1 00:00:00,280 --> 00:00:04,720 Speaker 1: This is Bloomberg Wall Street Week. The global push into infrastructure, 2 00:00:04,760 --> 00:00:08,480 Speaker 1: breaking the IPO logjam in text, the financial stories that 3 00:00:08,560 --> 00:00:11,680 Speaker 1: shape our work, cutting inflation without losing jobs. Do we 4 00:00:11,800 --> 00:00:14,440 Speaker 1: need rate cuts and if so, how many? Investing in 5 00:00:14,480 --> 00:00:16,400 Speaker 1: the time of geopolitical. 6 00:00:15,680 --> 00:00:18,560 Speaker 2: Turmoil Through the eyes of the most influential voices. 7 00:00:18,720 --> 00:00:22,480 Speaker 1: Ten Rogueff Economists of Harvard, former FDIC had Shila Bert 8 00:00:22,680 --> 00:00:26,439 Speaker 1: ge CEO, Larry Kulp, San Francisco fed President Mary Daily. 9 00:00:26,239 --> 00:00:30,240 Speaker 2: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 10 00:00:30,440 --> 00:00:33,440 Speaker 1: No summer break for fighting in Ukraine and the Middle East, 11 00:00:33,840 --> 00:00:37,680 Speaker 1: changes at the top of Japan, Thailand and Starbucks and 12 00:00:37,720 --> 00:00:41,479 Speaker 1: the US government malls breaking up Google. This is Bloomberg 13 00:00:41,479 --> 00:00:45,560 Speaker 1: Wall Street Week. I'm David Weston this week. Greg Peters 14 00:00:45,600 --> 00:00:49,320 Speaker 1: of PGM on how bond etf are transforming the fixed 15 00:00:49,400 --> 00:00:50,240 Speaker 1: income market. 16 00:00:50,440 --> 00:00:53,279 Speaker 3: So I think the growth is just beginning. 17 00:00:53,520 --> 00:00:56,680 Speaker 1: Zach Liscow of Yale on the hurdles facing the Biden 18 00:00:56,720 --> 00:00:59,280 Speaker 1: administration's race to build infrastructure. 19 00:01:00,240 --> 00:01:04,520 Speaker 4: Has a longstanding difficulty building infrastructure. 20 00:01:04,680 --> 00:01:07,880 Speaker 1: And Jonathan Klein at Hang Media on why legacy media 21 00:01:07,959 --> 00:01:10,280 Speaker 1: companies are having so much trouble. 22 00:01:10,480 --> 00:01:13,000 Speaker 5: It's a problem with the industry that they find themselves in. 23 00:01:26,000 --> 00:01:28,640 Speaker 1: We start with the US CPI numbers out this week 24 00:01:28,640 --> 00:01:31,840 Speaker 1: and welcome Jan Hattias Goldman Sachs chief economists to take 25 00:01:31,920 --> 00:01:34,399 Speaker 1: us through what they tell us about the economy. So welcome, 26 00:01:34,440 --> 00:01:36,600 Speaker 1: it's great to have you here. Jan. What did we 27 00:01:36,680 --> 00:01:38,160 Speaker 1: learn this week about use economy? 28 00:01:38,600 --> 00:01:41,960 Speaker 6: It's great to be here. I think the information we've 29 00:01:41,959 --> 00:01:46,280 Speaker 6: gotten this week has been very encouraging on the growth side, 30 00:01:47,000 --> 00:01:53,800 Speaker 6: mostly good news, another drop in jobless claims and clearly 31 00:01:53,880 --> 00:01:57,640 Speaker 6: stronger than expected retail sales number that was very reassuring 32 00:01:58,280 --> 00:02:01,360 Speaker 6: in light of the weaker employer I'M report for July 33 00:02:01,760 --> 00:02:05,880 Speaker 6: and the concerns around the consumer at the bottom up 34 00:02:05,960 --> 00:02:09,200 Speaker 6: level in some of the earnings reports. In the macro data, 35 00:02:09,280 --> 00:02:15,359 Speaker 6: we're not seeing the consumer softening sharply, and I think 36 00:02:15,360 --> 00:02:19,680 Speaker 6: that's the probably number one takeaway as far as economic 37 00:02:19,680 --> 00:02:22,920 Speaker 6: activity is concerned. There were also some more mixed numbers 38 00:02:22,960 --> 00:02:26,320 Speaker 6: from industrial production and housing starts, but I would put 39 00:02:26,360 --> 00:02:29,600 Speaker 6: more weight on the consumption news than on those. 40 00:02:29,720 --> 00:02:33,160 Speaker 1: We also are down to a two number starting with 41 00:02:33,200 --> 00:02:36,320 Speaker 1: the two at least number on the headline CPI. So 42 00:02:36,440 --> 00:02:38,440 Speaker 1: are we getting inflation and control? Is it going to 43 00:02:38,440 --> 00:02:40,040 Speaker 1: continue in your opinion. 44 00:02:40,320 --> 00:02:45,160 Speaker 6: I am very optimistic that inflation is largely in the 45 00:02:45,160 --> 00:02:49,160 Speaker 6: rearview mirror. If we look at the July core PCE 46 00:02:49,680 --> 00:02:53,679 Speaker 6: estimate that we get on the basis of CPI, PPI 47 00:02:53,800 --> 00:02:59,359 Speaker 6: and import prices, we are at thirteen basis points, which 48 00:02:59,639 --> 00:03:03,560 Speaker 6: is yet another sign that we're on our way back 49 00:03:03,639 --> 00:03:07,359 Speaker 6: to two percent. Now in terms of year on year 50 00:03:07,440 --> 00:03:10,880 Speaker 6: rates for core PC inflation, it's going to be difficult 51 00:03:10,960 --> 00:03:13,480 Speaker 6: to make a lot of headway in the second half 52 00:03:13,520 --> 00:03:16,560 Speaker 6: of the year because the year on year comparisons are 53 00:03:16,600 --> 00:03:21,040 Speaker 6: becoming more difficult. We have very low sequential inflation rates 54 00:03:21,080 --> 00:03:26,280 Speaker 6: in twenty twenty three, but I think on a three 55 00:03:26,320 --> 00:03:29,160 Speaker 6: month annualized basis and a lot of the underlying trend 56 00:03:29,200 --> 00:03:34,440 Speaker 6: measures are saying we're pretty close to two percent and 57 00:03:34,600 --> 00:03:37,480 Speaker 6: this is no longer a major. 58 00:03:37,200 --> 00:03:41,800 Speaker 1: Issue for monetary policy. Is always the case, there are 59 00:03:41,840 --> 00:03:43,680 Speaker 1: some ups and downs, some things that are a little better, 60 00:03:43,720 --> 00:03:46,720 Speaker 1: things that are little work was under the headline numbers, 61 00:03:46,880 --> 00:03:49,400 Speaker 1: But what about housing? Did I give you any pause? 62 00:03:49,560 --> 00:03:53,840 Speaker 1: And with respect to how much control we're getting over inflation, well. 63 00:03:53,760 --> 00:03:57,720 Speaker 6: I think the rent numbers were a little higher than 64 00:03:57,760 --> 00:04:04,320 Speaker 6: expected in the in the most recent release but if 65 00:04:04,320 --> 00:04:07,840 Speaker 6: I look at the trend in rent, we are seeing 66 00:04:07,920 --> 00:04:11,920 Speaker 6: a deceleration in rent in owner's equivalent rent. There are 67 00:04:11,920 --> 00:04:17,640 Speaker 6: some alternative indicators from the Cleveland Fed and the Labor 68 00:04:17,680 --> 00:04:22,839 Speaker 6: Department that look that breakdown rents into new leases and 69 00:04:23,520 --> 00:04:28,200 Speaker 6: existing leases. Those are showing a clear trend towards improvement. 70 00:04:28,720 --> 00:04:32,280 Speaker 6: And I think just based on our modeling of how 71 00:04:32,480 --> 00:04:38,960 Speaker 6: new lease prices translate into the overall CPI numbers, there 72 00:04:39,000 --> 00:04:43,000 Speaker 6: is a very high confidence that we'll see ongoing, gradual, 73 00:04:43,800 --> 00:04:47,360 Speaker 6: gradual improvement. The other point I'd make on inflation is 74 00:04:47,520 --> 00:04:50,440 Speaker 6: what are we seeing on the labor market. We've seen 75 00:04:50,640 --> 00:04:54,280 Speaker 6: the labor market rebalance. The unemployment rate is drifted up 76 00:04:54,320 --> 00:04:58,160 Speaker 6: to four point three percent. We've seen very large declines 77 00:04:58,200 --> 00:05:01,720 Speaker 6: in job openings and quits. We've seen a very material 78 00:05:01,800 --> 00:05:05,680 Speaker 6: deceleration in wage growth. The latest average hourly earnings number 79 00:05:06,120 --> 00:05:11,240 Speaker 6: was only three point six percent, and that basically says 80 00:05:11,800 --> 00:05:15,320 Speaker 6: we no longer have a significant labor cost issue. Unit 81 00:05:15,400 --> 00:05:18,120 Speaker 6: labor costs were up only half a percent on a 82 00:05:18,160 --> 00:05:22,280 Speaker 6: year on year basis in the second quarter. So all 83 00:05:22,320 --> 00:05:23,400 Speaker 6: of that is very encouraging. 84 00:05:23,880 --> 00:05:26,640 Speaker 1: Where are you right now on the possibility of recession? 85 00:05:26,760 --> 00:05:28,760 Speaker 1: We started the year, a lot of economists were really 86 00:05:28,880 --> 00:05:31,800 Speaker 1: almost predicting recession. Larry Summers, for example, this program is 87 00:05:31,800 --> 00:05:34,280 Speaker 1: saying it's more than fifty percent likely. That's changed over 88 00:05:34,279 --> 00:05:35,840 Speaker 1: the course of the year. Where are you on there 89 00:05:35,880 --> 00:05:36,359 Speaker 1: right now? 90 00:05:36,520 --> 00:05:40,680 Speaker 6: So we've been at we were at fifteen percent coming 91 00:05:40,680 --> 00:05:44,840 Speaker 6: into the year. We lifted that from fifteen to twenty 92 00:05:44,880 --> 00:05:48,279 Speaker 6: five percent on a twelve month forward basis after the 93 00:05:48,320 --> 00:05:52,400 Speaker 6: employment numbers for July. Not only because of the employment numbers, 94 00:05:52,400 --> 00:05:56,120 Speaker 6: we also had seen a couple of higher initial jobless 95 00:05:56,120 --> 00:05:59,640 Speaker 6: claims numbers. We've seen a you know, some week survey evidence, 96 00:05:59,640 --> 00:06:04,400 Speaker 6: we'd have some negative anecdotal information about the economy and 97 00:06:04,440 --> 00:06:08,240 Speaker 6: the consumer in some of the earnings reports. So we 98 00:06:08,320 --> 00:06:12,640 Speaker 6: lifted it somewhat, but I'd say twenty five basis points 99 00:06:12,839 --> 00:06:16,279 Speaker 6: is still, of course, well below fifty still somewhat below 100 00:06:16,320 --> 00:06:19,000 Speaker 6: the consensus. You know, I'd say at the margin, what 101 00:06:19,080 --> 00:06:22,599 Speaker 6: we've seen over the last two weeks has been encouraging. 102 00:06:22,720 --> 00:06:26,479 Speaker 6: So I think the likelihood is that that twenty five 103 00:06:26,520 --> 00:06:29,240 Speaker 6: percent is going to come down again. I would like 104 00:06:29,279 --> 00:06:32,200 Speaker 6: to see a little bit more information, especially again the 105 00:06:32,240 --> 00:06:37,520 Speaker 6: next employment report, just given the predictive value that we've 106 00:06:37,560 --> 00:06:43,520 Speaker 6: seen historically from labor market information for recession. That's encapsulated 107 00:06:43,600 --> 00:06:46,520 Speaker 6: in the so called sum rule that if you see 108 00:06:47,000 --> 00:06:50,360 Speaker 6: a half a percentage point increase on a year on 109 00:06:50,480 --> 00:06:53,359 Speaker 6: year basis in the unemployment rate, historically, that's been a 110 00:06:53,440 --> 00:06:54,920 Speaker 6: very strong recession predictor. 111 00:06:55,160 --> 00:06:56,279 Speaker 1: I think there are some good. 112 00:06:56,160 --> 00:07:00,560 Speaker 6: Reasons why that rule may not hold in problem doesn't 113 00:07:00,560 --> 00:07:03,600 Speaker 6: hold in the current environment, in particular the fact that 114 00:07:04,279 --> 00:07:09,040 Speaker 6: we've seen a very large increase in the labor force, 115 00:07:09,520 --> 00:07:13,440 Speaker 6: very large increase in immigration, and that's really, in our 116 00:07:13,560 --> 00:07:15,440 Speaker 6: view with the main reason for why we've seen in 117 00:07:15,440 --> 00:07:18,360 Speaker 6: a higher unemployment rate. Employment is still growing at a 118 00:07:18,360 --> 00:07:23,680 Speaker 6: good pace despite this latest somewhat softer number. Overall, still 119 00:07:23,720 --> 00:07:26,600 Speaker 6: see very strong employment growth, and so it just seems 120 00:07:26,680 --> 00:07:29,240 Speaker 6: like a different type of increase in the unemployment rate. 121 00:07:29,480 --> 00:07:33,880 Speaker 6: That's probably not as predictive over a session, but it's 122 00:07:34,040 --> 00:07:37,400 Speaker 6: hard to be sure. And that's why we are hedgering 123 00:07:37,440 --> 00:07:38,120 Speaker 6: a little bit more. 124 00:07:38,240 --> 00:07:39,440 Speaker 1: Yeah, and it's such a treat to have you on 125 00:07:39,440 --> 00:07:41,360 Speaker 1: Well Street. We thank you for being here. As Jan 126 00:07:41,440 --> 00:07:45,960 Speaker 1: Hatzias of Goldman Sachs. The market continued it's rebound, with 127 00:07:46,000 --> 00:07:47,960 Speaker 1: the S and P five hundred having its best week 128 00:07:48,000 --> 00:07:50,640 Speaker 1: of the year, adding three point nine percent to end 129 00:07:50,640 --> 00:07:53,200 Speaker 1: the week at fifty five fifty four, putting it just 130 00:07:53,400 --> 00:07:56,280 Speaker 1: under the median number the Bloomberg Elves are projected for 131 00:07:56,360 --> 00:07:59,200 Speaker 1: the end of the year. The Nantnag did even better, 132 00:07:59,280 --> 00:08:01,960 Speaker 1: adding five point two nine percent on the week, while 133 00:08:02,000 --> 00:08:04,840 Speaker 1: the yield on the tenure was down six basis points 134 00:08:04,880 --> 00:08:07,040 Speaker 1: to end the week at three point eight eight percent. 135 00:08:07,400 --> 00:08:09,080 Speaker 1: Take us through the week in the market. We welcome 136 00:08:09,120 --> 00:08:12,360 Speaker 1: back now kristin Bitterly City, head of Wealth at work, 137 00:08:12,440 --> 00:08:14,800 Speaker 1: So welcome back. Great to have you, always hear Chris, 138 00:08:15,000 --> 00:08:17,160 Speaker 1: So give us your stance about what happened. We've been 139 00:08:17,160 --> 00:08:19,240 Speaker 1: through a wild ride over the last two weeks. And 140 00:08:19,280 --> 00:08:21,760 Speaker 1: take us inside city. How did your shop react when 141 00:08:21,800 --> 00:08:23,800 Speaker 1: all of us who are running around saying, oh, emergency 142 00:08:23,880 --> 00:08:24,280 Speaker 1: rate cut? 143 00:08:24,480 --> 00:08:25,240 Speaker 3: Sure, of course. 144 00:08:25,280 --> 00:08:27,640 Speaker 7: I think what's interesting is at City Wealth, we've actually 145 00:08:27,680 --> 00:08:30,320 Speaker 7: been pretty resolute in terms of our views this year. 146 00:08:30,360 --> 00:08:33,040 Speaker 7: We started out this year thinking that we would get 147 00:08:33,080 --> 00:08:35,680 Speaker 7: three interest rate cuts of about twenty five basis points, 148 00:08:35,880 --> 00:08:38,559 Speaker 7: and that those cuts would not begin until the second half. 149 00:08:38,400 --> 00:08:38,840 Speaker 5: Of the year. 150 00:08:39,160 --> 00:08:41,760 Speaker 7: And so even though we've seen this wild repraising of 151 00:08:41,880 --> 00:08:44,320 Speaker 7: rates throughout the course of the past couple of months, 152 00:08:44,320 --> 00:08:46,280 Speaker 7: and we could even say year to date. We just 153 00:08:46,360 --> 00:08:48,240 Speaker 7: thought that the FED would not get the data that 154 00:08:48,280 --> 00:08:51,400 Speaker 7: they needed to confidently start cutting rates. And so what 155 00:08:51,480 --> 00:08:54,120 Speaker 7: happened last week was pretty wild because I think the 156 00:08:54,120 --> 00:08:56,800 Speaker 7: market once again got ahead of itself in terms of 157 00:08:56,920 --> 00:08:58,480 Speaker 7: is there going to be an emergency cut? 158 00:08:58,640 --> 00:08:59,439 Speaker 5: Are we locking in. 159 00:08:59,360 --> 00:09:01,800 Speaker 7: A fifty base point cut? I think we're still at 160 00:09:01,840 --> 00:09:05,400 Speaker 7: twenty five basis points because of this economic data that 161 00:09:05,440 --> 00:09:08,160 Speaker 7: we're seeing. We'll get a good piece of economic data 162 00:09:08,400 --> 00:09:10,600 Speaker 7: and then we'll get one that maybe is a little concerning. 163 00:09:10,640 --> 00:09:14,080 Speaker 7: Take today, for example, we have the consumer sentiment data 164 00:09:14,120 --> 00:09:16,600 Speaker 7: that came out better than expected, and then we had 165 00:09:16,600 --> 00:09:20,400 Speaker 7: the data around construction that was worse than expected. So 166 00:09:20,440 --> 00:09:22,559 Speaker 7: I think we're going to see this volatility in the data. 167 00:09:22,880 --> 00:09:25,920 Speaker 7: But the good news is that inflation is on the 168 00:09:25,960 --> 00:09:29,480 Speaker 7: trajectory that the FED needs, and that the labor when 169 00:09:29,520 --> 00:09:33,000 Speaker 7: you look at the labor market, it's cooling, not contracting, 170 00:09:33,400 --> 00:09:35,320 Speaker 7: And I think that's a sweet spot in terms of 171 00:09:35,360 --> 00:09:37,280 Speaker 7: the Fed's position to be able to start cutting. 172 00:09:37,440 --> 00:09:39,440 Speaker 1: Where are we in earnings because that drives a awful 173 00:09:39,440 --> 00:09:40,720 Speaker 1: lot of stock prices. 174 00:09:40,360 --> 00:09:42,840 Speaker 7: And that was another reason why last week. So just 175 00:09:42,880 --> 00:09:45,760 Speaker 7: take like August third, for example, that really horrible day 176 00:09:45,800 --> 00:09:48,280 Speaker 7: in the market, where if you got out on that 177 00:09:48,400 --> 00:09:50,679 Speaker 7: date you would have actually missed out on a pretty 178 00:09:50,679 --> 00:09:53,040 Speaker 7: substantial rally of about seven percent in the S and 179 00:09:53,040 --> 00:09:55,760 Speaker 7: P five hundred since then, But the reason for it 180 00:09:55,800 --> 00:09:58,600 Speaker 7: is earnings have actually been really resilient. If we go 181 00:09:58,679 --> 00:10:01,640 Speaker 7: back to last year, last year we had about seven 182 00:10:01,640 --> 00:10:03,800 Speaker 7: out of the eleven sectors in the S and P 183 00:10:03,920 --> 00:10:07,439 Speaker 7: five hundred that we're experiencing in earnings recession. This year, 184 00:10:07,800 --> 00:10:10,280 Speaker 7: we actually expect ten out of those eleven sectors at 185 00:10:10,320 --> 00:10:15,160 Speaker 7: city to turn to earnings profitability. So earnings have actually surprised, 186 00:10:15,400 --> 00:10:17,800 Speaker 7: and what we're seeing is really a broadening out of 187 00:10:17,800 --> 00:10:21,800 Speaker 7: that story. It is no longer uniquely a magnificent seven story. 188 00:10:22,000 --> 00:10:24,640 Speaker 7: We're starting to see it come through in earnings across 189 00:10:24,760 --> 00:10:27,800 Speaker 7: various sectors, which is actually a reason to stay invested. 190 00:10:28,120 --> 00:10:28,320 Speaker 5: Well. 191 00:10:28,600 --> 00:10:30,800 Speaker 1: So we're going to ask exactly how many people are 192 00:10:30,800 --> 00:10:33,040 Speaker 1: fully invested still at this point, because, as you point out, 193 00:10:33,200 --> 00:10:35,760 Speaker 1: if on August third you'd gone to cash, you'd be 194 00:10:35,920 --> 00:10:38,520 Speaker 1: sad right now to what extends there's still cash on 195 00:10:38,559 --> 00:10:39,120 Speaker 1: the sidelines. 196 00:10:39,160 --> 00:10:41,320 Speaker 7: I think there's still significant cash on the sidelines. You 197 00:10:41,320 --> 00:10:43,600 Speaker 7: could look to money market funds and the flows that 198 00:10:43,640 --> 00:10:46,560 Speaker 7: have come into money market funds as an example of that. 199 00:10:47,000 --> 00:10:48,880 Speaker 7: So the latest numbers that I saw were about six 200 00:10:48,960 --> 00:10:51,600 Speaker 7: point three trillion dollars in money market funds, and that 201 00:10:51,600 --> 00:10:55,200 Speaker 7: doesn't include cash held in deposit accounts and other types 202 00:10:55,240 --> 00:10:58,200 Speaker 7: of bank products. So when we think of other catalysts 203 00:10:58,280 --> 00:11:00,720 Speaker 7: for the market, just think about this. If we do 204 00:11:00,840 --> 00:11:03,960 Speaker 7: start to experience interest rate cuts, what's going to happen 205 00:11:04,040 --> 00:11:06,360 Speaker 7: is all of that cash that is no longer receiving 206 00:11:06,640 --> 00:11:09,600 Speaker 7: a five percent five percent plus interest rate is going 207 00:11:09,679 --> 00:11:12,280 Speaker 7: to look for places to reinvest, and it's going to 208 00:11:12,320 --> 00:11:14,960 Speaker 7: be a balance across equity markets and fixing come market. 209 00:11:15,120 --> 00:11:16,440 Speaker 1: Chris, I don't want to let you go about before 210 00:11:16,440 --> 00:11:18,440 Speaker 1: we talk about your new positions since we've seen your 211 00:11:18,559 --> 00:11:20,719 Speaker 1: last You have a new position. Congratulations that, thank you 212 00:11:20,800 --> 00:11:22,440 Speaker 1: so much. What it is, how is it different? Yeah? 213 00:11:22,480 --> 00:11:25,040 Speaker 7: So I'm running our wealth at work business globally for City, 214 00:11:25,080 --> 00:11:28,080 Speaker 7: and what that is is it's really workplace wealth solutions. 215 00:11:28,559 --> 00:11:31,360 Speaker 7: This started with an area of our business that we've 216 00:11:31,360 --> 00:11:35,640 Speaker 7: actually been dominating and had for over five decades, which 217 00:11:35,679 --> 00:11:38,200 Speaker 7: is our law firm group. So where we bank entry 218 00:11:38,280 --> 00:11:43,000 Speaker 7: level associates through to senior partners and institutional capital. And 219 00:11:43,040 --> 00:11:45,719 Speaker 7: what's unique about it is it really brings the perspective 220 00:11:45,800 --> 00:11:48,360 Speaker 7: of not only knowing you personally in terms of your 221 00:11:48,360 --> 00:11:51,760 Speaker 7: wealth journey, but also looking through how is your industry 222 00:11:51,800 --> 00:11:55,080 Speaker 7: impacted by various trends. So it's knowing your business and 223 00:11:55,160 --> 00:11:58,640 Speaker 7: how to advise you professionally but also personally. And we've 224 00:11:58,679 --> 00:12:01,360 Speaker 7: expanded that on a global base, says, but also looking 225 00:12:01,360 --> 00:12:05,720 Speaker 7: at other segments like asset managers, professional services, and just 226 00:12:05,800 --> 00:12:09,880 Speaker 7: other segments and sectors of different types of companies. So 227 00:12:10,080 --> 00:12:12,000 Speaker 7: really exciting. But thanks for asking about it. 228 00:12:12,040 --> 00:12:14,360 Speaker 1: Menaging the choir, We like lawyers here at Walls. We 229 00:12:14,400 --> 00:12:16,080 Speaker 1: got to tell you. Thank you so much. Chris, great 230 00:12:16,080 --> 00:12:18,240 Speaker 1: to have you with us. Thank you. Kristin Bitterly of 231 00:12:18,360 --> 00:12:23,360 Speaker 1: City coming up. The Biden administration is proud of the 232 00:12:23,400 --> 00:12:27,240 Speaker 1: over one trillion dollars in infrastructure it got enacted. We 233 00:12:27,280 --> 00:12:29,600 Speaker 1: go through how long it will take before we see 234 00:12:29,640 --> 00:12:32,920 Speaker 1: the results with Zach Liskau of the Yale Law School. 235 00:12:33,679 --> 00:12:37,439 Speaker 4: If you look at government spending, our research and developments, 236 00:12:37,679 --> 00:12:40,559 Speaker 4: we are behind pure countries, and we're behind where we. 237 00:12:40,559 --> 00:12:40,880 Speaker 5: Used to be. 238 00:12:42,840 --> 00:12:45,280 Speaker 1: That's next on Wall Street Week on Bloomberg. 239 00:12:52,200 --> 00:12:56,400 Speaker 2: This is Bloomberg Wall Street Week with David Weston from 240 00:12:56,520 --> 00:13:03,959 Speaker 2: Bloomberg Radio. 241 00:13:04,200 --> 00:13:06,560 Speaker 1: This is Wall Street Week. I'm David Weston. The Biden 242 00:13:06,600 --> 00:13:09,720 Speaker 1: administration prides itself on the investment it's making in clean 243 00:13:09,880 --> 00:13:12,800 Speaker 1: energy and semiconductors, but it is having a little bit 244 00:13:12,840 --> 00:13:14,960 Speaker 1: of trouble getting the money out the door. And one 245 00:13:15,000 --> 00:13:18,280 Speaker 1: of the biggest beneficiaries, that's Intel, has announced large job 246 00:13:18,360 --> 00:13:21,280 Speaker 1: cuts and the need to protect its cash pile. Yale 247 00:13:21,360 --> 00:13:24,440 Speaker 1: Law Professor Zach Liscow, former Chief Economists at the OMB, 248 00:13:24,800 --> 00:13:28,520 Speaker 1: has studied infrastructure investment and challenges in making it work, 249 00:13:28,559 --> 00:13:30,920 Speaker 1: and we welcome now to a Wall Street Week. So, professor, 250 00:13:31,000 --> 00:13:32,280 Speaker 1: thank you so much for being here. It's great to 251 00:13:32,320 --> 00:13:34,760 Speaker 1: have you here. You have studied the question of you know, 252 00:13:34,760 --> 00:13:36,680 Speaker 1: it's a good thing to have the intention of getting 253 00:13:36,880 --> 00:13:39,559 Speaker 1: infrastructure investments made, it's a little harder to get it done, 254 00:13:39,559 --> 00:13:41,360 Speaker 1: at least in the United States of America. What are 255 00:13:41,360 --> 00:13:43,600 Speaker 1: the some of the impediments to that that the Biden 256 00:13:43,600 --> 00:13:45,280 Speaker 1: administration may be facing right now. 257 00:13:46,200 --> 00:13:50,840 Speaker 4: Yeah, great question, A pleasure to be here. So first 258 00:13:50,840 --> 00:13:53,840 Speaker 4: I want to say a little bit on what we 259 00:13:53,920 --> 00:13:58,599 Speaker 4: see on the ground now. So if you're talking about manufacturing, 260 00:13:59,120 --> 00:14:05,080 Speaker 4: things actually look really good. What we're seeing is investments 261 00:14:05,240 --> 00:14:11,360 Speaker 4: in manufacturing, building structures. It's the current levels of that 262 00:14:11,640 --> 00:14:16,320 Speaker 4: are roughly double what they were from the period between 263 00:14:16,320 --> 00:14:20,520 Speaker 4: twenty twenty nineteen. So we are just blowing out of 264 00:14:20,520 --> 00:14:23,720 Speaker 4: the water the amount of investment. 265 00:14:23,360 --> 00:14:24,600 Speaker 5: That we're making in manufacturing. 266 00:14:24,880 --> 00:14:28,240 Speaker 4: This is a real terms adjusting for inflation, so a 267 00:14:28,280 --> 00:14:32,840 Speaker 4: lot is getting built in terms of manufacturing, but the 268 00:14:33,240 --> 00:14:37,040 Speaker 4: different kinds of investment. We also are making a big 269 00:14:37,080 --> 00:14:42,640 Speaker 4: push and infrastructure and in particular things like transportation. And 270 00:14:43,160 --> 00:14:46,600 Speaker 4: this is not because of this particular administration, but the 271 00:14:46,720 --> 00:14:53,280 Speaker 4: US just has a long standing difficulty in building infrastructure, 272 00:14:53,320 --> 00:14:57,640 Speaker 4: transportation infrastructure and cost effective ways. If you look at 273 00:14:58,000 --> 00:15:02,680 Speaker 4: urban rail, so you know, within a city and it's 274 00:15:02,720 --> 00:15:06,880 Speaker 4: on a rail, and you compare the US to other 275 00:15:07,960 --> 00:15:11,680 Speaker 4: high media income countries on a per mile basis, the 276 00:15:11,840 --> 00:15:13,080 Speaker 4: US ends. 277 00:15:13,320 --> 00:15:15,960 Speaker 5: About two and a half times as much from iile. 278 00:15:16,760 --> 00:15:19,680 Speaker 4: You compare to the lowest cost countries in Europe, countries 279 00:15:19,720 --> 00:15:23,080 Speaker 4: like Spain, we spend about six times as much from ILE. 280 00:15:23,680 --> 00:15:27,200 Speaker 1: And you know this is not good, Zach asked, someone 281 00:15:27,240 --> 00:15:29,560 Speaker 1: who's studied this as an economist as well as a lawyer. 282 00:15:29,960 --> 00:15:32,680 Speaker 1: I really studied the question of infrastructure. Let's go back 283 00:15:32,680 --> 00:15:35,320 Speaker 1: to where you started. Is there a big difference between 284 00:15:35,360 --> 00:15:37,240 Speaker 1: sort of the true public infrastructure if I can talk 285 00:15:37,720 --> 00:15:42,040 Speaker 1: it that way, highways, rails, you know, water, electrical grid 286 00:15:42,040 --> 00:15:43,960 Speaker 1: and things like that. On the one hand, and they 287 00:15:44,080 --> 00:15:46,240 Speaker 1: had some things that the government may get involved in 288 00:15:46,360 --> 00:15:49,640 Speaker 1: at least in subsidizing and really encouraging. But that also 289 00:15:49,720 --> 00:15:52,760 Speaker 1: private corporations do. I mean, when you talk about building semiconductors, 290 00:15:52,760 --> 00:15:56,040 Speaker 1: that's something typically United States we let private companies do. 291 00:15:56,320 --> 00:15:58,880 Speaker 1: Is there a different way to approach those two questions. 292 00:15:59,440 --> 00:16:04,720 Speaker 4: Yeah, So, you know, roads are public goods, makes a 293 00:16:04,720 --> 00:16:09,040 Speaker 4: lot of sense for the government to be in charge 294 00:16:09,080 --> 00:16:14,200 Speaker 4: of building them. Would be very problematic of a private 295 00:16:14,240 --> 00:16:16,120 Speaker 4: company on the road in front of my street and 296 00:16:16,160 --> 00:16:18,680 Speaker 4: we're like holding me each time I wanted to enter 297 00:16:18,680 --> 00:16:21,920 Speaker 4: my house. That that would be a bad way of 298 00:16:22,000 --> 00:16:24,720 Speaker 4: running things. So it makes a lot of sense to 299 00:16:24,760 --> 00:16:32,520 Speaker 4: have the government owned the roads, the highways, and then 300 00:16:32,600 --> 00:16:35,480 Speaker 4: to set contact out to the private sector to actually 301 00:16:35,520 --> 00:16:39,360 Speaker 4: have them built. There's a whole different thing going on 302 00:16:39,600 --> 00:16:45,640 Speaker 4: with manufacturing there makes we do not want the government 303 00:16:45,760 --> 00:16:50,920 Speaker 4: to be the one actually building the semiconductors. We want 304 00:16:50,920 --> 00:16:54,360 Speaker 4: the private sector to be doing that. You know, those 305 00:16:54,360 --> 00:16:56,920 Speaker 4: are not public goods. Those are goods that are exchanged 306 00:16:57,680 --> 00:17:02,440 Speaker 4: in you know, competitive markets. And for those you know 307 00:17:02,560 --> 00:17:06,760 Speaker 4: we have in the case of chips, to say a 308 00:17:06,920 --> 00:17:12,159 Speaker 4: national security reason to onshore those and us to provide 309 00:17:12,160 --> 00:17:16,520 Speaker 4: government subsidies to provide them. There are climate reasons to 310 00:17:16,560 --> 00:17:22,800 Speaker 4: provide subsidies to come to bring about the green economy 311 00:17:22,840 --> 00:17:27,720 Speaker 4: in terms of energy production. And so I think it's 312 00:17:29,440 --> 00:17:33,040 Speaker 4: good to take these two different approaches for transportation infrastructure, 313 00:17:34,040 --> 00:17:38,800 Speaker 4: government designs it and it manages it, and then to 314 00:17:38,840 --> 00:17:42,800 Speaker 4: have subsidies for these other private sector things which are 315 00:17:42,840 --> 00:17:43,879 Speaker 4: often in manufacturing. 316 00:17:45,000 --> 00:17:47,600 Speaker 1: Let me think, for Zach Liscal of the Yale Law School. 317 00:17:47,680 --> 00:17:51,160 Speaker 1: Professor Liscow's paper for the Aspen Economic Strategy Group will 318 00:17:51,160 --> 00:17:54,880 Speaker 1: be out of this fall. Arcley's launched the first ever 319 00:17:55,040 --> 00:17:58,080 Speaker 1: bond ETF in Canada back in two thousand and what 320 00:17:58,240 --> 00:18:00,439 Speaker 1: started out as a novelty has grown to be an 321 00:18:00,520 --> 00:18:04,119 Speaker 1: over two trillion dollar asset class, changing the entire market 322 00:18:04,400 --> 00:18:07,040 Speaker 1: to take us through fixed income ETFs and why they've 323 00:18:07,080 --> 00:18:11,000 Speaker 1: grown so big. We're welcome now. Greg Peters, Cocio of 324 00:18:11,080 --> 00:18:13,320 Speaker 1: PGM Fixed Income. Greg great to have you back with us. 325 00:18:13,320 --> 00:18:14,960 Speaker 1: Thanks for being here, Thanks for having me, David, So 326 00:18:15,000 --> 00:18:16,840 Speaker 1: take us to this world of bond ETFs. So a 327 00:18:16,880 --> 00:18:18,680 Speaker 1: lot of us think about it in terms of stocks, 328 00:18:18,720 --> 00:18:20,800 Speaker 1: but it's going to be quite a substantial part of 329 00:18:20,800 --> 00:18:21,240 Speaker 1: the market. 330 00:18:21,400 --> 00:18:23,760 Speaker 8: It is, and I think it's a poised to grow 331 00:18:23,840 --> 00:18:26,720 Speaker 8: even more. As we talked about earlier, the global fixed 332 00:18:26,720 --> 00:18:29,000 Speaker 8: income market is one hundred and twenty trillion, and so 333 00:18:29,080 --> 00:18:31,960 Speaker 8: two trillion seems like a drop in the ocean. So 334 00:18:32,080 --> 00:18:35,360 Speaker 8: I think the growth is just beginning. But I think 335 00:18:35,359 --> 00:18:39,639 Speaker 8: the important aspect of ETF for bond investors is that 336 00:18:39,680 --> 00:18:44,399 Speaker 8: it's changed how the market trades, and it's created more 337 00:18:44,440 --> 00:18:45,719 Speaker 8: liquidity in the marketplace. 338 00:18:46,200 --> 00:18:48,879 Speaker 3: And POSTGFC, it's allowed. 339 00:18:48,760 --> 00:18:52,320 Speaker 8: To bond investors, I guess, to reliquify in ways that 340 00:18:52,359 --> 00:18:53,879 Speaker 8: they didn't imagine prior to. 341 00:18:54,520 --> 00:18:57,560 Speaker 1: So why has it grown so big? And you mentioned 342 00:18:57,600 --> 00:19:00,320 Speaker 1: the Great Financial Crisis? There is that part of the cause, 343 00:19:00,400 --> 00:19:02,320 Speaker 1: in the sense that there was a lot of regulations 344 00:19:02,320 --> 00:19:04,760 Speaker 1: that came in after that that really made it a 345 00:19:04,800 --> 00:19:06,720 Speaker 1: little harder for some of the dealers to keep big 346 00:19:06,760 --> 00:19:07,399 Speaker 1: balance sheets. 347 00:19:07,600 --> 00:19:08,840 Speaker 3: That's precisely right. 348 00:19:09,040 --> 00:19:13,760 Speaker 8: The dealer balance sheets were really constrained post GFC. Through 349 00:19:14,160 --> 00:19:16,960 Speaker 8: you know, the alphabet soup of different kind of regulations, 350 00:19:17,760 --> 00:19:22,840 Speaker 8: and it really hurt the end investor because you, as 351 00:19:23,359 --> 00:19:27,720 Speaker 8: a fix income manager, have to go through the dealer 352 00:19:27,760 --> 00:19:31,639 Speaker 8: in order to transact. The ETF platform I call it 353 00:19:31,680 --> 00:19:36,480 Speaker 8: the chassis. The infrastructure allows through the redeem and create 354 00:19:36,560 --> 00:19:42,080 Speaker 8: process trading of individual bonds and ways that were unimaginable before. 355 00:19:42,119 --> 00:19:46,199 Speaker 8: And so this, this you know, revolutionary, evolutionary type of 356 00:19:46,240 --> 00:19:49,760 Speaker 8: process has really allowed fixing them to reliquify and trade 357 00:19:49,840 --> 00:19:50,320 Speaker 8: much better. 358 00:19:50,680 --> 00:19:53,920 Speaker 1: You mentioned one of the effects is increased liquidity. Back 359 00:19:54,000 --> 00:19:56,119 Speaker 1: during the pandemic March of twenty twenty, we had some 360 00:19:56,119 --> 00:19:59,199 Speaker 1: problems with liquidity. Do the body taps hold out? Is 361 00:19:59,200 --> 00:20:02,320 Speaker 1: the possibility that they will be able to take through 362 00:20:02,320 --> 00:20:03,400 Speaker 1: some of those rough patches. 363 00:20:03,840 --> 00:20:07,640 Speaker 8: I hope, So you know, one event doesn't you know, 364 00:20:07,800 --> 00:20:10,680 Speaker 8: make a declarative statement, of course, But it was really 365 00:20:10,720 --> 00:20:15,840 Speaker 8: interesting back in March of twenty twenty, voice trading effectively 366 00:20:16,040 --> 00:20:20,199 Speaker 8: shut down, and what you saw was through ETF and 367 00:20:20,240 --> 00:20:22,480 Speaker 8: electronic trading, which is still only. 368 00:20:22,280 --> 00:20:24,200 Speaker 3: About forty forty five. 369 00:20:24,040 --> 00:20:30,040 Speaker 8: Percent, and the entire fixed income universe traded levels that 370 00:20:30,080 --> 00:20:32,240 Speaker 8: we haven't seen before. So we had record levels of 371 00:20:32,320 --> 00:20:36,199 Speaker 8: volumes at a time when it was really difficult, almost 372 00:20:36,200 --> 00:20:40,760 Speaker 8: impossible to transact elsewhere. So I think that is a testament, 373 00:20:40,800 --> 00:20:44,280 Speaker 8: of course, but each crisis is a little different. You 374 00:20:44,440 --> 00:20:46,600 Speaker 8: just don't know, but I think the early signs are 375 00:20:46,640 --> 00:20:47,760 Speaker 8: actually quite positive. 376 00:20:48,000 --> 00:20:51,119 Speaker 1: You mentioned voice trading versus electronic trading, which is one 377 00:20:51,119 --> 00:20:54,000 Speaker 1: of the advents here. As I understand it, stocks are 378 00:20:54,080 --> 00:20:57,000 Speaker 1: more likely to be traded electronically rather than through voice. 379 00:20:57,200 --> 00:20:59,720 Speaker 1: Why is the fixed income market behind in that is 380 00:21:00,080 --> 00:21:03,639 Speaker 1: a matter of timing or are there's some inherent differences 381 00:21:03,720 --> 00:21:07,439 Speaker 1: in bonds in part because there are so many different 382 00:21:07,480 --> 00:21:09,920 Speaker 1: kinds of them, but that really keep you from doing 383 00:21:09,960 --> 00:21:12,040 Speaker 1: more electronic transfer with bonds. 384 00:21:12,119 --> 00:21:13,240 Speaker 3: I think it's a little bit of both. 385 00:21:13,320 --> 00:21:16,360 Speaker 8: I think historically the fix and come market has been 386 00:21:16,800 --> 00:21:20,879 Speaker 8: known late adopters. Also at the same time, as you mentioned, 387 00:21:21,240 --> 00:21:24,360 Speaker 8: you know, unlike a single stock, you have multiple bonds 388 00:21:24,440 --> 00:21:25,680 Speaker 8: off the name. 389 00:21:25,760 --> 00:21:29,120 Speaker 3: So use IBM as an example. There's only one equity 390 00:21:29,200 --> 00:21:31,160 Speaker 3: security to trade, but. 391 00:21:31,240 --> 00:21:34,919 Speaker 8: You could have anywhere from fifty to you know, almost 392 00:21:34,920 --> 00:21:37,800 Speaker 8: one hundred different cu SIPs of IBM. So it's just 393 00:21:37,920 --> 00:21:41,639 Speaker 8: the complexity is just much more difficult, and the market 394 00:21:41,680 --> 00:21:45,320 Speaker 8: is much more segmented as well. So I just think 395 00:21:45,359 --> 00:21:49,600 Speaker 8: it's about time because if you think about complexity, that's 396 00:21:49,640 --> 00:21:53,600 Speaker 8: where computers and machinery and algorithms can really. 397 00:21:53,880 --> 00:21:56,399 Speaker 3: Add a lot of value. It's just been slow to 398 00:21:56,480 --> 00:21:58,040 Speaker 3: adopt who. 399 00:21:57,880 --> 00:22:00,520 Speaker 1: Are the most likely customers for the ETF. You think 400 00:22:00,560 --> 00:22:03,120 Speaker 1: they're going to keep growing the bond ETFs, but who 401 00:22:03,160 --> 00:22:04,919 Speaker 1: are the people are to target customers for. 402 00:22:05,440 --> 00:22:09,000 Speaker 8: Yeah, So what's interesting about the bond ETF market is. 403 00:22:08,960 --> 00:22:11,800 Speaker 3: That if you look at particularly relative to the. 404 00:22:11,680 --> 00:22:17,480 Speaker 8: Equity side, is institutional bond managers like myself and ourselves 405 00:22:17,480 --> 00:22:24,280 Speaker 8: a PGM that actually utilize that security. So it's much 406 00:22:24,320 --> 00:22:28,960 Speaker 8: more of an institutional vehicle on the fixed income side, 407 00:22:29,160 --> 00:22:32,159 Speaker 8: whereas on the equity side is much more retail driven. 408 00:22:32,200 --> 00:22:34,040 Speaker 3: So we'll see how that changes over time. 409 00:22:34,480 --> 00:22:38,000 Speaker 8: But the way that you know, active money managers like 410 00:22:38,040 --> 00:22:39,040 Speaker 8: ourselves think. 411 00:22:38,840 --> 00:22:40,960 Speaker 3: About these passive ETFs, it's. 412 00:22:40,840 --> 00:22:45,240 Speaker 8: A way of kind of modulating your liquidity, modulating your 413 00:22:45,280 --> 00:22:49,679 Speaker 8: portfolio risk in a more seamless efficient manner. 414 00:22:50,200 --> 00:22:53,080 Speaker 3: So that's why it's taken off as a. 415 00:22:53,040 --> 00:22:56,399 Speaker 1: Big manager of fixed income here at PGM. Do you 416 00:22:56,480 --> 00:22:59,760 Speaker 1: tend to trade in individual bonds or is this in 417 00:22:59,760 --> 00:23:01,760 Speaker 1: whole portfolios that move at the same time. 418 00:23:02,240 --> 00:23:08,800 Speaker 8: It's both so so you tie ETFs that infrastructure to 419 00:23:08,880 --> 00:23:13,800 Speaker 8: what you're seeing through electronic trading, namely portfolio trading, which 420 00:23:13,840 --> 00:23:17,560 Speaker 8: is not a q SIP driven trade, it's a characteristic 421 00:23:17,720 --> 00:23:21,399 Speaker 8: driven trade. And so you now can trade you know, 422 00:23:21,520 --> 00:23:25,159 Speaker 8: up to one hundred some odd names in package form 423 00:23:25,560 --> 00:23:29,280 Speaker 8: and get liquidity, whereas before David you had to kind 424 00:23:29,280 --> 00:23:32,760 Speaker 8: of on the phone call individual and trade lock by lot, 425 00:23:32,840 --> 00:23:38,120 Speaker 8: and that was just grossly inefficient and really difficult to prosecute. 426 00:23:38,160 --> 00:23:43,240 Speaker 8: So the packaging has been the key risk transfer piece 427 00:23:43,320 --> 00:23:43,720 Speaker 8: to it all. 428 00:23:44,040 --> 00:23:46,560 Speaker 1: Well, we said it's gone from a couple hundred million 429 00:23:46,760 --> 00:23:50,320 Speaker 1: up to two trillion dollars. Now, how big can it get? 430 00:23:50,359 --> 00:23:52,000 Speaker 1: Where's the sky here that could growth? 431 00:23:52,720 --> 00:23:53,720 Speaker 3: That's an excellent question. 432 00:23:53,800 --> 00:23:55,520 Speaker 8: I'm not sure if you talk to some of the 433 00:23:56,440 --> 00:23:59,320 Speaker 8: the real ETF advocates, you know, the sky's the limit, 434 00:23:59,359 --> 00:24:01,840 Speaker 8: of course, but I think there's real scope for it 435 00:24:01,880 --> 00:24:04,480 Speaker 8: to grow and to continue to grow. The issue around 436 00:24:04,480 --> 00:24:07,439 Speaker 8: fixed income is the fragmentation of fixed income. Right, so 437 00:24:07,480 --> 00:24:10,000 Speaker 8: we talked about one hundred and twenty trillion globally. 438 00:24:10,920 --> 00:24:12,480 Speaker 3: You have various. 439 00:24:12,160 --> 00:24:15,679 Speaker 8: Government securities, you have corporates, you have high yield, you 440 00:24:15,720 --> 00:24:18,359 Speaker 8: have levered loans, you have all these different products. 441 00:24:18,520 --> 00:24:20,160 Speaker 3: You have privates as well. 442 00:24:20,359 --> 00:24:24,120 Speaker 8: And so it's not homogeneous, right, and so I think 443 00:24:24,160 --> 00:24:27,120 Speaker 8: it makes it much more difficult to kind of finally 444 00:24:27,160 --> 00:24:28,280 Speaker 8: put a number on it. 445 00:24:28,320 --> 00:24:30,800 Speaker 3: But I still think growth is upon us. 446 00:24:31,160 --> 00:24:33,840 Speaker 1: What are the risks in this growth and bondy ts 447 00:24:33,920 --> 00:24:35,720 Speaker 1: as you see it? Are there risks out there we 448 00:24:35,720 --> 00:24:37,400 Speaker 1: should be at least thinking about. 449 00:24:37,600 --> 00:24:40,159 Speaker 8: I think there's always risks of what I think. The 450 00:24:40,160 --> 00:24:43,040 Speaker 8: one risk that I think about is, you know, do 451 00:24:43,160 --> 00:24:46,480 Speaker 8: you have such an over reliance upon this one aspect? 452 00:24:46,560 --> 00:24:49,680 Speaker 8: So if you think about kind of the ETF infrastructure 453 00:24:49,720 --> 00:24:53,240 Speaker 8: and the create redeemed process, it's it's a handful of 454 00:24:53,320 --> 00:24:57,520 Speaker 8: names that's determined by the provider, and so does that 455 00:24:57,760 --> 00:25:01,479 Speaker 8: cannibalize other parts of the marketplace over time? And as 456 00:25:01,560 --> 00:25:04,760 Speaker 8: if that shuts down, does that have an amplifying cascading 457 00:25:04,800 --> 00:25:06,320 Speaker 8: effect across the system? 458 00:25:06,440 --> 00:25:08,960 Speaker 3: So the truth in the matter is we don't know. 459 00:25:09,680 --> 00:25:10,800 Speaker 3: It hasn't been tested. 460 00:25:10,960 --> 00:25:13,840 Speaker 8: We haven't had a credit cycle in a very long time, 461 00:25:14,320 --> 00:25:16,800 Speaker 8: so there's still a lot of tests that. 462 00:25:16,720 --> 00:25:20,360 Speaker 3: We need to kind of go through. So we shall see. 463 00:25:20,680 --> 00:25:22,520 Speaker 1: Okay, Greg, it's always great to have you this. Thank 464 00:25:22,560 --> 00:25:24,400 Speaker 1: you so much for coming back on Wall Street Week. 465 00:25:24,600 --> 00:25:28,960 Speaker 1: That is Greg Peters of p JIM coming up. It's 466 00:25:29,000 --> 00:25:31,800 Speaker 1: not easy these days to be running a legacy media company. 467 00:25:32,080 --> 00:25:34,800 Speaker 1: We talk with Jonathan Klein of Hanging Media about what's 468 00:25:34,840 --> 00:25:39,000 Speaker 1: broken and what can be done to fix it. That's 469 00:25:39,080 --> 00:25:41,160 Speaker 1: next on Wall Street Week on Bloomberg. 470 00:25:42,520 --> 00:25:46,760 Speaker 2: This is Bloomberg Wall Street Week with David Weston from 471 00:25:46,880 --> 00:25:53,600 Speaker 2: Bloomberg Radio. 472 00:25:54,520 --> 00:25:57,160 Speaker 1: This is Wall Street Week. I'm David Weston. Media companies 473 00:25:57,160 --> 00:25:59,679 Speaker 1: have been much in the news recently, and not always 474 00:25:59,760 --> 00:26:02,560 Speaker 1: in a good way, as both Warner Brothers, Discovery and 475 00:26:02,680 --> 00:26:05,880 Speaker 1: Paramount have taken big write downs on their linear assets, 476 00:26:06,000 --> 00:26:09,919 Speaker 1: and prospects for streaming services remain at best uncertain. To 477 00:26:09,960 --> 00:26:12,080 Speaker 1: take us through the ups and the downs, welcome back, 478 00:26:12,160 --> 00:26:15,600 Speaker 1: Jonathan Klein, co founder of Hanging Media and former president 479 00:26:15,640 --> 00:26:18,360 Speaker 1: of CNN. Jonathan's always great to have you with us. 480 00:26:19,000 --> 00:26:20,960 Speaker 1: But our business, if I can call it that way, 481 00:26:21,000 --> 00:26:24,160 Speaker 1: the media business, boy, has it changed. But start, for example, 482 00:26:24,160 --> 00:26:26,879 Speaker 1: with Warner Brothers Discovery, which is really taking it right now. 483 00:26:26,920 --> 00:26:29,360 Speaker 1: Their stock value is down, They've got a lot of debt, 484 00:26:29,400 --> 00:26:31,800 Speaker 1: over forty billion dollars in debt. What do you do? 485 00:26:31,920 --> 00:26:34,359 Speaker 1: There is a problem with the strategy of the execution. 486 00:26:35,119 --> 00:26:37,679 Speaker 9: It's a problem with the industry that they find themselves in, 487 00:26:38,680 --> 00:26:41,240 Speaker 9: is what it is. And this goes way beyond just 488 00:26:41,320 --> 00:26:45,280 Speaker 9: Warner Brothers Discovery. So you know, in their case, they've 489 00:26:45,280 --> 00:26:48,160 Speaker 9: got to swim in the same waters as every legacy 490 00:26:48,200 --> 00:26:51,160 Speaker 9: media company. They've got a lot of brands, they've got 491 00:26:51,160 --> 00:26:55,080 Speaker 9: a lot of assets. The main driver of their profit 492 00:26:55,200 --> 00:26:59,760 Speaker 9: has been the cable TV networks T and D, DDS, CNN, etc. 493 00:27:01,200 --> 00:27:08,560 Speaker 9: And just a raw amount of revenue available to cable 494 00:27:09,160 --> 00:27:12,600 Speaker 9: TV driven businesses has shrunk considerably. 495 00:27:13,000 --> 00:27:15,640 Speaker 5: The other component of their business, the studio business. 496 00:27:15,800 --> 00:27:16,320 Speaker 4: Same thing. 497 00:27:16,560 --> 00:27:20,880 Speaker 9: Just the pool of money available for them and all 498 00:27:20,880 --> 00:27:25,040 Speaker 9: of their competitors to make has shrunk. Subscriber fees that 499 00:27:25,080 --> 00:27:29,960 Speaker 9: the cable distributors are paying have shrunk because viewers have left, 500 00:27:30,040 --> 00:27:36,320 Speaker 9: so you're monthly income on a per subscriber basis has plummeted. 501 00:27:36,800 --> 00:27:40,920 Speaker 9: And as a result, also advertising revenues have plummeted. 502 00:27:41,000 --> 00:27:42,959 Speaker 5: And so of course you've got to redrench, you've got 503 00:27:43,000 --> 00:27:44,320 Speaker 5: to make cuts. They're all doing it. 504 00:27:44,359 --> 00:27:47,119 Speaker 9: You mentioned, Paramount just began their wave of layoffs, their 505 00:27:47,200 --> 00:27:51,959 Speaker 9: latest wave of layoffs today, and even Axios, which is 506 00:27:52,440 --> 00:27:57,000 Speaker 9: a digital only business, they've been through their biggest layoff 507 00:27:57,080 --> 00:27:59,760 Speaker 9: in the past couple of weeks. So in general, media 508 00:27:59,880 --> 00:28:04,280 Speaker 9: is really coming to terms with the reality that it's 509 00:28:04,640 --> 00:28:08,760 Speaker 9: more than ever an industry dominated by the tech giants, 510 00:28:09,200 --> 00:28:14,320 Speaker 9: the Apples and the Amazons and the certainly Google, which 511 00:28:14,320 --> 00:28:19,159 Speaker 9: owns YouTube, which is a monster. The industry is dominated 512 00:28:19,160 --> 00:28:25,080 Speaker 9: by those players, and there's just less opportunity for content creators. 513 00:28:25,640 --> 00:28:28,159 Speaker 1: So what do you do in that environment if you're 514 00:28:28,240 --> 00:28:30,400 Speaker 1: running with these big media companies. I mean, I think 515 00:28:30,440 --> 00:28:32,879 Speaker 1: both of our experiences, it's awfully hard to cut yourself 516 00:28:32,960 --> 00:28:35,040 Speaker 1: a success. You may have to cut, but it's hard 517 00:28:35,040 --> 00:28:37,640 Speaker 1: to get to success by cutting often. You then start 518 00:28:37,680 --> 00:28:40,160 Speaker 1: to think about deals, and John Malone, after all, is 519 00:28:40,240 --> 00:28:43,160 Speaker 1: the force behind the throne there at one of the Discovery. 520 00:28:43,480 --> 00:28:46,440 Speaker 1: Are there deals that could be done, consolidation deals that 521 00:28:46,560 --> 00:28:47,480 Speaker 1: might make things better? 522 00:28:47,720 --> 00:28:49,840 Speaker 9: Well, you're going to probably look to your left and 523 00:28:49,880 --> 00:28:53,040 Speaker 9: your right to see who's in the same boat. I 524 00:28:53,040 --> 00:28:57,320 Speaker 9: think that was their original strategy at Discovery when they 525 00:28:57,640 --> 00:29:02,120 Speaker 9: did the acquisition of WarnerMedia, was to get bigger, big 526 00:29:02,240 --> 00:29:04,280 Speaker 9: enough that they can maybe be the biggest kid on 527 00:29:04,320 --> 00:29:08,120 Speaker 9: the block and dictate the terms of other acquisitions and. 528 00:29:08,080 --> 00:29:11,360 Speaker 5: Start doing roll ups of other players. Now they're not 529 00:29:11,400 --> 00:29:12,560 Speaker 5: the biggest kid on the block. 530 00:29:12,720 --> 00:29:16,080 Speaker 9: Now their market cap has taken such a severe hit 531 00:29:16,600 --> 00:29:20,800 Speaker 9: that the deal numbers themselves are going to be much smaller. 532 00:29:20,880 --> 00:29:23,520 Speaker 9: But that's what's going to have to happen, is consolidation 533 00:29:23,840 --> 00:29:25,640 Speaker 9: for all of these guys. You have a new team 534 00:29:25,720 --> 00:29:29,400 Speaker 9: coming into Paramount, David Ellison and Jeff Shell, who's so sharp. 535 00:29:31,000 --> 00:29:34,400 Speaker 9: They at least have the benefit of beginner's mind, that is, 536 00:29:34,440 --> 00:29:37,760 Speaker 9: they can look at that Paramount portfolio of companies in 537 00:29:37,800 --> 00:29:41,360 Speaker 9: a fresh way. And they also don't have the legacy 538 00:29:41,440 --> 00:29:44,680 Speaker 9: relationships inside the company, and they can maybe make some 539 00:29:44,800 --> 00:29:45,720 Speaker 9: tougher decisions. 540 00:29:45,920 --> 00:29:47,720 Speaker 5: But it's tricky moving forward. 541 00:29:47,920 --> 00:29:49,640 Speaker 9: One of others, Discovery is going to have to find 542 00:29:49,960 --> 00:29:54,080 Speaker 9: consolidation partners, merger partners. And just last month in Sun 543 00:29:54,200 --> 00:29:57,240 Speaker 9: Valley at the Big Media Conference, you know, David Zaslav 544 00:29:57,360 --> 00:30:01,640 Speaker 9: was bemoaning the excessive government regulation in his mind, you know, 545 00:30:01,680 --> 00:30:04,920 Speaker 9: that prevents them from making mergers too easily. 546 00:30:05,320 --> 00:30:07,160 Speaker 1: So it's one thing to get bigger. People like to 547 00:30:07,160 --> 00:30:09,880 Speaker 1: get bigger, what about also getting smaller In this respect, 548 00:30:10,120 --> 00:30:13,239 Speaker 1: Netflix has done pretty well for itself with basically, if 549 00:30:13,240 --> 00:30:14,960 Speaker 1: I can put it this way, a movie studio hooked 550 00:30:14,960 --> 00:30:17,760 Speaker 1: down to a streaming service without all those pesky linear 551 00:30:17,840 --> 00:30:19,880 Speaker 1: ch channels that you and I have worked with through 552 00:30:19,880 --> 00:30:22,280 Speaker 1: the year. Is that a strategy to say, let's double 553 00:30:22,320 --> 00:30:24,960 Speaker 1: down on the production and the streaming and let's get 554 00:30:25,080 --> 00:30:27,560 Speaker 1: rid of the businesses or do something about the business. 555 00:30:27,680 --> 00:30:29,240 Speaker 1: They aren't going anywhere, They're not growing. 556 00:30:30,240 --> 00:30:34,560 Speaker 9: Netflix has had the advantage always of being a tech 557 00:30:34,720 --> 00:30:40,480 Speaker 9: first company that applied that technology to media content and distribution. 558 00:30:40,680 --> 00:30:44,160 Speaker 9: At first just distribution, and now they're in the content 559 00:30:44,200 --> 00:30:45,080 Speaker 9: business as well. 560 00:30:45,640 --> 00:30:49,680 Speaker 5: And their market cap is what twenty times. 561 00:30:49,320 --> 00:30:52,920 Speaker 9: That of Warner Brothers Discovery at this point, and so 562 00:30:53,000 --> 00:30:57,720 Speaker 9: they've got that inherent advantage. The problem is that everything 563 00:30:57,720 --> 00:31:00,560 Speaker 9: we're seeing today is the result of the impact of 564 00:31:00,640 --> 00:31:06,440 Speaker 9: technology on content distribution. We went from cable and broadcast 565 00:31:06,640 --> 00:31:10,840 Speaker 9: to internet distribution of content. What's about to happen now 566 00:31:11,440 --> 00:31:16,240 Speaker 9: is the massive disruption of content production. 567 00:31:17,280 --> 00:31:19,120 Speaker 5: Thanks to a guide. 568 00:31:19,440 --> 00:31:23,400 Speaker 9: There's just going to be more and more, less and 569 00:31:23,520 --> 00:31:28,880 Speaker 9: less expensive content out there, and the legacy companies cannot 570 00:31:28,880 --> 00:31:32,680 Speaker 9: really play in that space. You can't turn Warner Brothers 571 00:31:33,080 --> 00:31:37,520 Speaker 9: into YouTube. YouTube is able to sit there and just 572 00:31:37,640 --> 00:31:41,000 Speaker 9: allow all their users to post whatever they want and 573 00:31:41,040 --> 00:31:43,560 Speaker 9: in the time that we're talking, they're probably going to 574 00:31:43,560 --> 00:31:46,880 Speaker 9: be a million new videos posted to YouTube just in 575 00:31:46,960 --> 00:31:49,520 Speaker 9: this short time frame, and they can just sit back 576 00:31:49,560 --> 00:31:52,520 Speaker 9: and present it to everyone. And at the same time, 577 00:31:52,840 --> 00:31:55,320 Speaker 9: the other power that a YouTube has is all that 578 00:31:55,480 --> 00:32:01,480 Speaker 9: data collection, all that information about who's hosting, what they post, 579 00:32:01,960 --> 00:32:04,479 Speaker 9: who's watching, what they watch, when they leave, when they 580 00:32:04,520 --> 00:32:08,520 Speaker 9: come back. So the YouTube possesses this vast trove of 581 00:32:08,640 --> 00:32:12,840 Speaker 9: audience insight that they can then re funnel back into 582 00:32:12,880 --> 00:32:16,480 Speaker 9: their marketing decisions, their programming decisions. What do we buy 583 00:32:16,760 --> 00:32:20,640 Speaker 9: Do we buy the NFL Sunday ticket package? Yes we do, 584 00:32:20,680 --> 00:32:23,600 Speaker 9: they've decided, right, and now they can analyze behaviors around 585 00:32:23,680 --> 00:32:27,000 Speaker 9: that as they make other decisions about getting into other. 586 00:32:26,840 --> 00:32:28,520 Speaker 5: Aspects of sports rights. 587 00:32:28,880 --> 00:32:33,840 Speaker 9: Pretty soon you've got these giants now competing for the 588 00:32:33,880 --> 00:32:38,480 Speaker 9: same content that's been driving the legacy players for the 589 00:32:38,560 --> 00:32:42,600 Speaker 9: last several decades sports news, right. 590 00:32:42,880 --> 00:32:46,040 Speaker 5: And now they're taking all that away. 591 00:32:45,880 --> 00:32:48,400 Speaker 9: From the legacy players as well their way out of 592 00:32:48,400 --> 00:32:52,120 Speaker 9: this to a degree, they can supply programming as they 593 00:32:52,240 --> 00:32:56,200 Speaker 9: resumed doing with the HBO programming and also of the 594 00:32:56,240 --> 00:32:58,960 Speaker 9: Max programming. They can start to supply others with that 595 00:32:59,080 --> 00:33:03,520 Speaker 9: programming as well, and just settle into that niche of 596 00:33:03,600 --> 00:33:05,600 Speaker 9: being a content supplier. 597 00:33:06,320 --> 00:33:07,640 Speaker 5: But the issue is that the. 598 00:33:07,680 --> 00:33:12,959 Speaker 9: Kind of content that younger viewers are consuming in droves 599 00:33:13,720 --> 00:33:21,160 Speaker 9: is not the fancy studio productions. It's mister Beasts on YouTube. 600 00:33:21,560 --> 00:33:27,440 Speaker 9: It's rudimentary shot on a cell phone and the audience 601 00:33:27,520 --> 00:33:30,120 Speaker 9: loves that. And you know, that's the history of disruption 602 00:33:30,240 --> 00:33:35,320 Speaker 9: in all businesses. Cheaper, easier, more accessible tends to win 603 00:33:35,360 --> 00:33:37,520 Speaker 9: the day it gets a foothold, and then it expands 604 00:33:37,640 --> 00:33:40,920 Speaker 9: up into more expensive and so you've got your subscription 605 00:33:41,000 --> 00:33:43,160 Speaker 9: tiers of YouTube as well if you want to watch that. 606 00:33:43,360 --> 00:33:47,040 Speaker 9: But that's how the castle laws collapse around the legacy players. 607 00:33:47,440 --> 00:33:49,640 Speaker 1: It is a tough business. Jonathan, thank you so much. 608 00:33:49,640 --> 00:33:51,320 Speaker 1: It's always great to have you here to explain it 609 00:33:51,360 --> 00:33:56,120 Speaker 1: to us. That is Jonathan Klein of Hang Media. Plato 610 00:33:56,280 --> 00:33:58,960 Speaker 1: taught that when there is an income tax, the just 611 00:33:59,120 --> 00:34:02,520 Speaker 1: man will pay more and the unjust less on the 612 00:34:02,560 --> 00:34:05,720 Speaker 1: same amount of income. But however we feel about justice, 613 00:34:05,840 --> 00:34:08,120 Speaker 1: let's face it, none of us really looks forward to 614 00:34:08,160 --> 00:34:10,719 Speaker 1: paying the income taxes we owe. And so when we're 615 00:34:10,719 --> 00:34:13,440 Speaker 1: in an election season, our candidates go out of their 616 00:34:13,440 --> 00:34:16,279 Speaker 1: way to promise they'll cut our taxes if only we'll 617 00:34:16,360 --> 00:34:19,360 Speaker 1: vote for them. Former President Trump touts the tax cuts 618 00:34:19,360 --> 00:34:22,200 Speaker 1: he got through back in twenty seventeen, taxes that by 619 00:34:22,239 --> 00:34:25,600 Speaker 1: their terms, we're supposed to go away for individuals next year, 620 00:34:25,920 --> 00:34:28,719 Speaker 1: but the mister Trump promises he'll make permanent if he's 621 00:34:28,760 --> 00:34:30,080 Speaker 1: elected to another term. 622 00:34:30,160 --> 00:34:32,520 Speaker 10: Instead of a Biden tax cic, I'll give you a 623 00:34:32,600 --> 00:34:39,760 Speaker 10: Trump middle class, upper class, lower class, business class, big 624 00:34:40,239 --> 00:34:41,440 Speaker 10: tax cut. 625 00:34:41,640 --> 00:34:42,359 Speaker 5: You're gonna have the. 626 00:34:42,360 --> 00:34:44,600 Speaker 10: Biggest tax cut on day one. 627 00:34:44,719 --> 00:34:49,080 Speaker 11: We will throw out Biden comics and we will reinstate Meganomics. 628 00:34:49,400 --> 00:34:52,920 Speaker 1: Mister Trump's running mate jd Vance proposes even more tax breaks, 629 00:34:52,920 --> 00:34:55,200 Speaker 1: in the form of a child tax credit. He'd take 630 00:34:55,360 --> 00:34:58,799 Speaker 1: up to five thousand dollars a year. Jd Vance is 631 00:34:58,840 --> 00:35:01,080 Speaker 1: calling for a higher minimum age. What is he going 632 00:35:01,120 --> 00:35:03,400 Speaker 1: to hire Lena con next, I'm not sure when on 633 00:35:03,440 --> 00:35:06,600 Speaker 1: Sunday morning television to call for an expanded child tax credit. 634 00:35:06,880 --> 00:35:09,520 Speaker 1: This urged to cut our taxes and injected a rare 635 00:35:09,680 --> 00:35:12,960 Speaker 1: moment of by person agreement into the election when the 636 00:35:13,000 --> 00:35:15,880 Speaker 1: former president said he'd eliminate taxes on tips paid to 637 00:35:15,960 --> 00:35:16,680 Speaker 1: service staff. 638 00:35:16,880 --> 00:35:18,920 Speaker 11: And remember, what I'm going to do is something that 639 00:35:19,000 --> 00:35:23,000 Speaker 11: nobody has ever even thought about doing no tax on 640 00:35:23,120 --> 00:35:27,319 Speaker 11: tips for all of you waitresses, for all of you 641 00:35:27,440 --> 00:35:28,440 Speaker 11: caddies at Darrel. 642 00:35:28,719 --> 00:35:31,399 Speaker 1: His opponent, Vice President Harris second of the motion. 643 00:35:31,719 --> 00:35:34,680 Speaker 9: When I am president, we will continue our fight for 644 00:35:34,840 --> 00:35:36,080 Speaker 9: working families of. 645 00:35:36,160 --> 00:35:45,880 Speaker 1: America, including to raise the minimum wage and eliminate taxes 646 00:35:45,920 --> 00:35:50,040 Speaker 1: on tips for service and hospitality workers, leaving mister Trump 647 00:35:50,120 --> 00:35:53,520 Speaker 1: to cry foul because the Democrats have stolen his idea. 648 00:35:53,760 --> 00:35:55,080 Speaker 1: But she truly is a radical. 649 00:35:55,160 --> 00:35:57,719 Speaker 11: She's flip flopping on everything to get elected. After she 650 00:35:57,760 --> 00:36:00,000 Speaker 11: gets elected, it all goes right back to where it was. 651 00:36:00,320 --> 00:36:03,120 Speaker 1: But let's get back to that justice part of paying 652 00:36:03,120 --> 00:36:05,759 Speaker 1: our taxes, or at least making sure we're doing our part. 653 00:36:06,000 --> 00:36:07,960 Speaker 1: It will come as no surprise that we have a 654 00:36:08,040 --> 00:36:10,719 Speaker 1: deficit problem in the United States, one that puts at 655 00:36:10,760 --> 00:36:13,319 Speaker 1: risk what our children will inherit from us. 656 00:36:13,520 --> 00:36:16,839 Speaker 9: You can't leave your children a negative bequest unless you're 657 00:36:16,840 --> 00:36:18,560 Speaker 9: doing it through the government, and that's what we're basically doing, 658 00:36:18,600 --> 00:36:20,760 Speaker 9: because we're leaving our children to negative bequest by running 659 00:36:20,800 --> 00:36:21,200 Speaker 9: up the debt. 660 00:36:21,280 --> 00:36:23,480 Speaker 1: And as much as people like to talk about fixing 661 00:36:23,520 --> 00:36:25,960 Speaker 1: the deficit through spending cuts alone. 662 00:36:25,560 --> 00:36:27,880 Speaker 9: We're already on track to spend more on interest Stavis 663 00:36:27,920 --> 00:36:31,000 Speaker 9: than we are for national defense, and regrettably, none of 664 00:36:31,000 --> 00:36:32,680 Speaker 9: these guys appos you anything about it. 665 00:36:32,800 --> 00:36:35,800 Speaker 1: Most experts tell us that we're going to need someone 666 00:36:35,920 --> 00:36:38,719 Speaker 1: to pay more taxes someplace if we're to get our 667 00:36:38,719 --> 00:36:41,680 Speaker 1: fiscal house in order, which brings us to a possible 668 00:36:41,719 --> 00:36:45,680 Speaker 1: example of Plato's just man. One of the richest men around, 669 00:36:45,760 --> 00:36:49,120 Speaker 1: Warren Buffett, has long complained that, if anything, he pays 670 00:36:49,120 --> 00:36:49,960 Speaker 1: too little in. 671 00:36:49,960 --> 00:36:53,799 Speaker 12: Taxes right now because of loo Pauls and shelters in 672 00:36:53,840 --> 00:36:58,080 Speaker 12: the tax code, a quarter of all millionaires pay lower 673 00:36:58,160 --> 00:36:59,840 Speaker 12: tax rates than millions of. 674 00:37:00,000 --> 00:37:04,000 Speaker 1: Middle class households. Right now, Warren Buffett. 675 00:37:03,480 --> 00:37:06,319 Speaker 12: Pays a lower tax rate than a secretary. 676 00:37:06,520 --> 00:37:09,200 Speaker 1: This week we learned that mister Buffett has taken concrete 677 00:37:09,239 --> 00:37:11,040 Speaker 1: action to help us out at least a bit with 678 00:37:11,120 --> 00:37:13,640 Speaker 1: our national deficit. When he sold off a good portion 679 00:37:13,680 --> 00:37:16,040 Speaker 1: of Berkshire Hathaway's stake and Apple, he ran up a 680 00:37:16,040 --> 00:37:20,080 Speaker 1: tax bill of some fifteen billion dollars. That may seem 681 00:37:20,120 --> 00:37:22,120 Speaker 1: like a high price to pay for a shrewd investment, 682 00:37:22,320 --> 00:37:25,360 Speaker 1: But as Doug con my baby tax professor back at Michigan, 683 00:37:25,400 --> 00:37:27,680 Speaker 1: baby tax is what we call tax one, as opposed 684 00:37:27,680 --> 00:37:30,319 Speaker 1: to the much more difficult corporate tax course. As Doug 685 00:37:30,360 --> 00:37:33,040 Speaker 1: taught us all those years ago, the good news about 686 00:37:33,040 --> 00:37:35,920 Speaker 1: paying income taxes is that they're always less than the 687 00:37:35,960 --> 00:37:38,400 Speaker 1: money you made. And in the case of Warren Buffett, 688 00:37:38,400 --> 00:37:41,360 Speaker 1: he owes that fifteen billion dollars on a nice gain 689 00:37:41,520 --> 00:37:44,879 Speaker 1: of fifteen nine billion dollars, and maybe it will leave 690 00:37:44,920 --> 00:37:47,440 Speaker 1: a bit of the tax burden on those less able 691 00:37:47,600 --> 00:37:48,239 Speaker 1: to afford it. 692 00:37:48,320 --> 00:37:52,360 Speaker 9: Missus Gilmour owes the irs two hundred and seventy thousand dollars. 693 00:37:52,560 --> 00:37:54,359 Speaker 5: We're going to have to sell the house to someone else. 694 00:37:54,480 --> 00:37:56,799 Speaker 5: But she's an old lady. I mean, look at her, 695 00:37:56,840 --> 00:37:57,680 Speaker 5: she's old. 696 00:37:58,239 --> 00:37:59,960 Speaker 1: That does it. For this episode of Wall Street Week, 697 00:38:00,120 --> 00:38:04,440 Speaker 1: I'm David Weston. This is Bloomberg. See you next week.