our consumers ready to pony had to

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Speaker 1: spend the money. Markets began the week jittery, following FED

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Speaker 1: chair pals hawk ish tilled from Friday, with Minneapolis Fed

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Speaker 1: President Neil cash Cary hammering the point home. I was

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Speaker 1: actually happy to see how the chair Pal's Jackson Whole

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Speaker 1: speech was received. You know, people now understand the seriousness

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Speaker 1: of our commitment to getting inflation back down to two.

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Speaker 1: Inflation in Europe rocketed to yet another all time high,

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Speaker 1: reaching nine point one year over year, as the Block's

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Speaker 1: Central Bank ways whether to go with a jump the

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Speaker 1: rate hike of seventy five basis points. But economists are

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Speaker 1: also being swayed because of all this hawkish commentary we've

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Speaker 1: had out of the CB. We've had six members of

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Speaker 1: the Governing Council now saying that a move bigger than

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Speaker 1: a half point needs to be at least considered class.

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Speaker 1: Natural gas prices in Europe continue to fall throughout the week,

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Speaker 1: even as Russia's gas proms shut off the spigots to

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Speaker 1: Germany's Norde Dream pipeline three days of maintenance. I could

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Speaker 1: quote marks around that because some people would doubt the motives.

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Speaker 1: Fine back, I'm Caroline Hyde alongside Matt Miller. Let us

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Speaker 1: shape up the week for you. The week that was

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Speaker 1: on Wall Street s ANDP five hundred five days were

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Speaker 1: in the red to the tune of almost or three

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Speaker 1: and a half percent. This is third straight week of losses.

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Speaker 1: This is the worst week we've had since mid June

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Speaker 1: two year yield almost in a round trip. Look, we're

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Speaker 1: basically flat on the week, But what a movement intra

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Speaker 1: weak volatility that we had. Yields rise. We think we

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Speaker 1: have a hawk is fed on our hands. They pull

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Speaker 1: back when we get a really rather gold Delocks scenario

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Speaker 1: with the jobs data and Matt the vix, it creeps

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Speaker 1: a little Hibbert. Look, twenty five is above the annual average.

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Speaker 1: I think the VIX doesn't really do much. So I'm

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Speaker 1: that conveys that were really headed down hard. Yet the

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Speaker 1: market doesn't really believe that the Fed can go ahead

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Speaker 1: with rate hike after rate hike after rate hike. They're

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Speaker 1: a little more convinced after Jackson Hole. But this job

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Speaker 1: number you were talking about this earlier today, Um, we

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Speaker 1: saw what looked like maybe a little stabilization in terms

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Speaker 1: of average hourly earnings, and we saw the participation rate climb,

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Speaker 1: So you know that's putting in a couple more question

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Speaker 1: marks over the Fed's commitment to raise rates soft landing.

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Speaker 1: Can they do it? Let's ask our guests were pleased

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Speaker 1: to welcome to the show, and they Director and fundamental

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Speaker 1: portfolio manager for Causeway Capital Sonalta, said chief investment officer

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Speaker 1: Franklin Templeton Fixed Income. It is wonderful to have you

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Speaker 1: both here as we look towards a long weekend, a

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Speaker 1: long weekend where it felt that money managers took risk

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Speaker 1: off the table. And then start first and foremost with

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Speaker 1: us your interpretation of the job's number and where that

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Speaker 1: leaves the Federal reserve. You know, people are looking at

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Speaker 1: the number very care way to see if what feds

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Speaker 1: are doing is working, to see if this what actions

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Speaker 1: have taken, are loosening the labor market. It doesn't. There's

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Speaker 1: incremental signs, but nothing for sure. And I think there

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Speaker 1: is also some confusion in the market thinking that you know,

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Speaker 1: only from the unemployment numbers we will see uh slow down,

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Speaker 1: be more market. But in a high inflationary era, it

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Speaker 1: is common that labor market stays tight before the shoe

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Speaker 1: really drops. So I know this is a number that

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Speaker 1: the BED is concerned about. But we have way more

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Speaker 1: to go before unemployment is threatening, where FED has to

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Speaker 1: be a birth course. We had, you know, in the

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Speaker 1: last trading day of the week, a big turnaround. As

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Speaker 1: Caroline points out, of course, a lot of asset managers

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Speaker 1: are going to take risk off the table as they

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Speaker 1: go into a labor day weekend. You don't want to

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Speaker 1: be sitting on the beach worried about your portfolio. Now

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Speaker 1: decide you have a big portfolio to worry about. Is

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Speaker 1: that what you guys have done at the end of

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Speaker 1: the week. Do you see portfolio managers typically doing that

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Speaker 1: at Actually take it back to what you started started

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Speaker 1: discussing the FED lacks credibility. Markets don't believe that the

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Speaker 1: FED is going to do what the FED keeps saying

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Speaker 1: it's going to do. That's a problem for the FED

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Speaker 1: and it's also a problem for markets. So we in

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Speaker 1: our portfolios have actually we started taking risk of sometime

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Speaker 1: before this long weekend. We don't think that a long

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Speaker 1: weekend in and of itself makes a major difference. I

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Speaker 1: couldn't agree more with Eden. This is one day to point.

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Speaker 1: The bottom line is I'm going to be looking very

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Speaker 1: carefully at the Fed's new SEPs to see if we

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Speaker 1: get some more realistic SEPs after the March and June

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Speaker 1: number June projections, which I didn't think were internally consistent

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Speaker 1: at all. So I want to dig in that for

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Speaker 1: a moments now, because you're saying they lack credibility. You

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Speaker 1: are a bond money manager first and foremost fixing. It

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Speaker 1: felt as though the bond market sort of had interpreted

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Speaker 1: the Federal Reserve along the right tracks prior to Jackson Hall.

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Speaker 1: They didn't expect to pivot and quite the same way

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Speaker 1: that the equity market did. Why do you think, therefore

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Speaker 1: credibility has been so hard to come about. I'm not

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Speaker 1: sure I fully agree with you, because we were at

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Speaker 1: three forty seven. The type of volatility we've seen in

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Speaker 1: the bond market on every single data point, to me,

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Speaker 1: indicates that the bond market also fully anticipates that the

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Speaker 1: Fed is going to do what it's done for the

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Speaker 1: better part of a couple of decades now, which is,

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Speaker 1: as soon as the market gets wappy, the Fed blinks

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Speaker 1: and it reverses course. It happened in twenty eighteen. People

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Speaker 1: keep anticipating that for the Feds first, and almost view

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Speaker 1: the first target. The only target is unemployment and growth.

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Speaker 1: When we've got inflation at eight and a half percent

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Speaker 1: and we have employment significantly lower than current NYROU, it

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Speaker 1: seems remarkable. We're gonna have much more wish now to

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Speaker 1: side and Ellen Lee. Ellen's going to give us some

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Speaker 1: individual company names to talk about after we take a break.

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Speaker 1: This is Wall three on Bloomberg. This is Bloomberg Wall

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Speaker 1: Street Week with David Weston from Bloomberg Radio. But this

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Speaker 1: week the conventional media began to catch up. After all,

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Speaker 1: it was hard totally to ignore such additional developments as

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Speaker 1: the slowest rate of manufacturing growth in thirteen months, the

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Speaker 1: first outright decline in construction spending in seven months, falling

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Speaker 1: prices for raw materials to the lowest levels in September,

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Speaker 1: the biggest monthly tumble in factory orders in almost a decade,

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Speaker 1: arising unemployment rate, and the first monthly decline in private

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Speaker 1: sector jobs in more than four years. You think maybe

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Speaker 1: the economy really is a hairless vibrant these days. This

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Speaker 1: is Bloomberg Wall Free Week. I'm Matt Miller alongside Caroline Hide.

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Speaker 1: That Cliff of Lewis Rookheiser from June two, two thousand,

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Speaker 1: when Santana's Maria Maria was at the top of the

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Speaker 1: charts and Mission Impossible Too was the number one movie

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Speaker 1: of the land. There were similarities between the economy then

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Speaker 1: and now. The unemployment rate ticked up, but back then

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Speaker 1: it was all the way to four percent compared to

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Speaker 1: this month's three point seven percent, and people were starting

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Speaker 1: to really think about what was going on in the

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Speaker 1: economy rather than at the individual company level. Ellen Lee

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Speaker 1: joins us right now, and I'll decide they're back with

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Speaker 1: us to continue this conversation. Ellen, I wanted to touch

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Speaker 1: on this because it seems like the whole world's gone macro.

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Speaker 1: Everybody wants to talk about the unemployment rate and the

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Speaker 1: fed um inflation. How does that strike you as as

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Speaker 1: a fundamental research annelist. I can't ignore what's happening in

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Speaker 1: the world, obviously, because it's the backdrop for the environment

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Speaker 1: in which companies operate. But at causeway, we're looking for

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Speaker 1: bottom up, you know, investment ideas, and there a couple

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Speaker 1: that I really like in this environment, you know, Phillips

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Speaker 1: and also both are restructuring store raised trading at ten times.

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Speaker 1: I think in the current environment, were interest rates are

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Speaker 1: going up, I think that's a good tail with were

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Speaker 1: value stocks. But more importantly, they have more half their

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Speaker 1: faith in their control, where the management can lead them

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Speaker 1: out of the situation they're in, and of course macro

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Speaker 1: environment being challenging. We believe it is all reflected in

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Speaker 1: their valueation. Philips Alston both being European companies and Phillips

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Speaker 1: you know, for you might use them for your teethbrush

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Speaker 1: for examples. Not you, You're a global perspective here. We

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Speaker 1: looked towards next week, we looked towards the European Central Bank,

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Speaker 1: it's said, is not the only central bank having to

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Speaker 1: fight inflation here. It's certainly not. And really the p

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Speaker 1: bocs here. Anyone who doesn't are your perspective of whether

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Speaker 1: Europe isn't a place to be investing at the moment

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Speaker 1: a very wild girl mind. Sorry, sorry one moment, and

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Speaker 1: then I just just us allow for a second. I'm sorry,

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Speaker 1: I didn't I didn't hear that. So I was just

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Speaker 1: going to say that Europe in a very different position, yeah,

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Speaker 1: the relative to the US. I would say that it's

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Speaker 1: interesting that inflation is almost as you know, is very

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Speaker 1: similarly high in EU Rope as it is in the US,

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Speaker 1: when it comes from completely different fundamental characteristics. You had

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Speaker 1: energy prices go up six that I think energy prices

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Speaker 1: in Europe. Gas prices, for example, went up the six

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Speaker 1: seven ten times more than they went up here in

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Speaker 1: the US. So yes, you've got inflation, but it's very different.

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Speaker 1: The drivers are different. The demand side for your is

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Speaker 1: significantly different than the demand side we had here in

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Speaker 1: the US. This is why I think, this is why

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Speaker 1: I think Ellen's call for Phillips Nelson is so interesting.

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Speaker 1: I mean, um, the Russians said late on Friday that

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Speaker 1: they are not gonna reopen. This figures in terms of

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Speaker 1: nord dream one. Caroline was anchoring the clothes on Bloomberg

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Speaker 1: and all of a sudden the markets turned around bigly. Ellen,

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Speaker 1: why would you want two industrials in Europe at the

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Speaker 1: time when they can't even count on energy bills to

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Speaker 1: stay as low as ten times as high as what

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Speaker 1: we pay in the US. Because you have to look

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Speaker 1: at the price on the screen. These stocks are downboard

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Speaker 1: than and they're reflecting this challenging operating environment. But mind you,

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Speaker 1: you know this gas crisis, right now this winter it's

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Speaker 1: going to be difficult. Actually people are thinking about a

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Speaker 1: more difficult winter the year after. But the reality is

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Speaker 1: things are in motion where this is going to be resolved.

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Speaker 1: And guess what in the long term, everybody's going off

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Speaker 1: Russian gas. I mean it. So now this is your

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Speaker 1: sweet spot. We all know, of course the Franklin Templeton's

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Speaker 1: of this world for emerging market expertise, but also global expertise,

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Speaker 1: and therefore, are there any emerging markets at this moment?

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Speaker 1: They're looking any way attractive when you've got the US dollar,

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Speaker 1: as it did this week, hitting a new record high.

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Speaker 1: So I think that you've got to look at different elements,

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Speaker 1: whether you're looking at local currency, where they're looking at

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Speaker 1: hot currency. Certainly, of in our emerging market get opportunity

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Speaker 1: is fund We continue to find opportunities in the hot

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Speaker 1: currency space in particular. I would note though that as

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Speaker 1: these valuations get more attractive, there is a tendency to

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Speaker 1: throw everything out, and there are many emerging markets which

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Speaker 1: continue to have very solid policies number one. Number two.

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Speaker 1: When you have energy crises the way we currently have,

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Speaker 1: unsurprisingly still have a large number of emerging markets not

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Speaker 1: NOTTRA structure, many other emerging markets which actually stand to

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Speaker 1: benefit from high energy prices valuation. Now, Allen makes an

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Speaker 1: interesting point which I want to get your take on.

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Speaker 1: This winner is gonna be hard, next winner could be worse. Right,

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Speaker 1: We've seen forecasts for inflation in the UK, for example,

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Speaker 1: of over two from reputable investment banks. I mean, how

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Speaker 1: quickly do the central banks want to get a handle

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Speaker 1: on inflation, Because if they want to do it quickly,

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Speaker 1: they're gonna have to come down hard, like Paul Vulker,

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Speaker 1: hard on labor markets, and that's going to cause widespread

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Speaker 1: spread pain and maybe civil unrest, and it's gonna be

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Speaker 1: politically maybe untenable. So it's going to be really hard.

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Speaker 1: There's no easy way to put this. I don't think

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Speaker 1: those massive double digit inflation rates are necessarily going to

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Speaker 1: happen in all of Europe, and that's a different issue.

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Speaker 1: The UK in many respects, always seems to have some

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Speaker 1: more tail winds on inflation and the list than the

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Speaker 1: rest of Europe does, though all of it is very high.

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Speaker 1: The problem is that if you let that high inflation continue,

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Speaker 1: inevitably it starts getting built into expectations wage expectations and

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Speaker 1: it just gets harder the longer you wait. So it's

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Speaker 1: not clear to me that central banks have much of

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Speaker 1: an option, right. They don't have an easy way out.

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Speaker 1: And yes, it's going to be extremely painful. And I

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Speaker 1: think that Monterrey policy was way too easy for way

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Speaker 1: too long, and its full that a little bit of

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Speaker 1: the UK and he started to looking tough, perhaps the

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Speaker 1: whole before the market had antificated. What about Christine Lagard

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Speaker 1: nfol Ellen? What about next week? What about seventy five

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Speaker 1: basis points? I mean, I think you know, overall inflation

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Speaker 1: is high, so the central banks need to do what

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Speaker 1: they need to do. But again I would agree with Soanal.

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Speaker 1: The energy crisis is at the sort of center of inflation.

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Speaker 1: And because of that we see governments in Germany, brants

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Speaker 1: in UK discussing and thinking about how they can manage

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Speaker 1: power prices because they can change the structure of the

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Speaker 1: market to ensure that this can be more contained. And

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Speaker 1: I think there's more news to come, and I think

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Speaker 1: this is why when the pipeline shut down actually a

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Speaker 1: gas prices spell. And me, so now will decide wonderful

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Speaker 1: to have time with you. I want to thank you

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Speaker 1: both for joining us on Wall Street Week, and of

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Speaker 1: course coming up we're gonna have so much more of

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Speaker 1: a global perspective for you. It is global Wall Street.

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Speaker 1: That's next in Wall Street Week, I'll bring back this

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Speaker 1: is Bloomberg Wall Street Week with David Weston from Bloomberg Radio.

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Speaker 1: Welcome back to Wall Street Week on Bloomberg. I'm Matt Miller.

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Speaker 1: California has taken a big step forward in the electric

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Speaker 1: car revolution, banning the sale of internal combustion engine vehicles

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Speaker 1: in the state by twenty thirty five. So what do

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Speaker 1: investors need to know about how this will affect the

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Speaker 1: industry from World Let's go to Jessica Caldwell. She is

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Speaker 1: executive director for Insights with Edmonds. Jessica, thanks so much

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Speaker 1: for joining us. Let's let's first talk about the state

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Speaker 1: of the market. I mean, we have been seeing so

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Speaker 1: many testas on the road, certainly where you are, for

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Speaker 1: years and years, and everyone's talking about the new forward

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Speaker 1: Lightning as well as a number of other startup electric

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Speaker 1: car companies like Lucid, for example. But how much of

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Speaker 1: the market really is a electric right now across the

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Speaker 1: United States. It's not a big percentage if you look

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Speaker 1: at battery e V cells this year, they're around five

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Speaker 1: of pure e vs, so not a big percentage. And

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Speaker 1: this is a technology we've been talking about for over

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Speaker 1: a decade. We've seen these cars, but it finally feels

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Speaker 1: like now we're kind of on the cost of something big.

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Speaker 1: We don't know exactly what the effect of that is yet,

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Speaker 1: but it definitely feels like the products are finally coming.

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Speaker 1: So I think the question here is our consumer is

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Speaker 1: ready to pony up to spend the money. You know,

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Speaker 1: the past few years have been quite difficult in that

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Speaker 1: regard and to kind of see if infrastructure will support

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Speaker 1: increased sales. But if we look at the market as

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Speaker 1: it is, it's still a very small percentage of total

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Speaker 1: new vehicle sales. In terms of spending the money. We've

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Speaker 1: started to see price increases right forward. Is raising prices

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Speaker 1: for the Mackie. It's already raised prices for the Lightning

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Speaker 1: and not unsubstantial amount. We're talking about three, four, seven,

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Speaker 1: eight thousand dollar price increases these vehicles. I think at

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Speaker 1: least the small are ones were affordable before, but the

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Speaker 1: bigger ones like the trucks, can get up to a

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Speaker 1: hundred thousand dollars. Are they making any margin on those? Yes,

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Speaker 1: I mean I think that's what it's all about. Really.

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Speaker 1: I mean, there's been so much demand for these vehicles

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Speaker 1: this year. I mean, I don't even think you can

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Speaker 1: get on a reservation list right now for lightning, So

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Speaker 1: if you really want one, it's it's it's pretty hard

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Speaker 1: out there. So I think they're probably responding to the

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Speaker 1: demand that they see. I mean, we've seen a lot

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Speaker 1: of price increases also for Tesla products of where the

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Speaker 1: course of the past year, and just the market in general.

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Speaker 1: I mean, if we look at new vehicle crisis, they

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Speaker 1: really have skyrocket and I mean the average new vehicles

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Speaker 1: about forty seven thousand dollars right now, which feels much

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Speaker 1: higher than it ever has been historically, and new evs

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Speaker 1: are over sixty dollars. So it is not a cheap

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Speaker 1: game to to buy a new vehicle, particularly an EV. Fortunately,

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Speaker 1: for now, you get seven thousand, five hundred dollars back

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Speaker 1: from Uncle Sam, and a lot of uh local markets

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Speaker 1: also give you some sort of tax rebate. How long

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Speaker 1: is that gonna last? I mean I've heard that I'm

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Speaker 1: starting next year, you're gonna have to buy cars that

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Speaker 1: are made in America. In order to get that, and

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Speaker 1: that you're going to have to buy cars that have

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Speaker 1: battery components also made in America. Yes, next year is

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Speaker 1: where it starts to get really tricky, because not only

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Speaker 1: are there requirements for the vehicles themselves and their components

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Speaker 1: like their battery um the battery elements, as well as

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Speaker 1: where the vehicle is assembled, there's also requirements on income levels.

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Speaker 1: So if you're someone that is you know, you're a

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Speaker 1: married couple and you make over three hundred thousand dollars,

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Speaker 1: which may seem like a lot of money, but if

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Speaker 1: you think about these vehicles are a hundred thousand dollars,

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Speaker 1: it's it really isn't you're not going to be eligible

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Speaker 1: for those rebates, which is, you know, a bit difficult.

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Speaker 1: And the same thing for the used vehicles. So that's

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Speaker 1: what's interesting and new is that in UH we're going

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Speaker 1: to start seeing used rebates for e vs about four

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Speaker 1: thousand dollars. Again, income requirements, So all of a sudden,

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Speaker 1: this this market which didn't really have too many rules

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Speaker 1: in terms of the rebates, it's gonna get really strict

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Speaker 1: and it's gonna be pretty hard to figure out if

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Speaker 1: a vehicle qualifies. Um, there's gonna have to be vindor

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Speaker 1: Cooder is to figure out if your vehicle has the battery,

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Speaker 1: the battery components, and the vehicle's automakers have a few

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Speaker 1: years to ramp up to get these things set in place.

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Speaker 1: Obviously this cannot change overnight, but it's still going to

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Speaker 1: be a tough challenge for them as well as consumers

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Speaker 1: because as of right now, none of the electric vehicles

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Speaker 1: comply with the new regulations. In terms of you know,

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Speaker 1: the raw materials UM coming from the US or the

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Speaker 1: batteries being built in the US. UM, they're gonna have

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Speaker 1: to change that, are they? Do you think those companies

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Speaker 1: building car car electric cars in the US, like GM,

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Speaker 1: like four, like BMW, are they gonna have to revamp

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Speaker 1: the way they source these materials? Yes, a lot of

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Speaker 1: the company is there's a lot of crussure on them

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Speaker 1: to revamp the where where they source these materials. I mean,

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Speaker 1: we know that there's a lot of factories being built

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Speaker 1: as we speak, our back factory of building factories very soon,

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Speaker 1: so that's definitely something that's in play. But in terms

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Speaker 1: of sourcing some of these minerals UM the mining that

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Speaker 1: goes into it, that's a little bit different. That's something

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Speaker 1: that takes, from what I understand, a very long period

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Speaker 1: of time. You can't just change that overnight. I mean,

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Speaker 1: none of these things you can really change overnight. But

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Speaker 1: that is even more sensitive to time. So yes, in

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Speaker 1: terms of where they get these natural resources, they're going

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Speaker 1: to have to put a lot more effort into it,

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Speaker 1: which is tough. I mean it's not they don't have

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Speaker 1: to be a hundred percent next year. There is a

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Speaker 1: time frame associated with it. It's like six hundred percent eventually,

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Speaker 1: so they do have a bit of a time window. Jessica,

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Speaker 1: thanks so much for joining us, Jessica Caldwell. They're from

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Speaker 1: Edmonds talking to us about the race to win UM

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Speaker 1: the electric car crown. Coming up, we wrap up the

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Speaker 1: week with former US Treasury Secretary and Wall Street Week

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Speaker 1: contributor Larry Summers. That's next on Wall Street Week. This

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Speaker 1: is Bloomberg. Welcome back to Wall Street Week on Bloomberg.

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Speaker 1: I'm Matt Miller, I'm Caroline Hyde, and we are thrilled

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Speaker 1: as always as we do each week, to welcome our

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Speaker 1: Wall Street Week special contributor, Hobbard's Larry summers. Of course, Larry,

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Speaker 1: your reaction first and foremost with the job's number, with

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Speaker 1: actually take higher in participation, a steadying perhaps in terms

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Speaker 1: of wage inflation. What do you make of the numbers.

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Speaker 1: I think these numbers were relatively close to what we expected.

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Speaker 1: I doubt anyone's going to change their view UH radically

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Speaker 1: on this. I think the increases in participation are good news,

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Speaker 1: but I think there's a tendency to exaggerate how much

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Speaker 1: higher participation will reduce inflation because people think of it

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Speaker 1: as extra labor supply. But they forget that if the

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Speaker 1: unemployment rate ROT stays the same and participation goes up,

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Speaker 1: more people are working, earning and therefore spending, and that

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Speaker 1: in turn races the demand for labor. So I think

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Speaker 1: this is a positive development for the economy, more people working,

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Speaker 1: more GDP. But people have a tendency to exaggerate how

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Speaker 1: much favorable participation contributes to UH necessary disinflation. It doesn't

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Speaker 1: the Fed, Larry have to push people out of jobs.

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Speaker 1: I mean, right now everyone is earning money and able

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Speaker 1: to pay up as much as they need to for

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Speaker 1: goods and services. But um, in order to bring inflation down,

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Speaker 1: they're gonna need unemployment at four and a half five

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Speaker 1: five and a percent. I don't know what NEHRU is

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Speaker 1: right now, but maybe you have a view. Is that

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Speaker 1: going to bring a political backlash? Uh? Matt, My guess

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Speaker 1: is that things are much less good than the FED

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Speaker 1: has UH supposed. My estimate would be that the nehru's

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Speaker 1: now near five. I don't see how you can fail

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Speaker 1: to think that the AREU has risen substantially when you

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Speaker 1: look at how much there's been an increase in vacancies

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Speaker 1: at a given unemployment rate, what economists call the beverage curve,

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Speaker 1: when you look at the big increases in quit rates

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Speaker 1: UH that we've seen when you look at wage behavior,

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Speaker 1: and I add all that up, and I see a

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Speaker 1: difficult situation where I think that to start bringing down inflation,

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Speaker 1: we're gonna need to get weights. We're gonna need to

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Speaker 1: get above then a RU that's probably somewhere in the

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Speaker 1: five percent UH range. And I think we do have

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Speaker 1: to achieve some meaningful amount of disinflation. So I've said

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Speaker 1: that I'd be surprised if we get to the six percent,

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Speaker 1: get to the two percent inflation target without an unemployment rate. UH.

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Speaker 1: That approaches or exceeds uh six percent. And I've said

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Speaker 1: it before. I think the fed's most recent judgment that

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Speaker 1: they're going to get back to target with an unemployment

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Speaker 1: rate that stays at four point one per cent is

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Speaker 1: certainly a possible outcome. But how that could be regarded

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Speaker 1: as a most probable outcome, I can't really understand. I

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Speaker 1: think that's the quite optimistic case, nothing like the most

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Speaker 1: reasonable case. And I think that the preponderant probability is

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Speaker 1: that the combination of four percent unemployment and two percent

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Speaker 1: inflation a misery index four plus two of six, that

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00:24:38,480 --> 00:24:42,240
Speaker 1: the FED four seas will be a substantial underestimate of

431
00:24:42,280 --> 00:24:45,400
Speaker 1: where will be one year and two years from now.

432
00:24:45,960 --> 00:24:48,000
Speaker 1: And to that end, Therefore, Larry, when you look at

433
00:24:48,040 --> 00:24:50,080
Speaker 1: the jolt stata, because it hasn't just been, of course

434
00:24:50,080 --> 00:24:52,919
Speaker 1: the non farm payrolls, there's been a sprinkling another data,

435
00:24:52,960 --> 00:24:54,600
Speaker 1: whether we look at the new numbers coming from a

436
00:24:54,720 --> 00:24:57,600
Speaker 1: DP of course, whether it's the jobless claims that looked hot,

437
00:24:57,920 --> 00:25:00,800
Speaker 1: you felt that really a soft lanning was very hard

438
00:25:00,800 --> 00:25:03,920
Speaker 1: to achieve. To that point, the market now thinking potentially

439
00:25:03,920 --> 00:25:06,560
Speaker 1: a soft landing is achievable, you still think no, not

440
00:25:06,560 --> 00:25:11,399
Speaker 1: not necessarily here. I don't think that we've seen a

441
00:25:11,480 --> 00:25:17,359
Speaker 1: soft landing means disinflation with the strong economy. Evidence that

442
00:25:17,400 --> 00:25:22,680
Speaker 1: we're having a strong economy without substantial disinflation doesn't really

443
00:25:22,720 --> 00:25:26,280
Speaker 1: speak to the likelihood of a soft landing. So my

444
00:25:26,400 --> 00:25:30,640
Speaker 1: view that soft landing represents the triumph of hope over

445
00:25:30,720 --> 00:25:35,560
Speaker 1: experience is not one that I'm changing. Uh yet, it

446
00:25:35,680 --> 00:25:38,840
Speaker 1: certainly could happen, But I think that one has to

447
00:25:39,240 --> 00:25:43,760
Speaker 1: think in terms of preponderant probabilities, and uh, that's not

448
00:25:43,840 --> 00:25:47,080
Speaker 1: the preponderant probability. Larry, I want to bring up the

449
00:25:47,119 --> 00:25:50,679
Speaker 1: passing of Mikhail gorbat Chaff you served on the Council

450
00:25:50,720 --> 00:25:54,640
Speaker 1: of Economic Advisors and Ronald Reagan's White House. When when

451
00:25:54,680 --> 00:25:59,280
Speaker 1: those two made history together and really change the trajectory

452
00:25:59,400 --> 00:26:02,639
Speaker 1: of globalization, right, the fall of the Berlin Wall, the

453
00:26:02,640 --> 00:26:05,920
Speaker 1: fall of the Soviet Union um really brought the world

454
00:26:05,960 --> 00:26:09,439
Speaker 1: closer together. Now Vladimir Putin is taking it in the

455
00:26:09,560 --> 00:26:13,600
Speaker 1: other direction as Gorbachev dies, What are your thoughts on

456
00:26:13,640 --> 00:26:16,920
Speaker 1: the situation with Russia as it stands and and the

457
00:26:17,000 --> 00:26:21,200
Speaker 1: legacy of Mikhail Gorbachev. I think, in a quite extraordinary way,

458
00:26:21,720 --> 00:26:27,159
Speaker 1: Mikhail Gorbachev will be remembered as a great historic figure

459
00:26:27,920 --> 00:26:34,560
Speaker 1: for presiding over a great historic UH surrender and letting

460
00:26:34,600 --> 00:26:40,199
Speaker 1: that process play out without massive loss of life. And

461
00:26:40,240 --> 00:26:43,320
Speaker 1: I think that is in its way not the achievement

462
00:26:43,400 --> 00:26:46,920
Speaker 1: he set out to achieve, but is in its way

463
00:26:47,400 --> 00:26:52,520
Speaker 1: a very substantial achievement. Look, I think we're at a

464
00:26:52,600 --> 00:26:56,919
Speaker 1: time when globalization is getting a bad name. If you

465
00:26:57,080 --> 00:27:02,480
Speaker 1: ask what the era of globalization has meant in terms

466
00:27:02,480 --> 00:27:05,679
Speaker 1: of the quality of life for people around the world,

467
00:27:06,040 --> 00:27:10,160
Speaker 1: In terms of the having of the share of children

468
00:27:10,440 --> 00:27:13,840
Speaker 1: on our planet who die before the age of five,

469
00:27:14,600 --> 00:27:21,080
Speaker 1: the doubling of the fraction of kids who learned to read,

470
00:27:21,800 --> 00:27:25,240
Speaker 1: the fact that, for all our problems, the incidents of

471
00:27:25,359 --> 00:27:29,320
Speaker 1: violent conflict on our planet is much lower than it

472
00:27:29,440 --> 00:27:36,320
Speaker 1: was in the nineteen seventies or eighties. The extraordinary change

473
00:27:36,400 --> 00:27:40,800
Speaker 1: and human potential represented by the fact that they're now

474
00:27:40,880 --> 00:27:44,600
Speaker 1: more smartphones on Earth than there are adults, and so

475
00:27:45,160 --> 00:27:48,960
Speaker 1: the majority of the world's people can reach out to

476
00:27:49,320 --> 00:27:53,320
Speaker 1: all of the world's other people. I think these are

477
00:27:53,560 --> 00:27:58,040
Speaker 1: fantastic things. And yes, this is under attack. It is

478
00:27:58,160 --> 00:28:04,439
Speaker 1: under attack from uh Russia. It is under attack in

479
00:28:04,520 --> 00:28:10,960
Speaker 1: important respects from an access of authoritarians connecting Russia and

480
00:28:11,200 --> 00:28:16,240
Speaker 1: China and Iran, and it is going to be the

481
00:28:16,320 --> 00:28:24,640
Speaker 1: great struggle of our time to maintain the rule of law,

482
00:28:24,880 --> 00:28:30,080
Speaker 1: to maintain openness, to maintain an opportunity world of opportunity

483
00:28:30,200 --> 00:28:33,400
Speaker 1: for as many people as possible. But I think it's

484
00:28:33,560 --> 00:28:37,760
Speaker 1: very much the wrong way to pursue a strategy of

485
00:28:37,880 --> 00:28:43,560
Speaker 1: resisting UH international connection rather than a strategy of better

486
00:28:43,640 --> 00:28:49,440
Speaker 1: managing UH international connection. I think there's nothing in history

487
00:28:49,480 --> 00:28:57,480
Speaker 1: to suggest that a world of nations that isolate themselves

488
00:28:58,280 --> 00:29:03,600
Speaker 1: is going to be an all to thatly peaceful, or

489
00:29:03,840 --> 00:29:10,120
Speaker 1: prosperous or very attractive world. Larry, thanks so much for

490
00:29:10,200 --> 00:29:13,720
Speaker 1: joining us Wall Street Week special contributor. Of course, former

491
00:29:13,760 --> 00:29:18,479
Speaker 1: Treasury secretary and Harvard had Larry Summers. They're talking to us.

492
00:29:20,360 --> 00:29:24,200
Speaker 1: Finally one more fault. Of course, we're about to experience

493
00:29:24,280 --> 00:29:27,040
Speaker 1: labor Day. What happens after labor Day is everyone goes

494
00:29:27,080 --> 00:29:30,040
Speaker 1: back to laboring. And in fact, Matt, they're going back

495
00:29:30,040 --> 00:29:32,120
Speaker 1: to laboring, perhaps in the office a little bit, Yeah,

496
00:29:32,120 --> 00:29:34,200
Speaker 1: a lot of them, Goldman Sachs right, Morgan stand. They

497
00:29:34,280 --> 00:29:37,560
Speaker 1: came out with notes memos to employees saying, hey, you

498
00:29:37,600 --> 00:29:40,200
Speaker 1: know what, it's really time to come back and don't

499
00:29:40,240 --> 00:29:43,680
Speaker 1: worry about being vaccinated or taking a task, just get

500
00:29:43,720 --> 00:29:46,959
Speaker 1: back to the office, which I completely understand, because if

501
00:29:47,000 --> 00:29:49,560
Speaker 1: you're one of these banks clients, you want them to

502
00:29:49,560 --> 00:29:51,600
Speaker 1: be at work right You don't want them taking labor

503
00:29:51,680 --> 00:29:54,280
Speaker 1: day off to say that people are not productive when

504
00:29:54,280 --> 00:29:58,160
Speaker 1: they're working at home. I'm not saying that, although, um,

505
00:29:58,200 --> 00:30:00,240
Speaker 1: I guess you could be doubtful. If you're a ilion

506
00:30:00,360 --> 00:30:02,760
Speaker 1: and you want to get your money's worth, you don't

507
00:30:02,840 --> 00:30:05,120
Speaker 1: care as much if you're paying for their services about

508
00:30:05,160 --> 00:30:07,560
Speaker 1: their work life balance Right now, lawyer, is that done?

509
00:30:07,640 --> 00:30:10,440
Speaker 1: I feel like, isn't it more the lawyers who are

510
00:30:10,520 --> 00:30:12,840
Speaker 1: charging you for every five minutes ten minutes who should

511
00:30:12,880 --> 00:30:16,840
Speaker 1: be therefore seeing that sea? What did Shakespeare say, Um,

512
00:30:16,880 --> 00:30:18,440
Speaker 1: the first thing we do is kill all the lawyers.

513
00:30:18,480 --> 00:30:20,920
Speaker 1: I think that's quite a different story than the bankers,

514
00:30:20,960 --> 00:30:26,080
Speaker 1: but lawyers. I definitely understand why these banks want their

515
00:30:26,080 --> 00:30:28,520
Speaker 1: people back, and it's also about the culture. I don't

516
00:30:28,880 --> 00:30:31,560
Speaker 1: do you think that they can collaborate as well? Do

517
00:30:31,600 --> 00:30:33,840
Speaker 1: you think that they can pass on knowledge from the

518
00:30:33,880 --> 00:30:36,320
Speaker 1: senior bankers to the kids. Do you think they need

519
00:30:36,360 --> 00:30:39,320
Speaker 1: that five days a week? Yes? So I think I

520
00:30:39,320 --> 00:30:40,960
Speaker 1: mean I want to point out that what I think

521
00:30:41,000 --> 00:30:43,880
Speaker 1: doesn't matter, but that is my opinion. That is my opinion.

522
00:30:44,320 --> 00:30:46,560
Speaker 1: I quite Jeffrey, as I thought, had a slightly more

523
00:30:46,640 --> 00:30:49,320
Speaker 1: nuanced note. Clearly they felt. I like the way that

524
00:30:49,360 --> 00:30:52,000
Speaker 1: they sort of said it was in your lonely silos

525
00:30:52,160 --> 00:30:54,640
Speaker 1: at home. I mean, anyone who has kids like we do,

526
00:30:54,760 --> 00:30:56,760
Speaker 1: or a dog or anything isn't as lonely as they'd

527
00:30:56,760 --> 00:30:59,000
Speaker 1: like to be. I think. But there is that element

528
00:30:59,080 --> 00:31:01,160
Speaker 1: of their saying, come back, but we're not clock watching you.

529
00:31:01,240 --> 00:31:03,440
Speaker 1: We're not seeing when you're badging and badging out. Just

530
00:31:03,520 --> 00:31:05,520
Speaker 1: treat everyone like catulets and decide to be in maybe

531
00:31:05,600 --> 00:31:09,400
Speaker 1: three days a week on certain collaborative from Jeffries. I mean,

532
00:31:09,640 --> 00:31:12,480
Speaker 1: they're pretty hardcore at Jeffries. I think they might be

533
00:31:12,560 --> 00:31:16,400
Speaker 1: watched CEO on the phone. Did Chandler? Are you really

534
00:31:16,640 --> 00:31:19,480
Speaker 1: not clock watching? I mean, he probably has people that

535
00:31:19,520 --> 00:31:21,640
Speaker 1: do it for him. But I think it's about time

536
00:31:21,640 --> 00:31:23,600
Speaker 1: for Wall Street really to get back to business, to

537
00:31:23,600 --> 00:31:25,200
Speaker 1: get back to work the way they have been. It

538
00:31:25,360 --> 00:31:30,000
Speaker 1: might not happen. Isn't happening because rising do you see

539
00:31:30,000 --> 00:31:33,040
Speaker 1: Schnelli bast send this note earlier showing that M and

540
00:31:33,120 --> 00:31:36,600
Speaker 1: A this year is a trillion dollars less than M

541
00:31:36,640 --> 00:31:38,600
Speaker 1: and A at the same time last year. We've seen

542
00:31:38,640 --> 00:31:42,280
Speaker 1: a ton of deals break apart and many many more

543
00:31:42,320 --> 00:31:45,360
Speaker 1: not even get done. So that's as well. Front that

544
00:31:45,800 --> 00:31:48,760
Speaker 1: exactly hid itself. We sold Bonnie, the Yugat makers just

545
00:31:48,800 --> 00:31:51,120
Speaker 1: put its I p O on Ice I Feel and

546
00:31:51,200 --> 00:31:53,480
Speaker 1: Nova Grass isn't gonna buy bit Go. I mean, there's

547
00:31:53,480 --> 00:31:55,160
Speaker 1: a ton of deals that have fallen apart, but more

548
00:31:55,200 --> 00:31:59,120
Speaker 1: and more haven't gotten done. To that note Crypto, then

549
00:31:59,160 --> 00:32:00,960
Speaker 1: I'll go out to the fist And Mayson seemed to

550
00:32:00,960 --> 00:32:03,240
Speaker 1: me about as well. Right the West Coast, they're not

551
00:32:03,240 --> 00:32:05,080
Speaker 1: going back to the office because they work from home

552
00:32:05,200 --> 00:32:08,560
Speaker 1: or because they're getting fired. Right, you're seeing big layoffs

553
00:32:08,800 --> 00:32:11,760
Speaker 1: on the West Coast, big layoffs in tech, and that's

554
00:32:11,760 --> 00:32:14,080
Speaker 1: started to spread across to industrial America. With a three

555
00:32:14,120 --> 00:32:16,680
Speaker 1: am announcement, it's not mistic way to leave it, isn't it. Yes,

556
00:32:16,760 --> 00:32:20,160
Speaker 1: We'll have a great weekend. Enjoy your Labor day. You've

557
00:32:20,160 --> 00:32:23,040
Speaker 1: been watching We want to do it together Wall Street.

558
00:32:23,680 --> 00:32:25,160
Speaker 1: This is blomk