Speaker 1: This is Bloomberg Wall Street Week. We turn our attention
Speaker 1: to the markets this week. U s CPI members reinforcing
Speaker 1: concerns about inflation. The financial stories that sheep are worth
Speaker 1: a really different reaction to Mark. It's more indications of
Speaker 1: just how hot the U. S economy really is through
Speaker 1: the eyes of the most influential voices Larry Summers, the
Speaker 1: former Treachery Secretary, Katherine Keening, CEO of v N y
Speaker 1: mon Sam's l Sharmon and founder of Equatic Group Investment
Speaker 1: in Bloomberg wool Street Week with David Weston from Bloomberg Radio.
Speaker 1: Something for everyone in the August jobs report, with the
Speaker 1: top line beating estimates, but the unemployment rate ticking higher
Speaker 1: and European inflation hits a record high. This is Wall
Speaker 1: Street Week. This week wool Street Week contribute to Larry
Speaker 1: Summers on the Job's report, people have a tendency to
Speaker 1: exaggerate how much favorable participation contributes to necessary disinflation and
Speaker 1: Jessica Coldwell of Edmund's on the future of the electric
Speaker 1: vehicle market. It finally feels like now we're kind of
Speaker 1: on the cost of something big, So I think the
Speaker 1: question here is our consumers ready to pony had to
Speaker 1: spend the money. Markets began the week jittery, following FED
Speaker 1: chair pals hawk ish tilled from Friday, with Minneapolis Fed
Speaker 1: President Neil cash Cary hammering the point home. I was
Speaker 1: actually happy to see how the chair Pal's Jackson Whole
Speaker 1: speech was received. You know, people now understand the seriousness
Speaker 1: of our commitment to getting inflation back down to two.
Speaker 1: Inflation in Europe rocketed to yet another all time high,
Speaker 1: reaching nine point one year over year, as the Block's
Speaker 1: Central Bank ways whether to go with a jump the
Speaker 1: rate hike of seventy five basis points. But economists are
Speaker 1: also being swayed because of all this hawkish commentary we've
Speaker 1: had out of the CB. We've had six members of
Speaker 1: the Governing Council now saying that a move bigger than
Speaker 1: a half point needs to be at least considered class.
Speaker 1: Natural gas prices in Europe continue to fall throughout the week,
Speaker 1: even as Russia's gas proms shut off the spigots to
Speaker 1: Germany's Norde Dream pipeline three days of maintenance. I could
Speaker 1: quote marks around that because some people would doubt the motives.
Speaker 1: Fine back, I'm Caroline Hyde alongside Matt Miller. Let us
Speaker 1: shape up the week for you. The week that was
Speaker 1: on Wall Street s ANDP five hundred five days were
Speaker 1: in the red to the tune of almost or three
Speaker 1: and a half percent. This is third straight week of losses.
Speaker 1: This is the worst week we've had since mid June
Speaker 1: two year yield almost in a round trip. Look, we're
Speaker 1: basically flat on the week, But what a movement intra
Speaker 1: weak volatility that we had. Yields rise. We think we
Speaker 1: have a hawk is fed on our hands. They pull
Speaker 1: back when we get a really rather gold Delocks scenario
Speaker 1: with the jobs data and Matt the vix, it creeps
Speaker 1: a little Hibbert. Look, twenty five is above the annual average.
Speaker 1: I think the VIX doesn't really do much. So I'm
Speaker 1: that conveys that were really headed down hard. Yet the
Speaker 1: market doesn't really believe that the Fed can go ahead
Speaker 1: with rate hike after rate hike after rate hike. They're
Speaker 1: a little more convinced after Jackson Hole. But this job
Speaker 1: number you were talking about this earlier today, Um, we
Speaker 1: saw what looked like maybe a little stabilization in terms
Speaker 1: of average hourly earnings, and we saw the participation rate climb,
Speaker 1: So you know that's putting in a couple more question
Speaker 1: marks over the Fed's commitment to raise rates soft landing.
Speaker 1: Can they do it? Let's ask our guests were pleased
Speaker 1: to welcome to the show, and they Director and fundamental
Speaker 1: portfolio manager for Causeway Capital Sonalta, said chief investment officer
Speaker 1: Franklin Templeton Fixed Income. It is wonderful to have you
Speaker 1: both here as we look towards a long weekend, a
Speaker 1: long weekend where it felt that money managers took risk
Speaker 1: off the table. And then start first and foremost with
Speaker 1: us your interpretation of the job's number and where that
Speaker 1: leaves the Federal reserve. You know, people are looking at
Speaker 1: the number very care way to see if what feds
Speaker 1: are doing is working, to see if this what actions
Speaker 1: have taken, are loosening the labor market. It doesn't. There's
Speaker 1: incremental signs, but nothing for sure. And I think there
Speaker 1: is also some confusion in the market thinking that you know,
Speaker 1: only from the unemployment numbers we will see uh slow down,
Speaker 1: be more market. But in a high inflationary era, it
Speaker 1: is common that labor market stays tight before the shoe
Speaker 1: really drops. So I know this is a number that
Speaker 1: the BED is concerned about. But we have way more
Speaker 1: to go before unemployment is threatening, where FED has to
Speaker 1: be a birth course. We had, you know, in the
Speaker 1: last trading day of the week, a big turnaround. As
Speaker 1: Caroline points out, of course, a lot of asset managers
Speaker 1: are going to take risk off the table as they
Speaker 1: go into a labor day weekend. You don't want to
Speaker 1: be sitting on the beach worried about your portfolio. Now
Speaker 1: decide you have a big portfolio to worry about. Is
Speaker 1: that what you guys have done at the end of
Speaker 1: the week. Do you see portfolio managers typically doing that
Speaker 1: at Actually take it back to what you started started
Speaker 1: discussing the FED lacks credibility. Markets don't believe that the
Speaker 1: FED is going to do what the FED keeps saying
Speaker 1: it's going to do. That's a problem for the FED
Speaker 1: and it's also a problem for markets. So we in
Speaker 1: our portfolios have actually we started taking risk of sometime
Speaker 1: before this long weekend. We don't think that a long
Speaker 1: weekend in and of itself makes a major difference. I
Speaker 1: couldn't agree more with Eden. This is one day to point.
Speaker 1: The bottom line is I'm going to be looking very
Speaker 1: carefully at the Fed's new SEPs to see if we
Speaker 1: get some more realistic SEPs after the March and June
Speaker 1: number June projections, which I didn't think were internally consistent
Speaker 1: at all. So I want to dig in that for
Speaker 1: a moments now, because you're saying they lack credibility. You
Speaker 1: are a bond money manager first and foremost fixing. It
Speaker 1: felt as though the bond market sort of had interpreted
Speaker 1: the Federal Reserve along the right tracks prior to Jackson Hall.
Speaker 1: They didn't expect to pivot and quite the same way
Speaker 1: that the equity market did. Why do you think, therefore
Speaker 1: credibility has been so hard to come about. I'm not
Speaker 1: sure I fully agree with you, because we were at
Speaker 1: three forty seven. The type of volatility we've seen in
Speaker 1: the bond market on every single data point, to me,
Speaker 1: indicates that the bond market also fully anticipates that the
Speaker 1: Fed is going to do what it's done for the
Speaker 1: better part of a couple of decades now, which is,
Speaker 1: as soon as the market gets wappy, the Fed blinks
Speaker 1: and it reverses course. It happened in twenty eighteen. People
Speaker 1: keep anticipating that for the Feds first, and almost view
Speaker 1: the first target. The only target is unemployment and growth.
Speaker 1: When we've got inflation at eight and a half percent
Speaker 1: and we have employment significantly lower than current NYROU, it
Speaker 1: seems remarkable. We're gonna have much more wish now to
Speaker 1: side and Ellen Lee. Ellen's going to give us some
Speaker 1: individual company names to talk about after we take a break.
Speaker 1: This is Wall three on Bloomberg. This is Bloomberg Wall
Speaker 1: Street Week with David Weston from Bloomberg Radio. But this
Speaker 1: week the conventional media began to catch up. After all,
Speaker 1: it was hard totally to ignore such additional developments as
Speaker 1: the slowest rate of manufacturing growth in thirteen months, the
Speaker 1: first outright decline in construction spending in seven months, falling
Speaker 1: prices for raw materials to the lowest levels in September,
Speaker 1: the biggest monthly tumble in factory orders in almost a decade,
Speaker 1: arising unemployment rate, and the first monthly decline in private
Speaker 1: sector jobs in more than four years. You think maybe
Speaker 1: the economy really is a hairless vibrant these days. This
Speaker 1: is Bloomberg Wall Free Week. I'm Matt Miller alongside Caroline Hide.
Speaker 1: That Cliff of Lewis Rookheiser from June two, two thousand,
Speaker 1: when Santana's Maria Maria was at the top of the
Speaker 1: charts and Mission Impossible Too was the number one movie
Speaker 1: of the land. There were similarities between the economy then
Speaker 1: and now. The unemployment rate ticked up, but back then
Speaker 1: it was all the way to four percent compared to
Speaker 1: this month's three point seven percent, and people were starting
Speaker 1: to really think about what was going on in the
Speaker 1: economy rather than at the individual company level. Ellen Lee
Speaker 1: joins us right now, and I'll decide they're back with
Speaker 1: us to continue this conversation. Ellen, I wanted to touch
Speaker 1: on this because it seems like the whole world's gone macro.
Speaker 1: Everybody wants to talk about the unemployment rate and the
Speaker 1: fed um inflation. How does that strike you as as
Speaker 1: a fundamental research annelist. I can't ignore what's happening in
Speaker 1: the world, obviously, because it's the backdrop for the environment
Speaker 1: in which companies operate. But at causeway, we're looking for
Speaker 1: bottom up, you know, investment ideas, and there a couple
Speaker 1: that I really like in this environment, you know, Phillips
Speaker 1: and also both are restructuring store raised trading at ten times.
Speaker 1: I think in the current environment, were interest rates are
Speaker 1: going up, I think that's a good tail with were
Speaker 1: value stocks. But more importantly, they have more half their
Speaker 1: faith in their control, where the management can lead them
Speaker 1: out of the situation they're in, and of course macro
Speaker 1: environment being challenging. We believe it is all reflected in
Speaker 1: their valueation. Philips Alston both being European companies and Phillips
Speaker 1: you know, for you might use them for your teethbrush
Speaker 1: for examples. Not you, You're a global perspective here. We
Speaker 1: looked towards next week, we looked towards the European Central Bank,
Speaker 1: it's said, is not the only central bank having to
Speaker 1: fight inflation here. It's certainly not. And really the p
Speaker 1: bocs here. Anyone who doesn't are your perspective of whether
Speaker 1: Europe isn't a place to be investing at the moment
Speaker 1: a very wild girl mind. Sorry, sorry one moment, and
Speaker 1: then I just just us allow for a second. I'm sorry,
Speaker 1: I didn't I didn't hear that. So I was just
Speaker 1: going to say that Europe in a very different position, yeah,
Speaker 1: the relative to the US. I would say that it's
Speaker 1: interesting that inflation is almost as you know, is very
Speaker 1: similarly high in EU Rope as it is in the US,
Speaker 1: when it comes from completely different fundamental characteristics. You had
Speaker 1: energy prices go up six that I think energy prices
Speaker 1: in Europe. Gas prices, for example, went up the six
Speaker 1: seven ten times more than they went up here in
Speaker 1: the US. So yes, you've got inflation, but it's very different.
Speaker 1: The drivers are different. The demand side for your is
Speaker 1: significantly different than the demand side we had here in
Speaker 1: the US. This is why I think, this is why
Speaker 1: I think Ellen's call for Phillips Nelson is so interesting.
Speaker 1: I mean, um, the Russians said late on Friday that
Speaker 1: they are not gonna reopen. This figures in terms of
Speaker 1: nord dream one. Caroline was anchoring the clothes on Bloomberg
Speaker 1: and all of a sudden the markets turned around bigly. Ellen,
Speaker 1: why would you want two industrials in Europe at the
Speaker 1: time when they can't even count on energy bills to
Speaker 1: stay as low as ten times as high as what
Speaker 1: we pay in the US. Because you have to look
Speaker 1: at the price on the screen. These stocks are downboard
Speaker 1: than and they're reflecting this challenging operating environment. But mind you,
Speaker 1: you know this gas crisis, right now this winter it's
Speaker 1: going to be difficult. Actually people are thinking about a
Speaker 1: more difficult winter the year after. But the reality is
Speaker 1: things are in motion where this is going to be resolved.
Speaker 1: And guess what in the long term, everybody's going off
Speaker 1: Russian gas. I mean it. So now this is your
Speaker 1: sweet spot. We all know, of course the Franklin Templeton's
Speaker 1: of this world for emerging market expertise, but also global expertise,
Speaker 1: and therefore, are there any emerging markets at this moment?
Speaker 1: They're looking any way attractive when you've got the US dollar,
Speaker 1: as it did this week, hitting a new record high.
Speaker 1: So I think that you've got to look at different elements,
Speaker 1: whether you're looking at local currency, where they're looking at
Speaker 1: hot currency. Certainly, of in our emerging market get opportunity
Speaker 1: is fund We continue to find opportunities in the hot
Speaker 1: currency space in particular. I would note though that as
Speaker 1: these valuations get more attractive, there is a tendency to
Speaker 1: throw everything out, and there are many emerging markets which
Speaker 1: continue to have very solid policies number one. Number two.
Speaker 1: When you have energy crises the way we currently have,
Speaker 1: unsurprisingly still have a large number of emerging markets not
Speaker 1: NOTTRA structure, many other emerging markets which actually stand to
Speaker 1: benefit from high energy prices valuation. Now, Allen makes an
Speaker 1: interesting point which I want to get your take on.
Speaker 1: This winner is gonna be hard, next winner could be worse. Right,
Speaker 1: We've seen forecasts for inflation in the UK, for example,
Speaker 1: of over two from reputable investment banks. I mean, how
Speaker 1: quickly do the central banks want to get a handle
Speaker 1: on inflation, Because if they want to do it quickly,
Speaker 1: they're gonna have to come down hard, like Paul Vulker,
Speaker 1: hard on labor markets, and that's going to cause widespread
Speaker 1: spread pain and maybe civil unrest, and it's gonna be
Speaker 1: politically maybe untenable. So it's going to be really hard.
Speaker 1: There's no easy way to put this. I don't think
Speaker 1: those massive double digit inflation rates are necessarily going to
Speaker 1: happen in all of Europe, and that's a different issue.
Speaker 1: The UK in many respects, always seems to have some
Speaker 1: more tail winds on inflation and the list than the
Speaker 1: rest of Europe does, though all of it is very high.
Speaker 1: The problem is that if you let that high inflation continue,
Speaker 1: inevitably it starts getting built into expectations wage expectations and
Speaker 1: it just gets harder the longer you wait. So it's
Speaker 1: not clear to me that central banks have much of
Speaker 1: an option, right. They don't have an easy way out.
Speaker 1: And yes, it's going to be extremely painful. And I
Speaker 1: think that Monterrey policy was way too easy for way
Speaker 1: too long, and its full that a little bit of
Speaker 1: the UK and he started to looking tough, perhaps the
Speaker 1: whole before the market had antificated. What about Christine Lagard
Speaker 1: nfol Ellen? What about next week? What about seventy five
Speaker 1: basis points? I mean, I think you know, overall inflation
Speaker 1: is high, so the central banks need to do what
Speaker 1: they need to do. But again I would agree with Soanal.
Speaker 1: The energy crisis is at the sort of center of inflation.
Speaker 1: And because of that we see governments in Germany, brants
Speaker 1: in UK discussing and thinking about how they can manage
Speaker 1: power prices because they can change the structure of the
Speaker 1: market to ensure that this can be more contained. And
Speaker 1: I think there's more news to come, and I think
Speaker 1: this is why when the pipeline shut down actually a
Speaker 1: gas prices spell. And me, so now will decide wonderful
Speaker 1: to have time with you. I want to thank you
Speaker 1: both for joining us on Wall Street Week, and of
Speaker 1: course coming up we're gonna have so much more of
Speaker 1: a global perspective for you. It is global Wall Street.
Speaker 1: That's next in Wall Street Week, I'll bring back this
Speaker 1: is Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: Welcome back to Wall Street Week on Bloomberg. I'm Matt Miller.
Speaker 1: California has taken a big step forward in the electric
Speaker 1: car revolution, banning the sale of internal combustion engine vehicles
Speaker 1: in the state by twenty thirty five. So what do
Speaker 1: investors need to know about how this will affect the
Speaker 1: industry from World Let's go to Jessica Caldwell. She is
Speaker 1: executive director for Insights with Edmonds. Jessica, thanks so much
Speaker 1: for joining us. Let's let's first talk about the state
Speaker 1: of the market. I mean, we have been seeing so
Speaker 1: many testas on the road, certainly where you are, for
Speaker 1: years and years, and everyone's talking about the new forward
Speaker 1: Lightning as well as a number of other startup electric
Speaker 1: car companies like Lucid, for example. But how much of
Speaker 1: the market really is a electric right now across the
Speaker 1: United States. It's not a big percentage if you look
Speaker 1: at battery e V cells this year, they're around five
Speaker 1: of pure e vs, so not a big percentage. And
Speaker 1: this is a technology we've been talking about for over
Speaker 1: a decade. We've seen these cars, but it finally feels
Speaker 1: like now we're kind of on the cost of something big.
Speaker 1: We don't know exactly what the effect of that is yet,
Speaker 1: but it definitely feels like the products are finally coming.
Speaker 1: So I think the question here is our consumer is
Speaker 1: ready to pony up to spend the money. You know,
Speaker 1: the past few years have been quite difficult in that
Speaker 1: regard and to kind of see if infrastructure will support
Speaker 1: increased sales. But if we look at the market as
Speaker 1: it is, it's still a very small percentage of total
Speaker 1: new vehicle sales. In terms of spending the money. We've
Speaker 1: started to see price increases right forward. Is raising prices
Speaker 1: for the Mackie. It's already raised prices for the Lightning
Speaker 1: and not unsubstantial amount. We're talking about three, four, seven,
Speaker 1: eight thousand dollar price increases these vehicles. I think at
Speaker 1: least the small are ones were affordable before, but the
Speaker 1: bigger ones like the trucks, can get up to a
Speaker 1: hundred thousand dollars. Are they making any margin on those? Yes,
Speaker 1: I mean I think that's what it's all about. Really.
Speaker 1: I mean, there's been so much demand for these vehicles
Speaker 1: this year. I mean, I don't even think you can
Speaker 1: get on a reservation list right now for lightning, So
Speaker 1: if you really want one, it's it's it's pretty hard
Speaker 1: out there. So I think they're probably responding to the
Speaker 1: demand that they see. I mean, we've seen a lot
Speaker 1: of price increases also for Tesla products of where the
Speaker 1: course of the past year, and just the market in general.
Speaker 1: I mean, if we look at new vehicle crisis, they
Speaker 1: really have skyrocket and I mean the average new vehicles
Speaker 1: about forty seven thousand dollars right now, which feels much
Speaker 1: higher than it ever has been historically, and new evs
Speaker 1: are over sixty dollars. So it is not a cheap
Speaker 1: game to to buy a new vehicle, particularly an EV. Fortunately,
Speaker 1: for now, you get seven thousand, five hundred dollars back
Speaker 1: from Uncle Sam, and a lot of uh local markets
Speaker 1: also give you some sort of tax rebate. How long
Speaker 1: is that gonna last? I mean I've heard that I'm
Speaker 1: starting next year, you're gonna have to buy cars that
Speaker 1: are made in America. In order to get that, and
Speaker 1: that you're going to have to buy cars that have
Speaker 1: battery components also made in America. Yes, next year is
Speaker 1: where it starts to get really tricky, because not only
Speaker 1: are there requirements for the vehicles themselves and their components
Speaker 1: like their battery um the battery elements, as well as
Speaker 1: where the vehicle is assembled, there's also requirements on income levels.
Speaker 1: So if you're someone that is you know, you're a
Speaker 1: married couple and you make over three hundred thousand dollars,
Speaker 1: which may seem like a lot of money, but if
Speaker 1: you think about these vehicles are a hundred thousand dollars,
Speaker 1: it's it really isn't you're not going to be eligible
Speaker 1: for those rebates, which is, you know, a bit difficult.
Speaker 1: And the same thing for the used vehicles. So that's
Speaker 1: what's interesting and new is that in UH we're going
Speaker 1: to start seeing used rebates for e vs about four
Speaker 1: thousand dollars. Again, income requirements, So all of a sudden,
Speaker 1: this this market which didn't really have too many rules
Speaker 1: in terms of the rebates, it's gonna get really strict
Speaker 1: and it's gonna be pretty hard to figure out if
Speaker 1: a vehicle qualifies. Um, there's gonna have to be vindor
Speaker 1: Cooder is to figure out if your vehicle has the battery,
Speaker 1: the battery components, and the vehicle's automakers have a few
Speaker 1: years to ramp up to get these things set in place.
Speaker 1: Obviously this cannot change overnight, but it's still going to
Speaker 1: be a tough challenge for them as well as consumers
Speaker 1: because as of right now, none of the electric vehicles
Speaker 1: comply with the new regulations. In terms of you know,
Speaker 1: the raw materials UM coming from the US or the
Speaker 1: batteries being built in the US. UM, they're gonna have
Speaker 1: to change that, are they? Do you think those companies
Speaker 1: building car car electric cars in the US, like GM,
Speaker 1: like four, like BMW, are they gonna have to revamp
Speaker 1: the way they source these materials? Yes, a lot of
Speaker 1: the company is there's a lot of crussure on them
Speaker 1: to revamp the where where they source these materials. I mean,
Speaker 1: we know that there's a lot of factories being built
Speaker 1: as we speak, our back factory of building factories very soon,
Speaker 1: so that's definitely something that's in play. But in terms
Speaker 1: of sourcing some of these minerals UM the mining that
Speaker 1: goes into it, that's a little bit different. That's something
Speaker 1: that takes, from what I understand, a very long period
Speaker 1: of time. You can't just change that overnight. I mean,
Speaker 1: none of these things you can really change overnight. But
Speaker 1: that is even more sensitive to time. So yes, in
Speaker 1: terms of where they get these natural resources, they're going
Speaker 1: to have to put a lot more effort into it,
Speaker 1: which is tough. I mean it's not they don't have
Speaker 1: to be a hundred percent next year. There is a
Speaker 1: time frame associated with it. It's like six hundred percent eventually,
Speaker 1: so they do have a bit of a time window. Jessica,
Speaker 1: thanks so much for joining us, Jessica Caldwell. They're from
Speaker 1: Edmonds talking to us about the race to win UM
Speaker 1: the electric car crown. Coming up, we wrap up the
Speaker 1: week with former US Treasury Secretary and Wall Street Week
Speaker 1: contributor Larry Summers. That's next on Wall Street Week. This
Speaker 1: is Bloomberg. Welcome back to Wall Street Week on Bloomberg.
Speaker 1: I'm Matt Miller, I'm Caroline Hyde, and we are thrilled
Speaker 1: as always as we do each week, to welcome our
Speaker 1: Wall Street Week special contributor, Hobbard's Larry summers. Of course, Larry,
Speaker 1: your reaction first and foremost with the job's number, with
Speaker 1: actually take higher in participation, a steadying perhaps in terms
Speaker 1: of wage inflation. What do you make of the numbers.
Speaker 1: I think these numbers were relatively close to what we expected.
Speaker 1: I doubt anyone's going to change their view UH radically
Speaker 1: on this. I think the increases in participation are good news,
Speaker 1: but I think there's a tendency to exaggerate how much
Speaker 1: higher participation will reduce inflation because people think of it
Speaker 1: as extra labor supply. But they forget that if the
Speaker 1: unemployment rate ROT stays the same and participation goes up,
Speaker 1: more people are working, earning and therefore spending, and that
Speaker 1: in turn races the demand for labor. So I think
Speaker 1: this is a positive development for the economy, more people working,
Speaker 1: more GDP. But people have a tendency to exaggerate how
Speaker 1: much favorable participation contributes to UH necessary disinflation. It doesn't
Speaker 1: the Fed, Larry have to push people out of jobs.
Speaker 1: I mean, right now everyone is earning money and able
Speaker 1: to pay up as much as they need to for
Speaker 1: goods and services. But um, in order to bring inflation down,
Speaker 1: they're gonna need unemployment at four and a half five
Speaker 1: five and a percent. I don't know what NEHRU is
Speaker 1: right now, but maybe you have a view. Is that
Speaker 1: going to bring a political backlash? Uh? Matt, My guess
Speaker 1: is that things are much less good than the FED
Speaker 1: has UH supposed. My estimate would be that the nehru's
Speaker 1: now near five. I don't see how you can fail
Speaker 1: to think that the AREU has risen substantially when you
Speaker 1: look at how much there's been an increase in vacancies
Speaker 1: at a given unemployment rate, what economists call the beverage curve,
Speaker 1: when you look at the big increases in quit rates
Speaker 1: UH that we've seen when you look at wage behavior,
Speaker 1: and I add all that up, and I see a
Speaker 1: difficult situation where I think that to start bringing down inflation,
Speaker 1: we're gonna need to get weights. We're gonna need to
Speaker 1: get above then a RU that's probably somewhere in the
Speaker 1: five percent UH range. And I think we do have
Speaker 1: to achieve some meaningful amount of disinflation. So I've said
Speaker 1: that I'd be surprised if we get to the six percent,
Speaker 1: get to the two percent inflation target without an unemployment rate. UH.
Speaker 1: That approaches or exceeds uh six percent. And I've said
Speaker 1: it before. I think the fed's most recent judgment that
Speaker 1: they're going to get back to target with an unemployment
Speaker 1: rate that stays at four point one per cent is
Speaker 1: certainly a possible outcome. But how that could be regarded
Speaker 1: as a most probable outcome, I can't really understand. I
Speaker 1: think that's the quite optimistic case, nothing like the most
Speaker 1: reasonable case. And I think that the preponderant probability is
Speaker 1: that the combination of four percent unemployment and two percent
Speaker 1: inflation a misery index four plus two of six, that
Speaker 1: the FED four seas will be a substantial underestimate of
Speaker 1: where will be one year and two years from now.
Speaker 1: And to that end, Therefore, Larry, when you look at
Speaker 1: the jolt stata, because it hasn't just been, of course
Speaker 1: the non farm payrolls, there's been a sprinkling another data,
Speaker 1: whether we look at the new numbers coming from a
Speaker 1: DP of course, whether it's the jobless claims that looked hot,
Speaker 1: you felt that really a soft lanning was very hard
Speaker 1: to achieve. To that point, the market now thinking potentially
Speaker 1: a soft landing is achievable, you still think no, not
Speaker 1: not necessarily here. I don't think that we've seen a
Speaker 1: soft landing means disinflation with the strong economy. Evidence that
Speaker 1: we're having a strong economy without substantial disinflation doesn't really
Speaker 1: speak to the likelihood of a soft landing. So my
Speaker 1: view that soft landing represents the triumph of hope over
Speaker 1: experience is not one that I'm changing. Uh yet, it
Speaker 1: certainly could happen, But I think that one has to
Speaker 1: think in terms of preponderant probabilities, and uh, that's not
Speaker 1: the preponderant probability. Larry, I want to bring up the
Speaker 1: passing of Mikhail gorbat Chaff you served on the Council
Speaker 1: of Economic Advisors and Ronald Reagan's White House. When when
Speaker 1: those two made history together and really change the trajectory
Speaker 1: of globalization, right, the fall of the Berlin Wall, the
Speaker 1: fall of the Soviet Union um really brought the world
Speaker 1: closer together. Now Vladimir Putin is taking it in the
Speaker 1: other direction as Gorbachev dies, What are your thoughts on
Speaker 1: the situation with Russia as it stands and and the
Speaker 1: legacy of Mikhail Gorbachev. I think, in a quite extraordinary way,
Speaker 1: Mikhail Gorbachev will be remembered as a great historic figure
Speaker 1: for presiding over a great historic UH surrender and letting
Speaker 1: that process play out without massive loss of life. And
Speaker 1: I think that is in its way not the achievement
Speaker 1: he set out to achieve, but is in its way
Speaker 1: a very substantial achievement. Look, I think we're at a
Speaker 1: time when globalization is getting a bad name. If you
Speaker 1: ask what the era of globalization has meant in terms
Speaker 1: of the quality of life for people around the world,
Speaker 1: In terms of the having of the share of children
Speaker 1: on our planet who die before the age of five,
Speaker 1: the doubling of the fraction of kids who learned to read,
Speaker 1: the fact that, for all our problems, the incidents of
Speaker 1: violent conflict on our planet is much lower than it
Speaker 1: was in the nineteen seventies or eighties. The extraordinary change
Speaker 1: and human potential represented by the fact that they're now
Speaker 1: more smartphones on Earth than there are adults, and so
Speaker 1: the majority of the world's people can reach out to
Speaker 1: all of the world's other people. I think these are
Speaker 1: fantastic things. And yes, this is under attack. It is
Speaker 1: under attack from uh Russia. It is under attack in
Speaker 1: important respects from an access of authoritarians connecting Russia and
Speaker 1: China and Iran, and it is going to be the
Speaker 1: great struggle of our time to maintain the rule of law,
Speaker 1: to maintain openness, to maintain an opportunity world of opportunity
Speaker 1: for as many people as possible. But I think it's
Speaker 1: very much the wrong way to pursue a strategy of
Speaker 1: resisting UH international connection rather than a strategy of better
Speaker 1: managing UH international connection. I think there's nothing in history
Speaker 1: to suggest that a world of nations that isolate themselves
Speaker 1: is going to be an all to thatly peaceful, or
Speaker 1: prosperous or very attractive world. Larry, thanks so much for
Speaker 1: joining us Wall Street Week special contributor. Of course, former
Speaker 1: Treasury secretary and Harvard had Larry Summers. They're talking to us.
Speaker 1: Finally one more fault. Of course, we're about to experience
Speaker 1: labor Day. What happens after labor Day is everyone goes
Speaker 1: back to laboring. And in fact, Matt, they're going back
Speaker 1: to laboring, perhaps in the office a little bit, Yeah,
Speaker 1: a lot of them, Goldman Sachs right, Morgan stand. They
Speaker 1: came out with notes memos to employees saying, hey, you
Speaker 1: know what, it's really time to come back and don't
Speaker 1: worry about being vaccinated or taking a task, just get
Speaker 1: back to the office, which I completely understand, because if
Speaker 1: you're one of these banks clients, you want them to
Speaker 1: be at work right You don't want them taking labor
Speaker 1: day off to say that people are not productive when
Speaker 1: they're working at home. I'm not saying that, although, um,
Speaker 1: I guess you could be doubtful. If you're a ilion
Speaker 1: and you want to get your money's worth, you don't
Speaker 1: care as much if you're paying for their services about
Speaker 1: their work life balance Right now, lawyer, is that done?
Speaker 1: I feel like, isn't it more the lawyers who are
Speaker 1: charging you for every five minutes ten minutes who should
Speaker 1: be therefore seeing that sea? What did Shakespeare say, Um,
Speaker 1: the first thing we do is kill all the lawyers.
Speaker 1: I think that's quite a different story than the bankers,
Speaker 1: but lawyers. I definitely understand why these banks want their
Speaker 1: people back, and it's also about the culture. I don't
Speaker 1: do you think that they can collaborate as well? Do
Speaker 1: you think that they can pass on knowledge from the
Speaker 1: senior bankers to the kids. Do you think they need
Speaker 1: that five days a week? Yes? So I think I
Speaker 1: mean I want to point out that what I think
Speaker 1: doesn't matter, but that is my opinion. That is my opinion.
Speaker 1: I quite Jeffrey, as I thought, had a slightly more
Speaker 1: nuanced note. Clearly they felt. I like the way that
Speaker 1: they sort of said it was in your lonely silos
Speaker 1: at home. I mean, anyone who has kids like we do,
Speaker 1: or a dog or anything isn't as lonely as they'd
Speaker 1: like to be. I think. But there is that element
Speaker 1: of their saying, come back, but we're not clock watching you.
Speaker 1: We're not seeing when you're badging and badging out. Just
Speaker 1: treat everyone like catulets and decide to be in maybe
Speaker 1: three days a week on certain collaborative from Jeffries. I mean,
Speaker 1: they're pretty hardcore at Jeffries. I think they might be
Speaker 1: watched CEO on the phone. Did Chandler? Are you really
Speaker 1: not clock watching? I mean, he probably has people that
Speaker 1: do it for him. But I think it's about time
Speaker 1: for Wall Street really to get back to business, to
Speaker 1: get back to work the way they have been. It
Speaker 1: might not happen. Isn't happening because rising do you see
Speaker 1: Schnelli bast send this note earlier showing that M and
Speaker 1: A this year is a trillion dollars less than M
Speaker 1: and A at the same time last year. We've seen
Speaker 1: a ton of deals break apart and many many more
Speaker 1: not even get done. So that's as well. Front that
Speaker 1: exactly hid itself. We sold Bonnie, the Yugat makers just
Speaker 1: put its I p O on Ice I Feel and
Speaker 1: Nova Grass isn't gonna buy bit Go. I mean, there's
Speaker 1: a ton of deals that have fallen apart, but more
Speaker 1: and more haven't gotten done. To that note Crypto, then
Speaker 1: I'll go out to the fist And Mayson seemed to
Speaker 1: me about as well. Right the West Coast, they're not
Speaker 1: going back to the office because they work from home
Speaker 1: or because they're getting fired. Right, you're seeing big layoffs
Speaker 1: on the West Coast, big layoffs in tech, and that's
Speaker 1: started to spread across to industrial America. With a three
Speaker 1: am announcement, it's not mistic way to leave it, isn't it. Yes,
Speaker 1: We'll have a great weekend. Enjoy your Labor day. You've
Speaker 1: been watching We want to do it together Wall Street.
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