Speaker 1: This is Bloomberg Wall Street Week. We turn our attention
Speaker 1: to the markets this week at U S CPI members
Speaker 1: reinforcing concerns about inflation. The financial stories that chiep are
Speaker 1: worth a really different reaction to mark its more indications
Speaker 1: of just how hot the U. S. Economy really is.
Speaker 1: Through the eyes of the most influential voices Larry Summers,
Speaker 1: the former Tretory Secretary, Katherine Keening, CEO of the n
Speaker 1: Y Mollins Sam's l Sharmon and founder of Equatic Group
Speaker 1: Investment in Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio, do we know which way we're headed? Markets
Speaker 1: don't believe the Fed, the U S isn't sure about
Speaker 1: paying all those bills that it's wracked up, and earnings, well,
Speaker 1: earnings are just all over the place. This is Bloomberg
Speaker 1: Wall Street Week. I'm David west this week's special contributor
Speaker 1: Larry Summers of Harvard on a FED sending mixed signals.
Speaker 1: I think the FEDS doing a good job of portraying
Speaker 1: substantial uncertainty in the account. To me and Musher Sharma
Speaker 1: of Rockefeller International on whether India is finally coming into
Speaker 1: its own for investors. This is a country that has
Speaker 1: consistently disappointing the optimist and defaceims. It was a week
Speaker 1: of contradictions the Federal Reserve height rates and other twenty
Speaker 1: five basis points, and warned that more is coming and
Speaker 1: continue to anticipate that ongoing increases will be appropriate in
Speaker 1: order to attain a stance of monetary policy that is
Speaker 1: sufficiently restrictive to return inflation to two over time. Whatever
Speaker 1: Chair Pile said, the markets apparently heard only that things
Speaker 1: may be getting better. I think there are opportunities for
Speaker 1: this rally to go longer and higher, while the European
Speaker 1: Central Bank and the Bank of England continue to play
Speaker 1: catch up, with both raising rates the expected fifty basis points.
Speaker 1: We know we have ground to cover. We know that
Speaker 1: we are not don't. President Biden met with Speaker McCarthy
Speaker 1: at the White House and afterward they agreed only on
Speaker 1: continuing to talk with no resolution in sight of the
Speaker 1: debt ceiling dilemma. My role right now is to make
Speaker 1: sure we have a sensible, responsible ability to raise the
Speaker 1: debt ceiling, but not continue this runaway spin. Earnings were
Speaker 1: all over the place, with snaps selling off while metas
Speaker 1: surprise to the upside. It is a good sign that
Speaker 1: both daily active users and monthly active users for platform
Speaker 1: like Facebook that is you know, quite quite old in
Speaker 1: social network terms, is still gaining. Caterpillar miss on profits
Speaker 1: while GM scored big. Where we see consumer demand for
Speaker 1: our vehicles at our price points is really strong. We
Speaker 1: just need to make sure we get production up to
Speaker 1: be able to meet that demand. But over in India,
Speaker 1: the Adane conglomerate had bigger problems than just earnings as
Speaker 1: it tried to stabilize with a stock offer after being
Speaker 1: hit hard by a short seller, only to have to
Speaker 1: cancel the offering as the company lost over one hundred
Speaker 1: billion dollars in market value. Hey, it's all about good
Speaker 1: having a company and its associates heavily and bad and
Speaker 1: that's what hits away. And then came Friday with US
Speaker 1: jobs numbers coming in far above what anyone had predicted,
Speaker 1: adding five seventeen thousand new jobs to an already type market,
Speaker 1: dropping the unemployment rate to three point four percent, which
Speaker 1: drove bond yields up, with the yield on the tenure
Speaker 1: adding thirteen basis points on Friday alone, but remaining nearly
Speaker 1: flat for the week overall, ending up at three point
Speaker 1: five to while the SMB five hundred climbed one point
Speaker 1: six percent over the week and the NASDAC gained a
Speaker 1: robust three point three percent today through a very busy
Speaker 1: week in the markets, we welcome now Bob Michael He's
Speaker 1: JP Morgan Asset Management, Head of Global fixed Income, Currency
Speaker 1: and Commodities, and Aaron Brown, Pimco portfolio manager for multi
Speaker 1: asset Strategies. Welcome both of you for being back with us. Aaron,
Speaker 1: I'll start with you. This is a very busy week
Speaker 1: and the markets were not always clear about what they thought.
Speaker 1: What did you make of what happened over the course
Speaker 1: of the week, in particularly jobs numbers. I think that
Speaker 1: the jobs numbers came well above consensus expectations and certainly
Speaker 1: underpinned the fact that the economy is not in a
Speaker 1: recession right now. The job growth still remains quite strong,
Speaker 1: and the labor market is still quite tight. And it
Speaker 1: probably also underscores the fact that the Fed has more
Speaker 1: work to do with respect to, you know, keeping rates
Speaker 1: in restrictive territory. The FED has already indicated that they're
Speaker 1: likely hike and at least an additional time one time
Speaker 1: in March, and then after that, I think, you know,
Speaker 1: certainly there's scope for the Fed to potentially hike an
Speaker 1: additional one time or pause there, but in either case,
Speaker 1: the Fed will likely not cut rates for an extended period,
Speaker 1: continue to remain restrictive for quite some time time, and
Speaker 1: then really observe and see how the data unfolds from there.
Speaker 1: And so while the market has been romancing this idea
Speaker 1: of the Federal Reserve starting to cut at the tail
Speaker 1: end of three, the Federal Reserve, at least for now,
Speaker 1: is likely to continue to keep rates on hold for
Speaker 1: an extended period of time and not meet the market's
Speaker 1: expectations for rate hikes as soon as the market is expecting. Bob, Yeah, David,
Speaker 1: I wasn't confused at all. Actually, for the first time,
Speaker 1: I think the Federal Reserve and the labor data confirmed
Speaker 1: what the average investor, the average consumer is seeing. The
Speaker 1: Federal Reserve could have walked in and said, inflation is
Speaker 1: nowhere near our target. We've got to raise rates indefinitely
Speaker 1: and push FED rates expectations much higher, maybe the terminal
Speaker 1: rate to five and have even five and three quarters percent. Instead,
Speaker 1: they came in and said, what I see, which is
Speaker 1: inflation is moderating. We can see an end two rate hikes.
Speaker 1: They confirm that. You look at the jobs data, and
Speaker 1: yes it was a very big number, but how many
Speaker 1: times have we been here and we've said everywhere we
Speaker 1: go in the services economy there's a shortage of worker.
Speaker 1: You look at airports, you look at restaurants, they're complaining
Speaker 1: about not being able to hire enough workers. And this
Speaker 1: confirm that this labor for this labor report confirmed that
Speaker 1: the economy has shifted consumption from work from home sort
Speaker 1: of expenditures to things that are more services, travel and leisures.
Speaker 1: And what about that, because that's one of the things
Speaker 1: that struck everybody that you added so many jobs got
Speaker 1: tighter and tighter, and labor market at the same time,
Speaker 1: actually the wages came down a little bit. Where is
Speaker 1: the wage pressure and is it coming and when? Well,
Speaker 1: I think part of it is a mix shift issue,
Speaker 1: and we know that average hourly earnings does have some
Speaker 1: distortions with respect to the mix shift, and so looking
Speaker 1: at e c I Atlantic wage data is probably more
Speaker 1: appropriate indicators. You know that said, I do think that
Speaker 1: there is continued pressure, particularly on some of the services
Speaker 1: UM side, and particularly some of the areas that Bob
Speaker 1: mentioned with respect to leisure, travel transportation, which saw some
Speaker 1: of the you know, significant job gains this last month.
Speaker 1: UM that said, you know, we are starting to see
Speaker 1: peak inflation. On the wage side. We are starting to
Speaker 1: see measures of inflation start to move lower with respect
Speaker 1: to wage growth, and I think that that's likely to
Speaker 1: continue as we move through you know, the course of
Speaker 1: three will still see wage gains, but at a slower pace.
Speaker 1: And I think that's what they've FED is really keyed
Speaker 1: in on in terms of you know, setting and determining
Speaker 1: their policy. If they continue to see wage growth move
Speaker 1: lower UM, which we're starting to see, that will allow
Speaker 1: the FED to eventually back off and and really pause.
Speaker 1: And so I think that's what the key thing to
Speaker 1: watches is the pace of wage gage which is slowing
Speaker 1: from here so soon I pick up on that very
Speaker 1: point because I think most people agree. Certainly j Pal said,
Speaker 1: we're starting to see some disinflationary forces. We're starting to
Speaker 1: see seven inflation come off. But there's a question about
Speaker 1: whether that's going to continue as you suggested, or whether
Speaker 1: you're really gonna be able to get down to anything
Speaker 1: like two without a lot more increases on the FED.
Speaker 1: So I don't think the FED is likely to hike rates,
Speaker 1: you know, significantly higher than here. I think one additional
Speaker 1: basis point hiker potentially two is probably the most that's
Speaker 1: in the cards for the FED at this time. And
Speaker 1: then they're going to sit and wait. And you know,
Speaker 1: we all know that Federal reserve policy, you know, moves
Speaker 1: with variable and lagged effects, and so I still think
Speaker 1: that the FED thinks that that the effects of the
Speaker 1: tightening last year will still continue to make their way
Speaker 1: through the economy uh this year, and therefore, you know,
Speaker 1: there may not be future rate hikes that are necessary.
Speaker 1: But you know, I think that they're willing to to
Speaker 1: wait and see whether or not future rate hikes are
Speaker 1: are necessary after another one or two hikes. And so,
Speaker 1: you know, I do think that the FED right now,
Speaker 1: you know, does expect that they're at least not there's
Speaker 1: not significantly more hikes that are necessary, and as a
Speaker 1: result of that, they're you know, willing to take a
Speaker 1: little bit of a weight and see approach. You know
Speaker 1: that said, um, you know, we have seen some disinflation
Speaker 1: will likely see more, but to expect that we're going
Speaker 1: to move, you know, close to two percent by year end.
Speaker 1: I don't think you know, many are expecting that. And
Speaker 1: you know, I think that at this point the FED
Speaker 1: will think of anything less than three percent. Uh, you know,
Speaker 1: in terms of core PC inflation is a win. So
Speaker 1: I think that's the number to be looking for. Not
Speaker 1: to percent is really sub three percent? Well, last one,
Speaker 1: last one two on this subject, and that is what
Speaker 1: do you expect the Fed to do? And number two,
Speaker 1: what are the bond markets anticipating? Those could be two
Speaker 1: different things. Well, we expected two different things. So I
Speaker 1: agree with Aaron. The FED is setting us up to
Speaker 1: do one or two more rate hikes, and as she said,
Speaker 1: they pause, they wait for the cumulative and lagged effects
Speaker 1: to hit. Our analysis shows that from the last rate
Speaker 1: hike until recession, it's roughly a year, so you're gonna
Speaker 1: have to wait out several quarters to see are you
Speaker 1: going to have that mythical soft landing? Are you headed
Speaker 1: into recession? The market is starting to front run that.
Speaker 1: We've all done the work. We know at the time
Speaker 1: of the Fed's last rate hike, that's the peak in
Speaker 1: yields and things rally like crazy, particularly the front end
Speaker 1: of the yield curve. That's what we're seeing in bond
Speaker 1: markets absent today. We think that's what we're going to
Speaker 1: see going forward. Okay, thank you so much, Aaron Brown
Speaker 1: PIMCO and Bob Michael JP Morgan. They're gonna be staying
Speaker 1: with us as we turn to some of the other
Speaker 1: big issues out there for the market. That's gonna be
Speaker 1: up next on Wall Street Week on Bloomberg. This is
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: The market has disappointed the bulls. It is disappointed the bears.
Speaker 1: It has been, if anything, a cat on a hot
Speaker 1: ten economy. Those who believe, against all the evidence that
Speaker 1: the market is always efficient, sophisticated and prescient may have
Speaker 1: a little trouble explaining the last two weeks when the
Speaker 1: market first sword in its best day in ten months
Speaker 1: and then two sessions later panicked for its worst day
Speaker 1: in five months. That, of course, is luifer has around
Speaker 1: Wall Street Week back in February when the number one
Speaker 1: movie was on Golden Pond and the top song was
Speaker 1: Centerfold by the j Giles. But I have to say
Speaker 1: people to remind me what that song was, but I
Speaker 1: remember it now. Aaron Brown of PIMCO and Bob Michael
Speaker 1: from JP Morgan are still with the soul. Let me
Speaker 1: start with you, Bob. We've talked about the central banks,
Speaker 1: We've talked about jobs. I don't know if we have
Speaker 1: a market on a hot tin economy is that we've
Speaker 1: just learned from. But apart from the center bank and
Speaker 1: central bank, and apart from the jobs, one of the
Speaker 1: things that you're looking at that there and now they
Speaker 1: could have fixed investors. Well. I think that's a very
Speaker 1: good clip to go to because that's a reminder of
Speaker 1: the era when the Fed declared victory on inflation too
Speaker 1: soon and then had to go back and raise rates again.
Speaker 1: And for us, that's the biggest risk that that happens again.
Speaker 1: We're looking at a number of things. I think the
Speaker 1: one most recently that's occurred is China is reopening and
Speaker 1: suddenly you're going to have a billion for consumers out
Speaker 1: there consuming that's twice the size of the US and
Speaker 1: Europe put together. That could create a lot of pressure
Speaker 1: on the price of goods and services. The other thing
Speaker 1: out there that we're very mindful of is that the
Speaker 1: US and Europe got away with a very mild winter
Speaker 1: and that kept energy prices low, as did releasing the
Speaker 1: strategic petroleum Reserve. So Aaron, what about those are two
Speaker 1: very interesting risks, one of those that inflation is not
Speaker 1: going away, that federill actually have to keep raising or
Speaker 1: after pausing, after raise again maybe because of China. How
Speaker 1: big a risk is China in terms of inflation. I
Speaker 1: think that China, with respect to global inflation and particularly
Speaker 1: developed market inflation, is actually going to be quite small.
Speaker 1: The way that we think about it. From a growth perspective,
Speaker 1: it probably has about a point to percentage point increase
Speaker 1: to US growth and maybe point three increase to European
Speaker 1: growth just because of the trade effects, and pretty similar
Speaker 1: impact to inflation, albeit potentially even a little bit smaller
Speaker 1: than those impacts. And that's because you know, typically in
Speaker 1: an environment where you see China growth really rebounding, those
Speaker 1: tend to be the typical effects to growth and inflation
Speaker 1: to global Developed market GDP and inflation. This time around,
Speaker 1: it could be even a little bit smaller, given the
Speaker 1: fact that the reflation story and the and the growth
Speaker 1: story in China is going to be really centered in
Speaker 1: domestic growth drivers and more service reopening drivers rather than
Speaker 1: what you typically see, which tends to be more investment
Speaker 1: in infrastructure. Lad So this time it's going to be
Speaker 1: really focused on travel, getting back to work, getting back
Speaker 1: to you know, typical service oriented economy, which is very domestic,
Speaker 1: China focused. It probably has a bigger impact into the
Speaker 1: region than the region and sort of the country's closest
Speaker 1: to China rather than to the US and into Europe,
Speaker 1: into more developed market economies in the Western world. And
Speaker 1: so I think that the effects are going to be
Speaker 1: good for for China, good for maybe Korea, for Thailand,
Speaker 1: to Singapore, to Hong Kong, but but not as strong
Speaker 1: as a driver for growth and inflation, you know, in
Speaker 1: the US or in Europe. Well, although we did see
Speaker 1: the price of copper shoot up pretty smartly once China
Speaker 1: started to reopen, so they're out there competing for the
Speaker 1: same resources that the Western world is. Now that's inflationary pressure. Well,
Speaker 1: what about broke broadly to want to think you taking
Speaker 1: into account of emerging markets in your decisions about bond investing.
Speaker 1: We're gonna have sure, Shama. On a few minutes, you're
Speaker 1: talking about India is that a factor is making investment decisions, Bob,
Speaker 1: It's an enormous factor. As we look across bond markets,
Speaker 1: we've been very impressed with the emerging markets. We like
Speaker 1: to track the cumulative number of rate hikes since the
Speaker 1: start of the development markets have done close to four
Speaker 1: thousand basis points. The emerging markets have done over twenty
Speaker 1: two thousand basis points of rate hikes. They got in
Speaker 1: front of this, they raised rates. Real yields are high,
Speaker 1: they slay slowed growth and inflationary pressures. We can go
Speaker 1: into those markets, get high real yields and you know what,
Speaker 1: we do. Think the dollar has topped, it will come
Speaker 1: down over the balance of the year. That's a pretty
Speaker 1: nice tail went to local emerging market debt, and I
Speaker 1: think I cut you off. No, what I was gonna
Speaker 1: say was the biggest driver for inflation, particularly in the
Speaker 1: US from a commodity perspective, tends to be energy. And
Speaker 1: we've seen even since the China reopening which started in
Speaker 1: early in early October, we've seen energy prices come down,
Speaker 1: you know, fairly significantly, and gas prices also fall pretty
Speaker 1: precipitously as well. So while typically you would think that
Speaker 1: if it was going to have a significant commodity impact
Speaker 1: from China reopening, you would see that occurrent in energy costs.
Speaker 1: We've actually seen the opposite occur, which is why I
Speaker 1: don't think, you know, just looking at the data and
Speaker 1: looking what's transpired and looking at how China is reopening
Speaker 1: and the sectors is going to be impacted. It's why
Speaker 1: I don't think you're going to see a huge, you know,
Speaker 1: sort of impact to inflation from China real winning. I
Speaker 1: hope that's right. I hope the Fed engineers a soft landing,
Speaker 1: but China is going to be out there consuming and spending.
Speaker 1: And we also have to look at Europe. Europe did
Speaker 1: not go through the pain that we all feared over
Speaker 1: the last several months. That's put them in a much
Speaker 1: better position to consume as well. Fascinating. Thank you so
Speaker 1: very much. It's great to have both of you back
Speaker 1: with us. It's always a treat, that is Bob Michael
Speaker 1: of JP Morgan and also Aaron Brown of Pimco. Well,
Speaker 1: this week was hedge fund Week down in Miami, and
Speaker 1: our very own Shinelle Boss went down to report on
Speaker 1: this really important event for hedge funds. Were welcoming now
Speaker 1: to Wall Street. We great to have your Chanelle. I'm
Speaker 1: glad you were down there for it. So talk to
Speaker 1: the smart long term investor who's looking at their portfolio.
Speaker 1: Why do why do I need hedge fund in my portfolio?
Speaker 1: I mean, it looks like some make money, some lose money.
Speaker 1: And as a whole, the industry has lost more than
Speaker 1: two hundred billion dollars last year. So it's not like
Speaker 1: the hedge funds at large are doing so well. But
Speaker 1: there are select few that I've had some of their
Speaker 1: best years in history. Take Citadel for example, which not
Speaker 1: only had sixteen billion dollars in profit last year, they
Speaker 1: surpassed on Paulson with the greatest trades ever. And so
Speaker 1: single trades as well as larger funds have had amazing years.
Speaker 1: But what strategy, I think is what you're asking here,
Speaker 1: What what is a hedge fund? I wanna take a
Speaker 1: listen here really quickly to seem to lead the black
Speaker 1: Swan author who was famous for navigating these types of events,
Speaker 1: because even in universe of the fund that he advises
Speaker 1: didn't have a favorable year. But this is what's ahead,
Speaker 1: is what he has to say. We have more debt
Speaker 1: than we ever did in history. We have the weirdest
Speaker 1: valuations in history, and we have a lot more connectivity
Speaker 1: than we did before. So these things up and realized that, hey,
Speaker 1: you know what, disney Land is over, the children go
Speaker 1: back to school and then make sure you're so now
Speaker 1: we're gonna go back to the war. It's a humbling time.
Speaker 1: But listen, I spoke to both to lead as well
Speaker 1: as Jim Chainos, for example, who expects that over time
Speaker 1: corporate profits could drop another fifty And so whether you're
Speaker 1: going short in the market like Jim Chainos is known for,
Speaker 1: or whether you're buying options likeness seems teleb or whether
Speaker 1: you're cliff fastness and believe that trend following will get
Speaker 1: you there. There are a lot of strategies that are
Speaker 1: coming back to the surface now and at a humbling time,
Speaker 1: as you call it. We have a new leader at
Speaker 1: the top of the largest head fund, a new co
Speaker 1: c i O for Bridgewater. Tell us about her. Yeah,
Speaker 1: remember Ray Dalio just stepped down from this post about
Speaker 1: four months ago and he was co c i O.
Speaker 1: But as he transitions, remember their two new CEOs as
Speaker 1: well at Bridgewater that started early last year and this
Speaker 1: is their new leadership team. This is a big change.
Speaker 1: It comes at a tough time, David, because remember I
Speaker 1: was talking about Citadel. You have Citadel surpassing Bridgewater as
Speaker 1: the highest grossing hedge fund firm of all time according
Speaker 1: to l c H Investments. So Karen Carneal Tambor will
Speaker 1: take them into this new generation. She's only thirty seven
Speaker 1: years old, but started her career there being recruited there
Speaker 1: by Greg Jensen. Thank you so much to Shay Bask
Speaker 1: who reports on all things Wall Street right here for
Speaker 1: Wall Street Week coming up. We wrap up the week
Speaker 1: with our special contributor Larry Summers of Harvard. That's next
Speaker 1: on Wall Street Week on Bloomberg. This is Bloomberg Wall
Speaker 1: Street Week with David Weston from Bloomberg Radio. This is
Speaker 1: Wall Street Week. I'm David Western. We are joined once
Speaker 1: again by our very special contributor here on Wall Street Week.
Speaker 1: He is Larry Summers of Harvard. So, Larry, I gotta
Speaker 1: start with those jobs and never was out on Friday
Speaker 1: when they crossed. I actually thought maybe they were wrong.
Speaker 1: It is extraordinary FID jobs were adding given where we
Speaker 1: are already. It's a huge miss relative to the consensus,
Speaker 1: it's way out of line with what you'd expected with
Speaker 1: a DP. The labor mark, it's running very differently then
Speaker 1: lots of other indicators in the economy where you see
Speaker 1: some signs, particularly in manufacturing, of real slowing. So it's
Speaker 1: a pretty confused uh picture. UH. One idea would be
Speaker 1: that people are still worried about how much work they're
Speaker 1: going to get out of their workforces, given people UH
Speaker 1: working at home, given increased steps and teasm, given a
Speaker 1: variety of UH post COVID changes, and so they just
Speaker 1: feel that whenever they can get workers, they should take
Speaker 1: the opportunity. But it sure does seem like we have
Speaker 1: a lot of workers relative to the amount of demand
Speaker 1: we have or amount of production we have in UH
Speaker 1: the economy. And the question is, is all this gonna
Speaker 1: be income that's gonna be spent that's gonna lift the
Speaker 1: economy up a bunch? Is it going to turn out
Speaker 1: that at some point people realize they've got too much
Speaker 1: inventory and labor and we're gonna see a fairly sudden stop.
Speaker 1: I think it's as difficult to an economy to read
Speaker 1: as I can remember a year ago. At this time,
Speaker 1: I was pretty confident about what the principal imbalances were
Speaker 1: and how things we're gonna play out. I don't have
Speaker 1: that kind of confidence right now. Can we have this
Speaker 1: sort of addition to the job market and not have
Speaker 1: wages go up more than we thought? They went up
Speaker 1: four point four percent as a year over year now
Speaker 1: on the monthly, which was a tenth of a percent
Speaker 1: more than expected, but it wasn't that dramatic. Are we
Speaker 1: going to have wage inflation kick in here that will
Speaker 1: really give us problems once again on Terrey policy? David,
Speaker 1: that's a basic question. I went back and looked at
Speaker 1: forecasting model emphasizing vacancies that I had used a year
Speaker 1: ago to predict that we were headed for significant wage
Speaker 1: inflation problems, and what I found was quite interesting to me.
Speaker 1: What I found was that that model is predicting wage
Speaker 1: inflation right now, just about right, but it's substantially under
Speaker 1: predicted wage inflation in the latter part of two. So
Speaker 1: we saw an acceleration beyond what models would have predicted
Speaker 1: that in two. We saw that, I now realized with
Speaker 1: respect to wages, just as we saw that with respect
Speaker 1: to prices. And the central question is we had some
Speaker 1: easy come and now it's come off very quickly inflation.
Speaker 1: And the question now is whether that inflation is going
Speaker 1: to continue to decline rapidly, continuing the trend of the
Speaker 1: last few months, or whether the inflation that was never
Speaker 1: really predicted by models wasn't a sense ultimately transitory. But
Speaker 1: now we're left with an underlying inflation that's gonna be
Speaker 1: much more difficult to have get out of the economy.
Speaker 1: And the difficult you described, Larry sit right on the
Speaker 1: desk of J. Powell, the Chair of the FED, from
Speaker 1: whom we heard, of course this week, in connection with
Speaker 1: their decision. Last week, before we heard from him, you
Speaker 1: were on this program saying it's what the FED has.
Speaker 1: It's sort of like a car on a foggy night,
Speaker 1: and basically you got to keep the foot close to
Speaker 1: the accelerated and close to break. And this is actually
Speaker 1: what your friend and colleague Paul Krugman had to say
Speaker 1: reacting to what you had to say. It This really
Speaker 1: disturbs me to say this, but I think I agree
Speaker 1: with Larry. Yeah, we could. You know, we will get
Speaker 1: it wrong one way or the other. There's a reasonable
Speaker 1: chance in either direction. So there are you disturbed your
Speaker 1: friend Paul Groom because he actually agreed with you. But
Speaker 1: at the same time, do you think Paul did exactly
Speaker 1: what you were describing, didn't keep his foot sort of
Speaker 1: close to both the brick and he started without going
Speaker 1: too far either direction. I think of FEDS doing a
Speaker 1: good job of portraying substantial uncertainty UH in the economy,
Speaker 1: recognizing that it's going to be very hard and one's
Speaker 1: going to have to try to interpret the data month
Speaker 1: by month, and that there are a lot of uh surprises.
Speaker 1: I think they're having a difficult time uh convincing markets
Speaker 1: on their determination and with respect to the path towards
Speaker 1: the end of the the year, I probably will think,
Speaker 1: uh the risks that the two part theory I just
Speaker 1: laid out is true and that the inflation reductions will
Speaker 1: be transitory. I think that risk is greater than I
Speaker 1: think the FED thinks it is. I do still think
Speaker 1: there is the risk that I've talked about earlier on
Speaker 1: the show of a kind of wildly coyote moment where
Speaker 1: firms realize they've got too much inventory and uh too many,
Speaker 1: too many people, and that you see a more economy
Speaker 1: wide turned to adjustment of the kind you've seen in
Speaker 1: the relatively limited in terms of employment technology sector. But
Speaker 1: that's not that's certainly anything but a confident predict. Let's
Speaker 1: turn from the Central Bank actually the executive branch in
Speaker 1: the White House, where there's a big change going on
Speaker 1: in the staff there. Ron Claim, the chief of the staff,
Speaker 1: has left also Brian DEAs with whom you I know
Speaker 1: you've worked personally very closely. What do you think about
Speaker 1: their tenure and as important, what is present by now
Speaker 1: need going forward? I think Ron Claim as chief of
Speaker 1: Staff and Brian Deese as head of the any city,
Speaker 1: have very proud legacies. They can look back on. This
Speaker 1: administration with a very small set of margins in the
Speaker 1: Senate and in the end in the House, probably passed
Speaker 1: more economic legislation in its first two years than any
Speaker 1: administration in more than two generations. There are, to be sure,
Speaker 1: real and serious issues with inflation. But I don't think
Speaker 1: anybody would have predicted an economy quite as strong as
Speaker 1: is the one in the labor market at least uh
Speaker 1: that we are seeing, uh that we're that we're seeing
Speaker 1: right now. So they've got an enormous amount to be
Speaker 1: uh proud of, as does Treasury Secretary UH Janet Yellen,
Speaker 1: who UH will fortunately be continuing UH in her position
Speaker 1: and will provide I think some hugely important stability for
Speaker 1: the for the economy. But Ron Klane and Brian Deese
Speaker 1: should be and are leaving with their heads held very high.
Speaker 1: And of course one has to give enormous UH credit
Speaker 1: to the President who relied on them to really push
Speaker 1: forward a set of very bold policies. And finally, Larry,
Speaker 1: give us a minute on anti trust. We've talked in
Speaker 1: the past about Lynda Kahn, the chair of the FTC,
Speaker 1: and her new approach and interest. She tried it out
Speaker 1: in court trying to stop actually Meta from making an
Speaker 1: accussion of a small virtuality startup and was rebuffed by
Speaker 1: the court. What do you make of that. I'm worried
Speaker 1: about overambition in antitrust policy. This isn't the first or
Speaker 1: the second or the third time that our anti trust
Speaker 1: authorities have lost in court for overstepping I've heard stories
Speaker 1: that they are trying to ask so many questions about
Speaker 1: mergers even when they don't think they're going to have
Speaker 1: a strong legal argument. The deadlines are past, and the
Speaker 1: mergers don't happen. Okay, Thank you so very much to
Speaker 1: Larry Summers here a very special contributor here on Wall
Speaker 1: Street Week coming up, it's the country with the large
Speaker 1: just population in the world and the fifth largest economy.
Speaker 1: We talked with the ser Shama of Rockefeller International about
Speaker 1: whether investors should be taking a fresh look at India.
Speaker 1: That's next on Wall Street Week on Bloomberg. India the
Speaker 1: fifth largest economy in the world, with more people than China,
Speaker 1: and as the head of the State Bank of India
Speaker 1: told Us and Davos, it's growing faster. We are quite
Speaker 1: hopeful that this year will witness a growth of about
Speaker 1: seven and going forward even next year also on the
Speaker 1: higher base, we expect the growth to be about six person.
Speaker 1: India is benefiting from supply chain concerns with China. For
Speaker 1: too long, countries around the world have been overly dependent
Speaker 1: on risky countries for a single source for critical inputs,
Speaker 1: over corrected economic integration, trusted trading partners like India, and
Speaker 1: it's moving fast on everything from electric vehicles from companies
Speaker 1: like Tata. I think the transition in India is coming
Speaker 1: through very strong and very fast, much much faster than
Speaker 1: what people are expecting it to be to the expansion
Speaker 1: of five g O objective is by master twining four
Speaker 1: to cover the entire country on five, all of which
Speaker 1: is leading investors like Steve Ratner of Will and Advisers
Speaker 1: to take another look at opportunities in India. It does
Speaker 1: feel at the moment like India really is starting to
Speaker 1: move forward for a whole variety of reasons, including China
Speaker 1: moving back, and so India is interesting on a number
Speaker 1: of levels. And to bring us up to speed on
Speaker 1: where India is today and where it maybe going for investors,
Speaker 1: Welcome to Stony who knows the country terribly well. He
Speaker 1: is Russia Sharma. He is the chairman of Rockefeller International,
Speaker 1: also founder of Breakout Capital. Sure, great to have you
Speaker 1: back on Wall Street Week. I mean, I hear a
Speaker 1: lot of talk about maybe India is the next China
Speaker 1: in terms of investment here, the next great opportunity. How
Speaker 1: what's your reaction to that thought? Well, David, I guess
Speaker 1: this is a legacy of the fact that I've covered
Speaker 1: India now for nearly three decades. Uh and my consistent
Speaker 1: observation about India has been that this is a country
Speaker 1: that has consistently disappointed the optimists and the pessimists. So
Speaker 1: this is not the first time that I've heard India
Speaker 1: being the next China. India will be India, which is
Speaker 1: that it's a complicated story. There are many nuances out here,
Speaker 1: and there will possibly never be next China. Just because
Speaker 1: what China achieved over its UH four decade long economic expansion,
Speaker 1: where it grew at a pace of nearly ten percent,
Speaker 1: I think it's something which we've never seen in history
Speaker 1: and we're unlikely to see ever again. Because an extraordinary
Speaker 1: set of circumstances and leaders brought China to the position
Speaker 1: it is. And as you know that China has been
Speaker 1: reversing many of its policies over the last few years. Sosa.
Speaker 1: As India's concerned, I think that it UH offers many
Speaker 1: great prospects. But to project China on it is a
Speaker 1: story I've seen in the past, and unfortunately, I feel
Speaker 1: that people who think that are likely to be a
Speaker 1: bit disappointed. Sure, as you so wisely suggest, you really
Speaker 1: can't compare any two countries at the same time. Is
Speaker 1: there one parallel part of the reason for the amazing
Speaker 1: economic privrecs of China is they started from a very
Speaker 1: low base, and you actually cause me to go back
Speaker 1: and look at per capita GDP for India and it's
Speaker 1: something like a year as opposed to China was just
Speaker 1: like five times that much. Does that offer actual an
Speaker 1: opportunity because there's a lot of headroom there, you can
Speaker 1: grow in awful lot. Yes. So I think that India
Speaker 1: in terms of because of its low base, will remain
Speaker 1: one of the fastest growing economies on the in the world.
Speaker 1: It's been so over the last three or four decades.
Speaker 1: Just said, its success has been overshadowed by what China
Speaker 1: has been able to achieve. But if you look at
Speaker 1: India's grow it is consistently grown at a pace of
Speaker 1: about two and a half to three percentage points faster
Speaker 1: than the global economy. UH. That's been the link. China's
Speaker 1: growth street UH during the similar income levels was far
Speaker 1: greater than the average of the global economy. India's average
Speaker 1: has been about two and a half to three percentage
Speaker 1: points faster than the global economy has consistently been there
Speaker 1: and there's nothing to suggest that that's about to change.
Speaker 1: So if you expect the global economy to grow at
Speaker 1: about two two and a half percent, which is what
Speaker 1: I expected to for the foreseeable future. Then I think
Speaker 1: that India's growth strate is likely to be five five
Speaker 1: and a half percenter. So anything more than that to
Speaker 1: expect out of India is far too ambitious and something
Speaker 1: we have never seen UH in its UH post reform
Speaker 1: history which began. Thank you so much, for sure, it's
Speaker 1: always great to have you with us on Wall Street Week,
Speaker 1: that's for sure, Sherman. He is chairman of Rockefeller International.
Speaker 1: That does it for this episode of Wall Street Week.
Speaker 1: I'm David Weston. This is Bloomberg. See you next week.
Speaker 1: M