1 00:00:00,240 --> 00:00:05,000 Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer prices, 2 00:00:05,040 --> 00:00:07,400 Speaker 1: The economy is in the process of rebounding. Will the 3 00:00:07,400 --> 00:00:10,479 Speaker 1: Federal Reserve have its own digital currency? The financial stories 4 00:00:10,520 --> 00:00:12,879 Speaker 1: that cheap hard work. Many people think the eels are 5 00:00:12,880 --> 00:00:15,080 Speaker 1: just going to keep marching up. We have more spending 6 00:00:15,120 --> 00:00:17,200 Speaker 1: coming out of Congress. One of the big questions I 7 00:00:17,200 --> 00:00:19,880 Speaker 1: think on investor's minds inflation through the eyes of the 8 00:00:19,920 --> 00:00:23,560 Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary, 9 00:00:23,640 --> 00:00:27,240 Speaker 1: Bryan Wynhan, a back of America. Will Sarro CEO, Charlie Sharp, 10 00:00:27,360 --> 00:00:31,560 Speaker 1: Bloomberg wool Street Week with David Weston from Bloomberg Radio. 11 00:00:32,400 --> 00:00:35,720 Speaker 1: Which way is up? As the Fed talks taper, COVID 12 00:00:35,840 --> 00:00:40,760 Speaker 1: keeps growing, and the debacle seven thousand miles away consumes Washington. 13 00:00:41,320 --> 00:00:44,960 Speaker 1: This is Bloomberg Wall Street Week. I'm David Weston. It 14 00:00:45,040 --> 00:00:49,840 Speaker 1: was a week marked by uncertainty leading to indecision. Uncertainty 15 00:00:49,840 --> 00:00:53,160 Speaker 1: over the economy as retail sales felt more than expected, 16 00:00:53,720 --> 00:00:56,880 Speaker 1: Uncertainty over how quickly the Fed will taper its bond 17 00:00:56,960 --> 00:01:00,400 Speaker 1: buying after minutes from last month's meeting showed at least 18 00:01:00,440 --> 00:01:03,480 Speaker 1: some members want to get going before the year is out, 19 00:01:03,840 --> 00:01:07,760 Speaker 1: and uncertainty over whether a crisis caused by American withdrawal 20 00:01:07,800 --> 00:01:10,760 Speaker 1: from Afghanistan could make it even more difficult for the 21 00:01:10,800 --> 00:01:14,760 Speaker 1: Democrats to get their spending package through the Congress. And 22 00:01:14,800 --> 00:01:17,600 Speaker 1: the markets this week reflected much of that uncertainty by 23 00:01:17,640 --> 00:01:21,759 Speaker 1: being somewhat indecisive over the week. The SMP was down 24 00:01:21,800 --> 00:01:24,240 Speaker 1: a bit, but that was after it was up on Monday, 25 00:01:24,360 --> 00:01:27,839 Speaker 1: way down on Thursday, and then recovered on Friday. Small 26 00:01:27,920 --> 00:01:30,360 Speaker 1: caps took a hit, but again not in a straight line, 27 00:01:30,360 --> 00:01:33,320 Speaker 1: with losses on Tuesday and Thursday partially offset by gains 28 00:01:33,360 --> 00:01:37,679 Speaker 1: on Wednesday and Friday. Treasury yields remained stubbornly below one 29 00:01:37,680 --> 00:01:41,399 Speaker 1: point three, and commodities were the one asset showing real direction, 30 00:01:41,480 --> 00:01:44,600 Speaker 1: with oil down consistently through the week. To give us 31 00:01:44,600 --> 00:01:48,440 Speaker 1: an investor's perspective on these indecisive and slightly nervous markets, 32 00:01:48,600 --> 00:01:51,160 Speaker 1: we welcome tow Katherine Keating. She is CEO of b 33 00:01:51,320 --> 00:01:53,560 Speaker 1: n Y Melon Wealth MANAGERIC. So give us a sense 34 00:01:53,600 --> 00:01:56,440 Speaker 1: of what you learned. If anything is through this somewhat 35 00:01:56,440 --> 00:01:58,360 Speaker 1: put Tumultuo's week. Yeah, so, I think the word I 36 00:01:58,360 --> 00:02:01,800 Speaker 1: would used to describe this week David is moderating, moderating. 37 00:02:01,840 --> 00:02:04,680 Speaker 1: We came off a quarter of just torrid earnings growth, right, 38 00:02:05,360 --> 00:02:08,040 Speaker 1: earnings growth, and now we're looking at the economic data 39 00:02:08,080 --> 00:02:10,200 Speaker 1: to try to try to figure out what the future holds. 40 00:02:10,200 --> 00:02:12,720 Speaker 1: And as you said, we we saw um you know, 41 00:02:12,840 --> 00:02:17,360 Speaker 1: declines and consumer confidence declines in in retail sales, um 42 00:02:17,520 --> 00:02:20,160 Speaker 1: declines in the mortgage market, right, modest declines in the 43 00:02:20,160 --> 00:02:22,799 Speaker 1: mortgage market, which has been very strong. On the other hand, 44 00:02:22,840 --> 00:02:26,240 Speaker 1: we see corporate America continue to do well, industrial production up, 45 00:02:26,320 --> 00:02:29,240 Speaker 1: so you know, things are moderating, and that's normal at 46 00:02:29,240 --> 00:02:31,239 Speaker 1: this point in the cycle. That's normal at this point 47 00:02:31,240 --> 00:02:33,080 Speaker 1: in the cycle. You can shut down an economy all 48 00:02:33,120 --> 00:02:35,840 Speaker 1: at once, but it opens in an uneven pace, and 49 00:02:35,880 --> 00:02:38,400 Speaker 1: I think that's exactly what we're seeing. And investors are 50 00:02:38,400 --> 00:02:40,799 Speaker 1: looking through that and looking ahead. Well, that's my question. 51 00:02:40,840 --> 00:02:42,359 Speaker 1: What are you hearing from customers? What are they what 52 00:02:42,360 --> 00:02:44,000 Speaker 1: are they saying? Are they nervous about this? Are they 53 00:02:44,040 --> 00:02:46,920 Speaker 1: pretty sanguine? They think it's okay. You know. One of 54 00:02:46,960 --> 00:02:48,520 Speaker 1: the things I think that we have learned through this 55 00:02:48,639 --> 00:02:52,240 Speaker 1: crisis is how quickly things happen. How quickly a virus 56 00:02:52,240 --> 00:02:54,519 Speaker 1: spreads around the world, how quickly you can close down 57 00:02:54,520 --> 00:02:57,480 Speaker 1: the economy, how quickly the market can sit through all 58 00:02:57,480 --> 00:03:01,640 Speaker 1: that information. We had a six week bear market and 59 00:03:01,680 --> 00:03:04,880 Speaker 1: the market completely recovered in six months, so they're learning 60 00:03:05,160 --> 00:03:08,480 Speaker 1: to sift information very quickly. One of the other pieces 61 00:03:08,520 --> 00:03:11,120 Speaker 1: of information we sifted this week was the news about 62 00:03:11,160 --> 00:03:14,800 Speaker 1: the coronavirus and the need for booster shots. Right. The 63 00:03:14,880 --> 00:03:17,639 Speaker 1: market's way that understanding it is looking forward, and again 64 00:03:17,680 --> 00:03:20,520 Speaker 1: the market always looks forward a few quarters um and 65 00:03:20,600 --> 00:03:24,400 Speaker 1: looking forward, we continue to think, uh, the economy is healing. 66 00:03:24,440 --> 00:03:27,079 Speaker 1: We're growing at a six percent rate, that's three times 67 00:03:27,120 --> 00:03:29,519 Speaker 1: what we were growing at before this crisis, and we 68 00:03:29,560 --> 00:03:32,360 Speaker 1: think there's a lot of support for markets. Wall Street, 69 00:03:32,360 --> 00:03:35,600 Speaker 1: we talk about investors. Let's be a little more precise 70 00:03:35,680 --> 00:03:37,920 Speaker 1: about who these investors are. You pointed to a piece 71 00:03:37,920 --> 00:03:40,800 Speaker 1: on the Blueberg actually this week about Fidelity, which reported 72 00:03:40,800 --> 00:03:43,040 Speaker 1: that the number of four or one case went up, 73 00:03:44,120 --> 00:03:47,880 Speaker 1: the number of iras of people with a million dollars 74 00:03:47,920 --> 00:03:50,920 Speaker 1: or more in them. Is there a fundamental shift coming 75 00:03:51,200 --> 00:03:54,560 Speaker 1: in who these investors are that is retail versus institutional 76 00:03:55,000 --> 00:03:57,800 Speaker 1: And that is exactly the right question, David, because the 77 00:03:57,920 --> 00:04:02,120 Speaker 1: structure of the markets has changed during our lifetimes. Today, 78 00:04:02,240 --> 00:04:05,040 Speaker 1: the retail segment of the market that the assets that 79 00:04:05,080 --> 00:04:09,280 Speaker 1: are governed by individuals, is larger than the institutional institutional segment, 80 00:04:09,320 --> 00:04:11,640 Speaker 1: and it's growing faster. And there's a reason for that. 81 00:04:12,240 --> 00:04:16,000 Speaker 1: It's corporate America has fundamentally changed the way we save 82 00:04:16,080 --> 00:04:19,360 Speaker 1: for retirement. Our parents generation, they probably had a defined 83 00:04:19,400 --> 00:04:22,360 Speaker 1: benefit plan, They retired with a pension and annuity for 84 00:04:22,400 --> 00:04:26,800 Speaker 1: the rest of their lives and their personal savings. Today 85 00:04:27,040 --> 00:04:29,240 Speaker 1: we save for our retirements ourselves. If we work for 86 00:04:29,279 --> 00:04:31,720 Speaker 1: a great company, we're lucky to have them contribute as well. 87 00:04:31,760 --> 00:04:34,440 Speaker 1: But it's defined contribution plans. It's for owen cave plans 88 00:04:34,760 --> 00:04:37,920 Speaker 1: and our personal savings that make us ready for retirement. 89 00:04:37,960 --> 00:04:40,200 Speaker 1: So that's why you see this happening. I think one 90 00:04:40,240 --> 00:04:43,720 Speaker 1: of the interesting things about that story is it does 91 00:04:43,800 --> 00:04:46,839 Speaker 1: show the power of investing over the long term. The 92 00:04:46,839 --> 00:04:48,760 Speaker 1: average age of some of those folks with those the 93 00:04:48,839 --> 00:04:52,000 Speaker 1: million dollar accounts was fifty eight, So it shows the 94 00:04:52,080 --> 00:04:54,599 Speaker 1: power of investing over time and markets that do go 95 00:04:54,760 --> 00:04:56,680 Speaker 1: up over time. So, to put it very bluntly, do 96 00:04:56,720 --> 00:04:58,520 Speaker 1: we know what we're doing? It sounds nice to take 97 00:04:58,520 --> 00:05:01,160 Speaker 1: control of our own retire benefits. At the same time 98 00:05:01,200 --> 00:05:02,720 Speaker 1: when it was our pension plan, we sort of thought 99 00:05:02,760 --> 00:05:04,920 Speaker 1: that were professionals doing what they're doing. I'm not sure 100 00:05:04,920 --> 00:05:06,760 Speaker 1: I'm as good as those pension people are. Does it 101 00:05:06,880 --> 00:05:09,479 Speaker 1: change the way with the market performs? Yes, it does 102 00:05:09,600 --> 00:05:12,880 Speaker 1: so um. Yes, that pension plan had professional management, It 103 00:05:12,960 --> 00:05:15,720 Speaker 1: had a chief financial officer, it had a chief investment 104 00:05:15,800 --> 00:05:21,240 Speaker 1: officer doing running in with very clear institutional disciplines. How 105 00:05:21,320 --> 00:05:23,160 Speaker 1: much do we have to earn, what should our asset 106 00:05:23,200 --> 00:05:25,040 Speaker 1: allocation be, how much do we have to pay out 107 00:05:25,040 --> 00:05:29,320 Speaker 1: to our retirees? Very very disciplined, very mathematical. There's nothing 108 00:05:29,360 --> 00:05:32,880 Speaker 1: that requires us to do that ourselves. There's nothing that 109 00:05:32,920 --> 00:05:35,760 Speaker 1: requires us. We have to embed that ourselves in what 110 00:05:35,800 --> 00:05:37,960 Speaker 1: we do. And that's and that's actually quite a mission 111 00:05:38,000 --> 00:05:41,279 Speaker 1: for us in the wealth management industry. Because consumers are 112 00:05:41,320 --> 00:05:44,640 Speaker 1: sevent the economy. We want them to have very solid 113 00:05:44,640 --> 00:05:48,000 Speaker 1: financial futures, very rewarding retirements, and so we're trying to 114 00:05:48,120 --> 00:05:52,080 Speaker 1: embed all of those institutional disciplines right into wealth management. 115 00:05:52,160 --> 00:05:54,520 Speaker 1: I'm not sure how many of us individuals are paying 116 00:05:54,520 --> 00:05:57,279 Speaker 1: attention to FED, but a lot of the institutional people are. 117 00:05:57,520 --> 00:05:59,920 Speaker 1: We will next week. We paying attention and Jackson Hole, 118 00:06:00,000 --> 00:06:01,560 Speaker 1: which is now gonna be virtual. It turns out they're 119 00:06:01,560 --> 00:06:03,680 Speaker 1: not going to actually get together in Jackson Hole. What 120 00:06:03,720 --> 00:06:05,520 Speaker 1: are you looking for to come out of those meetings? 121 00:06:05,839 --> 00:06:07,839 Speaker 1: So I think we're looking for two things next week. 122 00:06:07,880 --> 00:06:09,960 Speaker 1: One is, of course Jackson Hole, and we look forward 123 00:06:10,000 --> 00:06:13,200 Speaker 1: to Chairman Pali's speech on Friday. Will be very interested 124 00:06:13,240 --> 00:06:15,800 Speaker 1: to see whether he talks about tapering. He may, he 125 00:06:15,880 --> 00:06:17,919 Speaker 1: may not. He may wait a week and get the 126 00:06:17,960 --> 00:06:21,520 Speaker 1: jobs report the first week of September. UM, so we 127 00:06:21,640 --> 00:06:25,560 Speaker 1: might not message anything very clear about tapering. UM. We 128 00:06:25,640 --> 00:06:29,039 Speaker 1: also were looking at the the pc inflation dedicator that 129 00:06:29,080 --> 00:06:32,400 Speaker 1: comes out next Friday, right, the FEDS Preferred measure, you 130 00:06:32,400 --> 00:06:34,480 Speaker 1: know c p I. The rate of increase at CPI 131 00:06:34,600 --> 00:06:37,000 Speaker 1: came down, that will probably come down to That's that's 132 00:06:37,000 --> 00:06:39,640 Speaker 1: an important data point, um. And so we're really looking 133 00:06:39,680 --> 00:06:42,880 Speaker 1: at those things next week. That's Katherine Keating, CEO of 134 00:06:42,960 --> 00:06:46,880 Speaker 1: b n y Melon Wealth Management, coming up. Sometimes the 135 00:06:46,920 --> 00:06:50,760 Speaker 1: tortoise beats the hair. We talked with long term value 136 00:06:50,760 --> 00:06:54,360 Speaker 1: investor John Rodgers of Aerial Investments about what their reflation 137 00:06:54,440 --> 00:06:58,560 Speaker 1: trade means for value stocks and why bigger may not 138 00:06:58,720 --> 00:07:02,880 Speaker 1: necessarily be That's next on Wall Street Week on Bloomberg. 139 00:07:07,360 --> 00:07:11,360 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 140 00:07:11,480 --> 00:07:14,920 Speaker 1: Bloomberg Radio. The growth versus value debate is a long 141 00:07:14,960 --> 00:07:18,680 Speaker 1: standing one, with mega cap growth stocks hogging the spotlight 142 00:07:18,760 --> 00:07:21,440 Speaker 1: in recent years with the star power of names like 143 00:07:21,560 --> 00:07:25,560 Speaker 1: Google and Tesla. The five largest components of the SMP 144 00:07:25,680 --> 00:07:30,160 Speaker 1: five hundred are Apple, Microsoft, Amazon, Facebook, and Alphabet. Here's 145 00:07:30,200 --> 00:07:33,800 Speaker 1: David Leibovitz of JP Morgan Asset Management. We're getting to 146 00:07:33,840 --> 00:07:37,280 Speaker 1: a point where the rest of the market needs to participate. 147 00:07:37,320 --> 00:07:39,320 Speaker 1: It can't be all about five or ten names in 148 00:07:39,360 --> 00:07:42,400 Speaker 1: the SMP five hundred. Even though growth stocks have largely 149 00:07:42,440 --> 00:07:45,920 Speaker 1: outperformed value stocks over the past few years, it didn't 150 00:07:46,000 --> 00:07:48,440 Speaker 1: used to be that way, and value still has a 151 00:07:48,440 --> 00:07:51,880 Speaker 1: place in long term investing strategy. These value stocks are 152 00:07:51,880 --> 00:07:55,560 Speaker 1: still generally cheap and under owned relative to growth stocks. 153 00:07:55,560 --> 00:07:57,960 Speaker 1: So um, you know, I think there's there's a number 154 00:07:58,000 --> 00:08:00,880 Speaker 1: of drivers that it can even be more than interest 155 00:08:00,960 --> 00:08:03,440 Speaker 1: rates and starts of voting value over growth right now. 156 00:08:03,600 --> 00:08:07,840 Speaker 1: That's Jill carry Hall of Bank of America. Economic conditions 157 00:08:07,840 --> 00:08:11,480 Speaker 1: may be ripe for value. Bets on economic recovery bring 158 00:08:11,560 --> 00:08:14,480 Speaker 1: the prospects of higher treasury yields yet to come which 159 00:08:14,520 --> 00:08:17,840 Speaker 1: would tend to lift companies sensitive to the economy overall, 160 00:08:18,280 --> 00:08:20,600 Speaker 1: a trend that began at the end of last year 161 00:08:20,640 --> 00:08:23,960 Speaker 1: when the reflation trade lifted value stocks as the global 162 00:08:24,000 --> 00:08:28,920 Speaker 1: economic recovery began to take shape. Here's City Groups, Tobias Lefkovitch. 163 00:08:29,400 --> 00:08:31,800 Speaker 1: This is a heavy growth market and if you flee 164 00:08:31,880 --> 00:08:34,400 Speaker 1: bondles are going to edge higher, then growth stocks are 165 00:08:34,400 --> 00:08:36,240 Speaker 1: going to take a little bit on the chin. And 166 00:08:36,280 --> 00:08:38,760 Speaker 1: that's why you probably want to be in more value. 167 00:08:38,800 --> 00:08:41,439 Speaker 1: Word Terris. When it comes to value investing, no one 168 00:08:41,520 --> 00:08:44,280 Speaker 1: knows it better or is perhaps more identified with it 169 00:08:44,440 --> 00:08:47,320 Speaker 1: than John Rogers, co CEO of Area Investments, with some 170 00:08:47,400 --> 00:08:50,480 Speaker 1: sixteen point eight billion dollars under management last time I counted. 171 00:08:50,760 --> 00:08:53,240 Speaker 1: And we welcome John now to Wall Street Week. John, 172 00:08:53,240 --> 00:08:54,719 Speaker 1: thank you so much for being with us. Let me 173 00:08:54,760 --> 00:08:57,680 Speaker 1: start with the most basic questions here. We talk about 174 00:08:57,760 --> 00:08:59,839 Speaker 1: value with his growth a lot. But when you take 175 00:08:59,840 --> 00:09:03,880 Speaker 1: a look for value stocks, what are the criteria used 176 00:09:03,920 --> 00:09:06,080 Speaker 1: to say yes, that's in the value bucket? What do 177 00:09:06,160 --> 00:09:08,600 Speaker 1: you look at? Well, first of all, we look at 178 00:09:09,040 --> 00:09:11,080 Speaker 1: what we think is the way that we look at value. 179 00:09:11,120 --> 00:09:13,800 Speaker 1: To want to have a low price earnings multiple, a 180 00:09:13,800 --> 00:09:16,600 Speaker 1: low price to EBA dam multiple And at the end 181 00:09:16,640 --> 00:09:18,800 Speaker 1: of the day, we're looking for new companies that are 182 00:09:18,840 --> 00:09:22,720 Speaker 1: selling it at least at discount to their intrinsic value, 183 00:09:23,240 --> 00:09:25,840 Speaker 1: um what we call our our private market value, and 184 00:09:25,880 --> 00:09:28,760 Speaker 1: we think that's critical to get it more than a discount. 185 00:09:29,200 --> 00:09:31,720 Speaker 1: So let me understand that intrinsic value, because I've seen 186 00:09:31,760 --> 00:09:34,640 Speaker 1: some debate now about how you define value. Some people 187 00:09:34,679 --> 00:09:36,840 Speaker 1: would talk about price to book and say that actually 188 00:09:37,040 --> 00:09:39,600 Speaker 1: that number is somewhat outmoded because tech is sort of 189 00:09:39,720 --> 00:09:42,160 Speaker 1: change the assets you keep on your balance shoot, do 190 00:09:42,240 --> 00:09:44,679 Speaker 1: you look at things like price to book or price 191 00:09:44,720 --> 00:09:47,120 Speaker 1: to cash flow? But we do look at price to 192 00:09:47,200 --> 00:09:49,920 Speaker 1: cash flow for sure. But we also are you know, 193 00:09:49,960 --> 00:09:54,040 Speaker 1: doing the traditional discount to present, you know, discounting future 194 00:09:54,080 --> 00:09:56,360 Speaker 1: cash flows into the future to get to what we 195 00:09:56,400 --> 00:10:00,320 Speaker 1: would look at our private market value. So that's you know, 196 00:10:00,400 --> 00:10:02,400 Speaker 1: people learning business school. And though I didn't go to 197 00:10:02,440 --> 00:10:05,600 Speaker 1: business school, but all of our analysts have and and 198 00:10:05,600 --> 00:10:07,920 Speaker 1: and they really do believe that, you know, looking at 199 00:10:07,920 --> 00:10:10,840 Speaker 1: those future cash flows discounting them back, it's how you 200 00:10:10,880 --> 00:10:14,240 Speaker 1: get to a real true value of a company. So 201 00:10:14,400 --> 00:10:16,480 Speaker 1: when you get to your bucket, if okay, these are 202 00:10:16,559 --> 00:10:19,560 Speaker 1: value stacks. How do you discriminate among them and say, yeah, 203 00:10:19,559 --> 00:10:21,240 Speaker 1: those are the ones that I think are really good 204 00:10:21,280 --> 00:10:23,760 Speaker 1: investments for the future. Those maybe value stacks, but I'm 205 00:10:23,800 --> 00:10:26,600 Speaker 1: not so sure about them. Well, one of the things 206 00:10:26,679 --> 00:10:29,840 Speaker 1: we always borrow from our you know, our hero Warren Buffett. 207 00:10:30,120 --> 00:10:32,360 Speaker 1: We want to make sure that the company truly has 208 00:10:32,400 --> 00:10:35,360 Speaker 1: a real moat around it, so that five to ten 209 00:10:35,440 --> 00:10:37,400 Speaker 1: years from now, you can bet that company is still 210 00:10:37,400 --> 00:10:39,760 Speaker 1: going to be a leader in their field and it 211 00:10:39,800 --> 00:10:42,280 Speaker 1: will be hard for competitors that come and knock them off. 212 00:10:42,920 --> 00:10:45,400 Speaker 1: That's really what we are trying so hard to understand 213 00:10:45,520 --> 00:10:48,160 Speaker 1: is making sure that industry is stable and that company's 214 00:10:48,240 --> 00:10:50,840 Speaker 1: leadership role is going to be stable in the long run. 215 00:10:51,559 --> 00:10:54,559 Speaker 1: Of course, we we make mistakes, and so we want 216 00:10:54,600 --> 00:10:56,160 Speaker 1: to make sure we have a margin the safety in 217 00:10:56,240 --> 00:10:58,240 Speaker 1: case for wrong. So we want to make sure the 218 00:10:58,280 --> 00:11:01,040 Speaker 1: companies have a very very strong own sheet that can 219 00:11:01,080 --> 00:11:03,920 Speaker 1: withstand all types of pressures that happen and that are 220 00:11:03,960 --> 00:11:07,760 Speaker 1: inevitable as our economy goes up and down. And then finally, 221 00:11:07,800 --> 00:11:09,760 Speaker 1: we're trying to look to a management team that we 222 00:11:09,800 --> 00:11:13,079 Speaker 1: think a shareholder friendly, that cares deeply about their shareholders 223 00:11:13,280 --> 00:11:15,959 Speaker 1: as well as their customers as well as their employees. 224 00:11:16,240 --> 00:11:18,640 Speaker 1: So getting to know managements is an important part of 225 00:11:18,640 --> 00:11:21,840 Speaker 1: our research. Going out and visiting companies, talking to management 226 00:11:21,840 --> 00:11:25,960 Speaker 1: teams every quarter, understanding understanding their strategy and their plans 227 00:11:25,960 --> 00:11:29,400 Speaker 1: to win is an important part of our analysis. John, 228 00:11:29,440 --> 00:11:31,800 Speaker 1: I think one of the big changes, certainly since maybe 229 00:11:31,800 --> 00:11:33,920 Speaker 1: two thousand eight, maybe four, but I think it's two 230 00:11:33,880 --> 00:11:37,120 Speaker 1: thousand eight, has been the role of government, first on 231 00:11:37,200 --> 00:11:40,320 Speaker 1: the monetary side and the fiscal side, and really being 232 00:11:40,400 --> 00:11:42,959 Speaker 1: involving themselves in the economy. And so people said the 233 00:11:43,200 --> 00:11:46,280 Speaker 1: referee is now joined the game. Has that changed the 234 00:11:46,320 --> 00:11:48,240 Speaker 1: calculus when it comes to value, when you know that 235 00:11:48,320 --> 00:11:50,960 Speaker 1: you can have the massive, massive, sort of fiscal and 236 00:11:51,040 --> 00:11:54,920 Speaker 1: monetary stimulus, well, we think that has certainly made it 237 00:11:55,000 --> 00:11:58,240 Speaker 1: very difficult over the last you know, twelve or thirteen years. 238 00:11:58,240 --> 00:12:01,160 Speaker 1: You're right, since the financial crisis. The FED is in, 239 00:12:01,640 --> 00:12:04,360 Speaker 1: you know, is injected so much liquidity into the market. 240 00:12:04,679 --> 00:12:08,720 Speaker 1: They've kept interest rates historically low for historic length of time, 241 00:12:09,320 --> 00:12:12,200 Speaker 1: and that makes the value of growth stocks, you know, 242 00:12:12,400 --> 00:12:15,199 Speaker 1: look relatively cheap. You know, the SMP at twenty one 243 00:12:15,240 --> 00:12:19,000 Speaker 1: times earnings is not overvalued if if interest rates stay 244 00:12:19,080 --> 00:12:23,360 Speaker 1: this low. But we do think inevitably all the stimulus, 245 00:12:23,600 --> 00:12:26,800 Speaker 1: it's got to have an impact on inflation. And as 246 00:12:26,840 --> 00:12:28,560 Speaker 1: we think about all the new things that are being 247 00:12:28,559 --> 00:12:32,199 Speaker 1: contemplated now by government to throw even more recent sources 248 00:12:32,240 --> 00:12:36,640 Speaker 1: at our economy, that ultimately that's going to cause higher inflation, 249 00:12:36,679 --> 00:12:39,960 Speaker 1: That will cause higher interest rates and be a reason 250 00:12:40,000 --> 00:12:43,880 Speaker 1: why growth stocks will start to underperform because so much 251 00:12:43,960 --> 00:12:46,839 Speaker 1: of their earnings power comes out into the future, and 252 00:12:46,880 --> 00:12:49,280 Speaker 1: if you have higher rates, those future earnings are not 253 00:12:49,320 --> 00:12:52,360 Speaker 1: worth as much today. John, those of us in business 254 00:12:52,360 --> 00:12:55,040 Speaker 1: and financial news like to think that we're providing information 255 00:12:55,080 --> 00:12:57,880 Speaker 1: and making better helping people make better decisions with investments. 256 00:12:58,000 --> 00:13:00,640 Speaker 1: But I wonder sometimes we might skew this system a bit. 257 00:13:00,960 --> 00:13:03,199 Speaker 1: We tend to cover the really big ones. You know, 258 00:13:03,240 --> 00:13:05,360 Speaker 1: when somebody goes over a trillion dollars in market cap, boy, 259 00:13:05,400 --> 00:13:07,440 Speaker 1: they get a lot of attention. Some people have balloons 260 00:13:07,480 --> 00:13:10,720 Speaker 1: coming down at things. But touch us about large versus small, 261 00:13:10,760 --> 00:13:13,040 Speaker 1: because I think you have a somewhat different view about this. 262 00:13:13,280 --> 00:13:16,080 Speaker 1: Well from the very beginning, when when we started Aerial 263 00:13:16,320 --> 00:13:19,280 Speaker 1: thirty eight years ago, we were heavily influenced by the 264 00:13:19,320 --> 00:13:21,720 Speaker 1: place that I used to work. William Blair you know, 265 00:13:21,840 --> 00:13:23,960 Speaker 1: Mr Blair used to always talk about the fact that 266 00:13:24,040 --> 00:13:28,200 Speaker 1: smaller companies should be able to grow faster than larger companies, 267 00:13:28,280 --> 00:13:31,120 Speaker 1: and we still believe that today they can be more nimble, 268 00:13:31,440 --> 00:13:35,080 Speaker 1: they can be able to take advantages of market opportunities 269 00:13:35,120 --> 00:13:38,840 Speaker 1: when you're small and nimble. But secondly, smaller companies are 270 00:13:38,880 --> 00:13:42,360 Speaker 1: less well researched. They were less well researched, uh forty 271 00:13:42,400 --> 00:13:44,920 Speaker 1: years ago, and they're still less well researched. They're not 272 00:13:45,000 --> 00:13:48,360 Speaker 1: as well followed. So you can find some inefficiencies in 273 00:13:48,400 --> 00:13:51,760 Speaker 1: the small cap sector. And even today, the amount of 274 00:13:51,760 --> 00:13:54,080 Speaker 1: research in the small cap sector, as you suggest, have 275 00:13:54,160 --> 00:13:56,760 Speaker 1: gotten less and less and less. People are just not 276 00:13:56,840 --> 00:13:59,839 Speaker 1: following these sort of neglected companies the way they follow 277 00:13:59,880 --> 00:14:02,400 Speaker 1: the large growth companies that have been so popular that 278 00:14:02,400 --> 00:14:04,920 Speaker 1: are the multi trillion dollar companies. So you can do 279 00:14:05,000 --> 00:14:08,840 Speaker 1: your own homework, do thorough research and find these undiscovered gyms. 280 00:14:08,880 --> 00:14:11,960 Speaker 1: We think in that small kept sector today more than ever, 281 00:14:12,400 --> 00:14:14,240 Speaker 1: and that's why we continue to fish in that same 282 00:14:14,280 --> 00:14:17,560 Speaker 1: fishing pod. That's John Rodgers, the chairman and co CEO 283 00:14:17,920 --> 00:14:21,960 Speaker 1: of Aerial Investments. Coming up. Greg Fleming of Rockefeller Capital 284 00:14:22,000 --> 00:14:25,680 Speaker 1: Management on where high net worth individuals are putting their 285 00:14:25,720 --> 00:14:29,000 Speaker 1: money in a low return world. That's next on Wall 286 00:14:29,000 --> 00:14:38,240 Speaker 1: Street Week on Bloomberg. This is Bloomberg Wall Street Week 287 00:14:38,440 --> 00:14:43,000 Speaker 1: with David Weston from Bloomberg Radio. Investors of all sorts 288 00:14:43,040 --> 00:14:45,800 Speaker 1: struggle these days to find yield and places where they 289 00:14:45,800 --> 00:14:48,280 Speaker 1: can get paid for the risks that they're taking. Greg 290 00:14:48,280 --> 00:14:51,400 Speaker 1: Fleming is president of Rockefeller Capital Management, managing assets of 291 00:14:51,440 --> 00:14:54,240 Speaker 1: some billion dollars at least that's the last time I checked. 292 00:14:54,440 --> 00:14:57,240 Speaker 1: And it's his job to find those opportunities that aren't 293 00:14:57,320 --> 00:15:01,200 Speaker 1: quite so obvious, especially for high net worth individuals. Rockefeller 294 00:15:01,240 --> 00:15:03,440 Speaker 1: grew out of the family office of John D. Rockefeller, 295 00:15:03,600 --> 00:15:06,280 Speaker 1: the oil magnet, and we welcome Greg now to Wall 296 00:15:06,280 --> 00:15:07,840 Speaker 1: Street Week. Thank you so much for being with us. 297 00:15:07,880 --> 00:15:09,480 Speaker 1: Greg is a big shoes, You have the filler with 298 00:15:09,560 --> 00:15:11,760 Speaker 1: John D. Rockefeller. But give us the sense as you 299 00:15:11,880 --> 00:15:14,000 Speaker 1: talked to these high that with individuals, what are they 300 00:15:14,040 --> 00:15:17,200 Speaker 1: looking for and where where are you finding it? That's 301 00:15:17,200 --> 00:15:18,680 Speaker 1: good to be here, David, is good to see you, 302 00:15:19,080 --> 00:15:24,000 Speaker 1: m David. Our clients are primarily high net worth individuals 303 00:15:24,080 --> 00:15:27,480 Speaker 1: and family and even into the altar high network category, 304 00:15:27,960 --> 00:15:30,800 Speaker 1: and we work with them through private wealth advisors that 305 00:15:31,280 --> 00:15:34,000 Speaker 1: deal with the client UH and their investment needs in 306 00:15:34,000 --> 00:15:38,280 Speaker 1: the near term all the way through to retirement generational planning. 307 00:15:38,360 --> 00:15:41,000 Speaker 1: So we take a long horizon with our private wealth 308 00:15:41,040 --> 00:15:43,800 Speaker 1: teams UH, and when we look at the world today, 309 00:15:44,320 --> 00:15:46,640 Speaker 1: given as you said, you set it up well with 310 00:15:47,360 --> 00:15:50,720 Speaker 1: a low rate environment. If anything, rates are going to 311 00:15:50,760 --> 00:15:53,880 Speaker 1: go higher from here. You have equity markets that have 312 00:15:54,040 --> 00:15:57,360 Speaker 1: both volatility and they have been on any historical measure, 313 00:15:57,680 --> 00:16:02,160 Speaker 1: pretty fully priced UH in certain parts of the ecuty markets. 314 00:16:02,160 --> 00:16:05,000 Speaker 1: So what we cancel our clients on, even that they 315 00:16:05,080 --> 00:16:09,800 Speaker 1: can handle the irequidity that comes with alterna investments is 316 00:16:09,840 --> 00:16:13,040 Speaker 1: to put a portion of their assets with besting class 317 00:16:13,080 --> 00:16:18,360 Speaker 1: alternative managers across the range of different investment strategies and 318 00:16:18,400 --> 00:16:23,240 Speaker 1: sometimes that even extends to investing rightly in companies that 319 00:16:23,280 --> 00:16:27,520 Speaker 1: are doing capital raising rounds on a direct basis. So 320 00:16:28,000 --> 00:16:31,280 Speaker 1: we think UH, Briana wor all linet work investors, it's 321 00:16:31,280 --> 00:16:34,600 Speaker 1: important to have a the percentage of their assets in 322 00:16:34,640 --> 00:16:38,560 Speaker 1: alternative investments for investing class managers who spent a lot 323 00:16:38,600 --> 00:16:42,960 Speaker 1: of time researching different managers and different strategies, and then 324 00:16:43,400 --> 00:16:49,560 Speaker 1: our private wealth teams bring those investments to our AP clients. 325 00:16:49,680 --> 00:16:52,040 Speaker 1: So Greg just educate me on this. When I hear 326 00:16:52,040 --> 00:16:55,400 Speaker 1: alternative investments, I think I'm giving up some liquidity. Those 327 00:16:55,400 --> 00:16:56,720 Speaker 1: tend to be things where I have to commit some 328 00:16:56,720 --> 00:16:58,520 Speaker 1: money for some period of time, sometimes for a long 329 00:16:58,560 --> 00:17:00,880 Speaker 1: period of time. Is that and if so, what's the 330 00:17:00,920 --> 00:17:03,600 Speaker 1: trade off there? Particularly at uncertain times where there's a 331 00:17:03,600 --> 00:17:07,000 Speaker 1: fair amount of hoolatility, they do tend to be more 332 00:17:07,119 --> 00:17:10,920 Speaker 1: ill liquid in the investment horizon is often longer, certainly 333 00:17:10,960 --> 00:17:14,720 Speaker 1: than a publicly available security, whether it's a stock or 334 00:17:14,760 --> 00:17:17,760 Speaker 1: a bond. So there's no question that that's what uh 335 00:17:18,200 --> 00:17:20,680 Speaker 1: you're you're giving up when you when you move into 336 00:17:20,680 --> 00:17:24,280 Speaker 1: alternate investments. But those investments that are made, whether it's 337 00:17:24,280 --> 00:17:26,960 Speaker 1: a private equity manature or even a hedge fund, they 338 00:17:27,000 --> 00:17:29,720 Speaker 1: tend to be made with a longer term investment horizon 339 00:17:29,960 --> 00:17:35,080 Speaker 1: mind um. And it allows the investor to access these 340 00:17:35,119 --> 00:17:39,959 Speaker 1: managers who are investing through the cycle, if you will, David, So, 341 00:17:40,800 --> 00:17:45,040 Speaker 1: we think it's an important, uh editive part of an 342 00:17:45,040 --> 00:17:49,040 Speaker 1: investment plan or highnet work multi hignetwork investors who don't 343 00:17:49,080 --> 00:17:52,919 Speaker 1: have to access the full range of the portfolio on 344 00:17:52,920 --> 00:17:56,639 Speaker 1: on a real time dear term basis. So so Greg 345 00:17:56,840 --> 00:17:59,280 Speaker 1: at Bloomberg here. We had an interview this week with 346 00:17:59,400 --> 00:18:02,080 Speaker 1: the head of the our Norwegian Sovereign Wealth fund, who 347 00:18:02,080 --> 00:18:03,960 Speaker 1: manages a fair amount of money. I think it's fair 348 00:18:04,000 --> 00:18:06,000 Speaker 1: to say believe it's the largest in the world. And 349 00:18:06,040 --> 00:18:08,240 Speaker 1: what he said was he thought the biggest threat to 350 00:18:08,320 --> 00:18:10,679 Speaker 1: his portfolio, and that's on the fixed income side and 351 00:18:10,720 --> 00:18:13,439 Speaker 1: an equi side, is inflation. At this point, do you 352 00:18:13,480 --> 00:18:15,480 Speaker 1: agree with that and if so, how do you take 353 00:18:15,520 --> 00:18:19,000 Speaker 1: that into account as you make investments. You know, I 354 00:18:19,040 --> 00:18:21,960 Speaker 1: think that inflation and he's probably what he's doing is 355 00:18:22,000 --> 00:18:26,040 Speaker 1: he's saying inflation, which will ultimately lead to higher rates, 356 00:18:26,680 --> 00:18:28,720 Speaker 1: is the threat to his investment portfolio. And this is 357 00:18:28,720 --> 00:18:31,480 Speaker 1: why the FED is working hard to thread this, David. 358 00:18:32,000 --> 00:18:35,960 Speaker 1: They wanted some near term inflation here for multiple reasons, UH, 359 00:18:36,119 --> 00:18:41,240 Speaker 1: including trying to avoid the UH deflationary trappic that Japan 360 00:18:41,359 --> 00:18:44,280 Speaker 1: is legally for so long, and to get some pricing 361 00:18:44,600 --> 00:18:47,040 Speaker 1: power in the hands of the company. So they wanted 362 00:18:47,760 --> 00:18:50,760 Speaker 1: and they hung with this, I think UH for for 363 00:18:50,880 --> 00:18:53,760 Speaker 1: some time to get some inflation in the system. But 364 00:18:53,800 --> 00:18:56,199 Speaker 1: if it goes too far and if it becomes something 365 00:18:56,359 --> 00:18:59,680 Speaker 1: and you know, people forget the inflation is also about 366 00:18:59,760 --> 00:19:03,119 Speaker 1: X patients and earlier in our lives and careers, there 367 00:19:03,160 --> 00:19:06,119 Speaker 1: will more inflation. And when there's a sense of inflation, 368 00:19:06,600 --> 00:19:08,800 Speaker 1: if it starts to get built into the system, then 369 00:19:09,080 --> 00:19:12,160 Speaker 1: it does tend to uh me be harder to move. 370 00:19:12,720 --> 00:19:17,000 Speaker 1: And also, you know, you factor in uh the increase 371 00:19:17,160 --> 00:19:21,399 Speaker 1: in home price uh home prices and home price sales 372 00:19:21,480 --> 00:19:23,960 Speaker 1: for distening home over the last year, you've had real 373 00:19:24,000 --> 00:19:26,639 Speaker 1: inflation in the economy. So he's looking at it and 374 00:19:26,680 --> 00:19:29,480 Speaker 1: he's worried about the fact that if it gets ahead 375 00:19:29,480 --> 00:19:32,720 Speaker 1: of the Fed and the Fed has to start raising rates, 376 00:19:32,720 --> 00:19:36,320 Speaker 1: that's obviously difficult for fixed income investments, but it also 377 00:19:36,480 --> 00:19:39,800 Speaker 1: tends to revising rate environment is a harder thing on 378 00:19:39,880 --> 00:19:43,520 Speaker 1: equity markets as well. So that's why he's saying, wait 379 00:19:43,520 --> 00:19:46,240 Speaker 1: a minute. If inflation starts to move, and if it 380 00:19:46,280 --> 00:19:49,280 Speaker 1: gets ahead of the central bankers and interest rates follow, 381 00:19:49,320 --> 00:19:52,560 Speaker 1: which they will necessarily happen at that point, that could 382 00:19:52,600 --> 00:19:56,320 Speaker 1: be problematic for both sides. UH good portfolio. That's Gregg 383 00:19:56,320 --> 00:20:00,240 Speaker 1: Fleming of Rockefeller Capital Management coming up. We ra up 384 00:20:00,280 --> 00:20:03,360 Speaker 1: the week with special contributor Larry Summers of Harvard. That's 385 00:20:03,400 --> 00:20:11,840 Speaker 1: next on Wall Street Week on Bloomberg. This is Bloomberg 386 00:20:11,880 --> 00:20:16,280 Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. We 387 00:20:16,320 --> 00:20:18,120 Speaker 1: have a lot to go over this week with our 388 00:20:18,160 --> 00:20:21,040 Speaker 1: special contributor Larry Summers at Harvard, So Larry, let's get 389 00:20:21,119 --> 00:20:22,919 Speaker 1: right to it. The biggest story of the week, I 390 00:20:22,920 --> 00:20:25,960 Speaker 1: think on the headlines every single day was Afghanistan. It's 391 00:20:25,960 --> 00:20:29,719 Speaker 1: a political, geopolitical, real crisis. I may say, are there 392 00:20:29,760 --> 00:20:35,560 Speaker 1: any economic ramifications? Do you see? Two comments, David, if 393 00:20:35,600 --> 00:20:39,320 Speaker 1: this affects the broad perception of the administration, that could 394 00:20:39,400 --> 00:20:43,840 Speaker 1: have economic consequences. If you look back to the fall 395 00:20:43,920 --> 00:20:49,480 Speaker 1: of Saigon, no major economic consequences that followed that, and 396 00:20:49,960 --> 00:20:55,159 Speaker 1: rather remarkably, uh month and a half afterwards, the president's 397 00:20:55,200 --> 00:20:59,320 Speaker 1: popularity was up by ten points. Here's what people aren't 398 00:20:59,400 --> 00:21:04,040 Speaker 1: paying at Engine two. The Taliban is going to find 399 00:21:04,080 --> 00:21:09,520 Speaker 1: its victory very challenging. Afghanistan was an economy supported largely 400 00:21:09,600 --> 00:21:14,359 Speaker 1: by foreign aid. That foreign aid, the US spending from 401 00:21:14,400 --> 00:21:17,840 Speaker 1: its troop presence. All of that is going to dry up, 402 00:21:18,520 --> 00:21:23,720 Speaker 1: and that's gonna make governing Afghanistan extremely difficult, and it 403 00:21:23,840 --> 00:21:26,280 Speaker 1: may a few months from now be a source of 404 00:21:26,400 --> 00:21:29,560 Speaker 1: leverage for people on the outside with respect to what 405 00:21:29,640 --> 00:21:33,800 Speaker 1: happens there. They've got big economic challenges ahead much larger 406 00:21:33,840 --> 00:21:37,240 Speaker 1: than people are recognizing. Larry, having been in Washington, take 407 00:21:37,280 --> 00:21:39,480 Speaker 1: your first point. Do you think this puts some of 408 00:21:39,560 --> 00:21:42,600 Speaker 1: President Biden's build back Better plan in jeopardy up on 409 00:21:42,680 --> 00:21:46,159 Speaker 1: the hill? I think the linkages between foreign policy and 410 00:21:46,200 --> 00:21:50,520 Speaker 1: domestic policy tend to be smaller than foreign policy people think. 411 00:21:50,960 --> 00:21:55,560 Speaker 1: And you know, it will all hinge on what happens 412 00:21:55,680 --> 00:21:59,400 Speaker 1: over the next couple of weeks. And we've had a 413 00:21:59,440 --> 00:22:02,520 Speaker 1: tough few days and may well be the next few 414 00:22:02,560 --> 00:22:06,000 Speaker 1: days we're going to be even uh tougher. But if 415 00:22:06,040 --> 00:22:11,920 Speaker 1: we are substantially successful with respect to uh the evacuations, 416 00:22:12,520 --> 00:22:18,000 Speaker 1: and this doesn't dent the president's overall standing, I don't 417 00:22:18,000 --> 00:22:20,640 Speaker 1: think the effect is going to be very large. If 418 00:22:20,640 --> 00:22:24,760 Speaker 1: the president loses ten approval points, all bets are off 419 00:22:25,160 --> 00:22:29,320 Speaker 1: on his ability to move major legislation. But it's really 420 00:22:29,359 --> 00:22:33,760 Speaker 1: an indirect effect through what it means for the president's approval, 421 00:22:34,119 --> 00:22:36,000 Speaker 1: which is the coin of the realm in terms of 422 00:22:36,040 --> 00:22:39,240 Speaker 1: presidential power. Lear. Another story in the news throughout the 423 00:22:39,280 --> 00:22:42,720 Speaker 1: week has been COVID nineteen the delta variant, including now 424 00:22:42,760 --> 00:22:45,359 Speaker 1: the recommendations about booster shots for people who are already 425 00:22:45,359 --> 00:22:47,600 Speaker 1: fully vaccinated you were one of the very first that 426 00:22:47,640 --> 00:22:50,879 Speaker 1: I knew at least the spot this pandemic on the rise. 427 00:22:51,320 --> 00:22:53,080 Speaker 1: Give us your sense about where we are in COVID 428 00:22:53,080 --> 00:22:55,399 Speaker 1: and specifically on booster shots. Something we talked about last 429 00:22:55,400 --> 00:22:58,040 Speaker 1: week on Wall Street Week, which is, if we give 430 00:22:58,040 --> 00:22:59,919 Speaker 1: the shots to booster shots, then what do we do 431 00:23:00,040 --> 00:23:01,920 Speaker 1: for the rest of the world that is not vaccinated 432 00:23:02,000 --> 00:23:05,280 Speaker 1: at all? Look, I think this is as clear a 433 00:23:05,400 --> 00:23:08,760 Speaker 1: case as I've ever seen for where we need to 434 00:23:08,800 --> 00:23:12,119 Speaker 1: shift from a policy of either or to a policy 435 00:23:12,160 --> 00:23:16,879 Speaker 1: of both. And UH. It is not remotely tenable for 436 00:23:16,920 --> 00:23:20,719 Speaker 1: a US president to heed the advice of the who 437 00:23:21,000 --> 00:23:23,760 Speaker 1: that somehow he shouldn't do what he thinks is necessary 438 00:23:23,840 --> 00:23:27,879 Speaker 1: for the health of American children and American seniors in 439 00:23:28,000 --> 00:23:33,520 Speaker 1: order to vaccinate people abroad. That's not how countries operate. 440 00:23:33,600 --> 00:23:37,800 Speaker 1: It's not how the United States will or should operate. 441 00:23:38,440 --> 00:23:41,400 Speaker 1: On the other hand, there is no reason why we 442 00:23:41,520 --> 00:23:49,320 Speaker 1: can't be launching big initiatives in tandem around both UH, 443 00:23:49,400 --> 00:23:55,160 Speaker 1: the booster shots at home and about supporting resilience capacity, 444 00:23:55,320 --> 00:24:00,159 Speaker 1: exporting vaccines and all that goes with UH responding to 445 00:24:00,400 --> 00:24:03,760 Speaker 1: the pandemic. And so I'd like to see the United 446 00:24:03,800 --> 00:24:06,920 Speaker 1: States be much more in the lead on the global 447 00:24:07,000 --> 00:24:12,080 Speaker 1: effort at the same time that we're redoubling our efforts 448 00:24:12,240 --> 00:24:16,280 Speaker 1: at home. I think that's the only way UH forward. 449 00:24:16,640 --> 00:24:21,840 Speaker 1: If we pose this as a choice between American eight 450 00:24:21,920 --> 00:24:27,800 Speaker 1: year olds and UH kids in developing UH countries and 451 00:24:27,920 --> 00:24:32,919 Speaker 1: societies that are falling apart, that kind of hardheartedness and 452 00:24:33,000 --> 00:24:36,280 Speaker 1: hardheadedness will come back to haunt us for a very 453 00:24:36,359 --> 00:24:39,560 Speaker 1: long time. Larry, Investors in the States clear, we're paying 454 00:24:39,600 --> 00:24:42,359 Speaker 1: attention to China this week because China seems to be 455 00:24:42,400 --> 00:24:45,399 Speaker 1: clamping down on yet another industry almost every day. We 456 00:24:45,440 --> 00:24:48,120 Speaker 1: started with tech, and then we went on to things 457 00:24:48,160 --> 00:24:50,159 Speaker 1: like media with reports they're gonna clamp down to that, 458 00:24:50,160 --> 00:24:53,320 Speaker 1: and now we're talking about cosmetics and liquor manufacturers. It's 459 00:24:53,400 --> 00:24:55,879 Speaker 1: raising questions in some people's mind. Golden Sex, a lot 460 00:24:55,920 --> 00:24:57,719 Speaker 1: of said the government. Sex said a lot of their 461 00:24:57,720 --> 00:25:00,760 Speaker 1: customers are asking, is China investi at this point? Just 462 00:25:00,800 --> 00:25:05,160 Speaker 1: because Beijing's seems to be almost capricious. Look, every investor 463 00:25:05,200 --> 00:25:08,960 Speaker 1: will have to make their make their own judgment. Those 464 00:25:09,080 --> 00:25:13,720 Speaker 1: who are serene about China remind me of those who 465 00:25:13,720 --> 00:25:19,280 Speaker 1: are serene about inflation. Bad things keep happening adverse surprises 466 00:25:19,440 --> 00:25:22,600 Speaker 1: keep happening, and they keep explaining them in terms of 467 00:25:22,680 --> 00:25:26,680 Speaker 1: specific factors and resisting the idea that there's some kind 468 00:25:26,720 --> 00:25:30,120 Speaker 1: of emergent general pattern. And I think there is an 469 00:25:30,119 --> 00:25:34,760 Speaker 1: emergent general pattern. Uh. Not that China is going back 470 00:25:35,160 --> 00:25:39,520 Speaker 1: uh to Mao, Uh, not that China is going to 471 00:25:39,800 --> 00:25:44,640 Speaker 1: entirely renounce the market system, but I think the risks 472 00:25:45,800 --> 00:25:50,800 Speaker 1: for foreign investors are going up and have to be 473 00:25:50,880 --> 00:25:54,919 Speaker 1: going up at a time when the greater insertion of 474 00:25:54,960 --> 00:25:59,960 Speaker 1: the Communist Party into every private enterprise is emerging as 475 00:26:00,040 --> 00:26:04,320 Speaker 1: a very important priority for the Chinese government. So it's 476 00:26:04,359 --> 00:26:09,359 Speaker 1: certainly a riskier environment. And I think when you have 477 00:26:09,400 --> 00:26:13,560 Speaker 1: a riskier environment, people demand much higher returns. And then 478 00:26:13,600 --> 00:26:17,400 Speaker 1: there's a question as to whether, given the tensions between 479 00:26:17,440 --> 00:26:21,520 Speaker 1: our nations, the much higher returns that are necessary to 480 00:26:21,600 --> 00:26:25,159 Speaker 1: compensate for much greater risks are going to be politically 481 00:26:25,200 --> 00:26:29,159 Speaker 1: sustainable for a long time in China. So I think uh, 482 00:26:29,600 --> 00:26:33,160 Speaker 1: anxiety is the right thing. And conclusion, let's go through 483 00:26:33,200 --> 00:26:35,280 Speaker 1: a rapid round if Summer says here, and we'll do 484 00:26:35,280 --> 00:26:38,480 Speaker 1: a little bit differently and three different topics. Let's take 485 00:26:38,480 --> 00:26:41,280 Speaker 1: a look at better or worse one week at, one month, 486 00:26:41,320 --> 00:26:43,880 Speaker 1: at six months out. Start with Afghanistan. Do you think 487 00:26:43,960 --> 00:26:46,719 Speaker 1: one week, one month, six months out, it's gonna be 488 00:26:46,720 --> 00:26:52,080 Speaker 1: better or worse, worse, worse, worse, worse better, Okay, six 489 00:26:52,119 --> 00:26:56,040 Speaker 1: months worse, worse, worse, worse better, six months six months out. 490 00:26:56,119 --> 00:26:58,600 Speaker 1: I think that we're going to have more leverage than 491 00:26:58,640 --> 00:27:02,200 Speaker 1: we realize. Then people think we're going to have as 492 00:27:02,280 --> 00:27:08,680 Speaker 1: the challenge of governing Afghanistan. UH is there for the 493 00:27:08,720 --> 00:27:12,919 Speaker 1: Taliban and they become dependent for various kinds of economic 494 00:27:12,960 --> 00:27:18,080 Speaker 1: assistance on the rest of the world. Okay, Afghanistan's number one, 495 00:27:18,200 --> 00:27:21,200 Speaker 1: number two is COVID once again, one week out, one 496 00:27:21,240 --> 00:27:26,760 Speaker 1: month out, six month out, better or worse, um about 497 00:27:26,800 --> 00:27:32,760 Speaker 1: the same, worse better, UH? I think it's UH. I 498 00:27:32,800 --> 00:27:38,120 Speaker 1: think we're clearly in the midst of an upsurge from delta. 499 00:27:38,720 --> 00:27:42,560 Speaker 1: But I think the dynamics around vaccination will change, and 500 00:27:42,600 --> 00:27:45,840 Speaker 1: I think as more and more people tragically are infected, 501 00:27:46,240 --> 00:27:50,840 Speaker 1: more and more people will have a period of immunity. 502 00:27:51,320 --> 00:27:54,800 Speaker 1: So I think we're gonna be further down the road 503 00:27:55,480 --> 00:28:02,239 Speaker 1: towards a new somewhat unfortunate equilibria where UH COVID is 504 00:28:02,280 --> 00:28:05,720 Speaker 1: like a second flu, but it is less paralyzing of 505 00:28:05,840 --> 00:28:09,280 Speaker 1: society six months from now. Okay, one more the economy. 506 00:28:09,320 --> 00:28:11,720 Speaker 1: Give us your read one week out, one month out, 507 00:28:11,760 --> 00:28:14,000 Speaker 1: six months out, better or worse. I think it's going 508 00:28:14,040 --> 00:28:21,480 Speaker 1: to get more difficult UH combination of UH COVID of COVID, 509 00:28:22,320 --> 00:28:28,359 Speaker 1: rising UH price pressures UH financial markets that are priced 510 00:28:28,800 --> 00:28:32,800 Speaker 1: UH for perfection. I don't think it gets much better 511 00:28:32,880 --> 00:28:38,720 Speaker 1: from here anytime soon. We'll see some further reductions and unemployment, 512 00:28:39,280 --> 00:28:42,800 Speaker 1: but I think the mood UH is probably gonna get 513 00:28:42,880 --> 00:28:47,440 Speaker 1: so earlier UH pretty continuously over the next six months. Okay, 514 00:28:47,440 --> 00:28:49,600 Speaker 1: there you happy. That's what Summers says. Thank you so 515 00:28:49,680 --> 00:28:54,360 Speaker 1: much to our special contributor, Larry Summers of Harvard. Finally 516 00:28:54,640 --> 00:29:00,360 Speaker 1: one more thought baseball as a science or not. Steve 517 00:29:00,360 --> 00:29:04,120 Speaker 1: Cohen made his name as an immensely successful hedge fund manager, 518 00:29:05,000 --> 00:29:07,520 Speaker 1: so when he bought the New York Mets, no one 519 00:29:07,640 --> 00:29:10,920 Speaker 1: thought he did it to lose, something he confirmed at 520 00:29:10,920 --> 00:29:13,640 Speaker 1: his first news conference as owner. I want to thank 521 00:29:13,680 --> 00:29:18,320 Speaker 1: my fellow Met fans, the greatest fans in baseball. Your 522 00:29:18,360 --> 00:29:21,800 Speaker 1: support has been incredible. You want us to win the 523 00:29:21,840 --> 00:29:26,240 Speaker 1: World Series, and so do I. New York fans have 524 00:29:26,360 --> 00:29:30,240 Speaker 1: high expectations and I want to exceed them. I want 525 00:29:30,280 --> 00:29:33,280 Speaker 1: an exceptional team. I want a team that's built to 526 00:29:33,320 --> 00:29:36,920 Speaker 1: be great every year. I don't just want to get 527 00:29:36,960 --> 00:29:40,600 Speaker 1: into the playoffs. I want to win a championship. And 528 00:29:40,680 --> 00:29:43,040 Speaker 1: for three months this season, it looked like Steve Cohen 529 00:29:43,120 --> 00:29:45,600 Speaker 1: was going to get his wish, as the Mets led 530 00:29:45,680 --> 00:29:49,000 Speaker 1: the National League East. But then then they had a 531 00:29:49,160 --> 00:29:52,520 Speaker 1: bad road trip and dropped out of first, the second, 532 00:29:53,000 --> 00:29:57,000 Speaker 1: and then the third, falling below five hundred. So Steve 533 00:29:57,040 --> 00:29:59,880 Speaker 1: Cohen does what he does best. He applied the math, 534 00:30:00,000 --> 00:30:04,360 Speaker 1: the medical prowess that made him a billionaire, analyzed his team, 535 00:30:04,400 --> 00:30:07,880 Speaker 1: and took to Twitter saying, quote, it's hard to understand 536 00:30:07,880 --> 00:30:11,880 Speaker 1: how professional hitters can be this unproductive. The best teams 537 00:30:11,880 --> 00:30:15,880 Speaker 1: have a more disciplined approach. The slugging and OPS numbers 538 00:30:16,080 --> 00:30:19,160 Speaker 1: don't lie. Now, for those of us who don't really 539 00:30:19,200 --> 00:30:22,440 Speaker 1: follow baseball stats, OPS is a combination of on base 540 00:30:22,720 --> 00:30:27,080 Speaker 1: and slugging percentage. Mr. Cohen's rigger in analyzing Smiths brings 541 00:30:27,120 --> 00:30:30,920 Speaker 1: back memories of Billy being in Moneyball when he brought 542 00:30:30,920 --> 00:30:34,360 Speaker 1: in a young economist to help remake his Oakland A's 543 00:30:34,440 --> 00:30:37,040 Speaker 1: after concluding that the only way they had to go 544 00:30:37,640 --> 00:30:41,280 Speaker 1: was up, and who knows, maybe Mr Cohen is onto something. 545 00:30:41,520 --> 00:30:44,520 Speaker 1: Hours after he publicly called the Mets out, they came 546 00:30:44,560 --> 00:30:47,920 Speaker 1: from behind to beat the Giants in an extra innings 547 00:30:47,960 --> 00:30:51,640 Speaker 1: twelve innings, three precise. That does it for this episode 548 00:30:51,680 --> 00:30:54,520 Speaker 1: of Wall Street Week. I'm David Weston, This is Bloomberg. 549 00:30:54,760 --> 00:30:56,320 Speaker 1: See you next week.