Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Ley, we bring
Speaker 1: you insight from the best and economics, finance, investment, and
Speaker 1: international relations. Find Bloomberg Surveillance on Apple podcast, Suncloud, Bloomberg
Speaker 1: dot com, and of course on the Bloomberg terminal. Michael
Speaker 1: Gapman joins us now the chief US economist a bad lease,
Speaker 1: and Mike, you've pointed out let's go in March. My
Speaker 1: question would be what would stop him? That's wait now
Speaker 1: and then, well, really not much. I mean you would
Speaker 1: need a major shift in terms of saying, oh Macron
Speaker 1: effect on the economy, geopolitical event that that would somehow
Speaker 1: disrupt um the economy, or risk taking sentiment. But in
Speaker 1: terms of where the feed is on their on their
Speaker 1: dual mandate inflation in the labor market, they're basically there.
Speaker 1: So coming out of the last employment report with the
Speaker 1: unemployment rated three point nine, another month of solid employment
Speaker 1: gains six tenths rise in average hourly earnings, that pretty
Speaker 1: much meets their bar. So I think in January, at
Speaker 1: the January meeting at the end of this month, they
Speaker 1: could very well declare we're at full employment. Yesterday Powell said,
Speaker 1: we are at or very close to full employment. They've
Speaker 1: already told us they're they're on the inflation side. So
Speaker 1: I don't really think anything stops them from going in
Speaker 1: March except one of these kind of outlier events. I
Speaker 1: think they're ready, Michael Gaping, You and I are the
Speaker 1: only ones that will understand. In two, I have the
Speaker 1: tiger reigns supreme. So inflations rising up back on the street.
Speaker 1: Is this the same inflation? Is two? No? Um? So
Speaker 1: that was rocky three? Right? So yeah, So the the
Speaker 1: age of the seventies and eighties inflation was a multidecade
Speaker 1: period of demand exceeding supply, creating wage price spirals, higher
Speaker 1: inflation expectation. It was very much a demand driven story,
Speaker 1: although there were certainly supply shock components to it, with
Speaker 1: with the oil market at the time. This is is
Speaker 1: a very different outcome. It's not necessarily from persistently easy
Speaker 1: policy over previous decades and expansionary fiscal policy. Obviously we
Speaker 1: have some of that in the response to the pandemic.
Speaker 1: We think it's still primarily a pandemic driven story that
Speaker 1: is likely to ease over time, And as you mentioned
Speaker 1: in the last segment, what can the FED do about that?
Speaker 1: I think a lot of this risk management positioning is
Speaker 1: about preventing second round effects, right, preventing those the impulse
Speaker 1: today from showing up in a lot higher longer run
Speaker 1: inflation expectation. So I do think it's a very different inflation.
Speaker 1: So how the FED responds to it should be different.
Speaker 1: And Michael, what's so important here is just a president
Speaker 1: and his will to survive. What does President Biden do
Speaker 1: with seven percent inflation? In part talk about that you
Speaker 1: you get it, you see it, you get it, you
Speaker 1: understand problem. It crimps real incomes. Households are very sensitive
Speaker 1: to changes in energy prices and food prices um. And
Speaker 1: then you also want to take some steps perhaps to
Speaker 1: help solve it. Make sure that your Federal Reserve chairman
Speaker 1: that you're appointing understands the issue and the importance of
Speaker 1: getting inflation lower. Uh, they unlock some of the strategic reserve.
Speaker 1: In terms of oil supplies, there's discussions around do you
Speaker 1: do you reverse tariffs on imports from China? So what
Speaker 1: can you do to help bring inflation down and stabilize
Speaker 1: the situation. But certainly he has to say, we get it,
Speaker 1: and we understand it, and we're taking corrective measures. How
Speaker 1: do you get the wrong kind of inflation down while
Speaker 1: keeping the inflation that they want to see. As we've
Speaker 1: been hearing from John this morning, the administration perhaps going
Speaker 1: to be a looking much more at the wage increases
Speaker 1: and how this is possibly a good thing for the worker.
Speaker 1: Paint a picture of negative two point four percent real
Speaker 1: year over year hourly wages. What does that mean in
Speaker 1: terms of the wage increases we can expect going forward
Speaker 1: and the trajectory of economic momentum. Well, certainly, I think
Speaker 1: conditions in the labor market are are type. We still
Speaker 1: have roughly four million people sitting sitting on the sideline.
Speaker 1: Demand for labor is strong. I suspect labor market conditions
Speaker 1: will remain robust, and average hourly earnings will continue to
Speaker 1: take hire and then you would hope that some of
Speaker 1: the inflation comes down on on the other side. But
Speaker 1: in the moment, of course, what it means is it
Speaker 1: bites and crimps real real purchasing power. So disposable income
Speaker 1: was kind of all the story last year about government
Speaker 1: transfer payment supporting income. If you start to adjust for inflation. Now,
Speaker 1: disposable income the last few months has been taking lower,
Speaker 1: so it might feed in to a little less demand.
Speaker 1: And this is where the Fed's messaging has shifted. It
Speaker 1: used to be we need accommodative policy to keep labor
Speaker 1: market momentum going. Now what we need to do is
Speaker 1: stabilize inflation to keep labor markets going and income and
Speaker 1: purchase power elevated. So it has shifted the narrative from
Speaker 1: the Fed. Mike. Part of that effort is not just
Speaker 1: right highs this balance sheet reduction as well informing the analysis.
Speaker 1: At the moment, it's just a FED speak. Where on
Speaker 1: earth is this gummy? We have a balance sheet pushing
Speaker 1: nine trillion. We're all trying to work on the work
Speaker 1: out the month on month reduction. Mike, Have you've got
Speaker 1: any idea what that looks like through the back half
Speaker 1: of this year if they start this summer, what it
Speaker 1: looks like into next year? Sure? I think if you
Speaker 1: if most of us think the balance sheet run el
Speaker 1: is going to start in the second half of the year,
Speaker 1: we're in July. You can empower seem to say later
Speaker 1: this year. So if you if you look at the
Speaker 1: mature maturity schedule of the Fed's balance sheet roughly over
Speaker 1: the year. After that point, you're looking at let's let's
Speaker 1: call it about a trillion, and treasuries running off and
Speaker 1: prepay estimates on on MBS portfolios will give you somewhere
Speaker 1: around another three hundred billion, So I think you could
Speaker 1: have at least half of that fifty billion, maybe up
Speaker 1: to a trillion in terms of how much the FED
Speaker 1: wants to take out of the balance sheet over kind
Speaker 1: of the first twelve months, so let's call it six
Speaker 1: billion a month. They may need to ratch it up
Speaker 1: to that level over time, start with their cap that's lower,
Speaker 1: and move higher. But I do think that they want
Speaker 1: to get to the balance sheet sooner than later, and
Speaker 1: with the trillion and a half sitting in the reverse
Speaker 1: repo facility, I think they feel they can do a
Speaker 1: lot of draining of reserves without having, you know, a
Speaker 1: negative effect on on front end financing conditions. So I
Speaker 1: think they may try to get a fairly fast pace
Speaker 1: of of runoff in the beginning and last point, if
Speaker 1: I can make it, there's about three hundred and twenty
Speaker 1: five billion and T bills on the Fed's balance sheet.
Speaker 1: This time. We had almost zero in the last expansion
Speaker 1: when the FED was doing this, So you may see
Speaker 1: different run operates for the T bills and the remainder
Speaker 1: of the coupon issues or the coupon holdings that they have.
Speaker 1: You could get a lot of runofs every quickly just
Speaker 1: by letting TEA bills go. That's a very interesting point,
Speaker 1: Mike Gape, and thank you Mike Gap, and of Barclay's
Speaker 1: right now this is very important. Stephen Roach joining a
Speaker 1: senior fellow at Yale University. We'll talk about the FED
Speaker 1: here and what we're doing in America. But Steve Roach,
Speaker 1: I've got to go back to the heart of your
Speaker 1: work on Asia, and the fact is you get off
Speaker 1: Cathay Pacific long ago and far away a Terminal one
Speaker 1: Hong Kong International Airport, and there was the big Morgan
Speaker 1: Stanley sign that you personally put up there as you
Speaker 1: came down the ramp at terminal run. Those days are gone.
Speaker 1: Your new view on the new China, well, those were
Speaker 1: the days. Tom. I probably will never go on Cathay
Speaker 1: Pacific again. Sadly, UM look like China is UM. Clearly
Speaker 1: UH embracing a different type of approach to UM. The
Speaker 1: balance between ideology, policy and economic growth than at any
Speaker 1: point since I've been covering the tree. Ideology is the
Speaker 1: dominant force under a Shijin ping Uh. And what has
Speaker 1: really been disturbing and shocking to some of us is
Speaker 1: how he used the ideology to go after what had
Speaker 1: been the most dynamics sectors of the Chinese economy UH,
Speaker 1: the internet platform companies, UH and um UH. At the
Speaker 1: same time he's doing that, he's he's got this income
Speaker 1: redistribution wealth redistribution program called Common Prosperity, and so it's
Speaker 1: a it's a twin pincher movement on the dynamism of China.
Speaker 1: We all know the growth rate is slowed. I'm not
Speaker 1: concerned about evergrand I think they can definitely manage that.
Speaker 1: There's zero COVID policy is also very restrictive on a
Speaker 1: short term basis, but I think they can get through
Speaker 1: that as well. I'm more concerned about the medium, the
Speaker 1: longer term of Jina. I've been positive for decades and
Speaker 1: I'm much less so today. Stephen, you helped build the
Speaker 1: modern of Hong Kong. What should be the Western bank
Speaker 1: response to all this? How does the Western banks adapt
Speaker 1: and adjust in Hong Kong. Well, being in Hong Kong
Speaker 1: now UH and in the future is just like being
Speaker 1: in UM mainland China. There's there's really no functional difference
Speaker 1: between UH, you know, Hong Kong as a Chinese city
Speaker 1: and UH operating in Shanghai or Beijing. So to the
Speaker 1: extent that Western banks are comfortable operating in Greater China, UH,
Speaker 1: you know, Hong Kong still has a good deal of
Speaker 1: attraction to them. I understand that, UM, you know, there's
Speaker 1: a lot of concern because of the traumatic shift from
Speaker 1: what Hong Kong had been to what it is right now,
Speaker 1: but you just have to look at it as another
Speaker 1: big Chinese city. Stephen, you said you are much less
Speaker 1: optimistic right now about China as trajectory going forward, and
Speaker 1: you have been in decades. Can you play out what
Speaker 1: the ramifications are at a time when you see inflation
Speaker 1: is becoming more intriged, that we see supply chains that
Speaker 1: originate in China becoming more and more disrupted. Well, the
Speaker 1: supply chain issue, LISA is clearly critical to UH the
Speaker 1: inflation outlook, and so much of the global supply chains
Speaker 1: run through through China that any disruptions there as we've
Speaker 1: seen have a critical bearing on the supply side of
Speaker 1: you know, most large goods producing markets around the world.
Speaker 1: But you know, and I wrote about this, you know
Speaker 1: a few years ago when I first warned of stagflation.
Speaker 1: But little did I know what was going to happen
Speaker 1: on the demand side. UM. The supply supply side was
Speaker 1: very fragile, to be sure, but the demand side went
Speaker 1: into lockdown. And then the post low down snap back,
Speaker 1: fueled by the FED, who was now desperately behind the curve, UH,
Speaker 1: really over over strip stripped UH what a limited supply
Speaker 1: side could produce. So the result is UM, you know,
Speaker 1: very high inflation rate UM and the lowest FED real
Speaker 1: federal funds rate in recorded history of federal funds rate
Speaker 1: today that is further into negative territory than it was
Speaker 1: in the nineteen mid nineteen seventies, in early nineteen eighties,
Speaker 1: when we had a terrific or a should I should say,
Speaker 1: a horrific UH inflation problem. So to say the FEDS
Speaker 1: behind the curve is putting it very kindly, well Steven,
Speaker 1: to build on that, and to go back to the
Speaker 1: idea where you said the demand side was rather unexpected
Speaker 1: in its plays to this elegant maya culpa that you
Speaker 1: wrote last year in August in Project Syndicate, where you
Speaker 1: talked about how your call for a double dip recession
Speaker 1: didn't come to fruition because of this, How do you
Speaker 1: gauge the forecasting the potential for forecasting errors at such
Speaker 1: an unprecedented time, which the FED is grappling with as well,
Speaker 1: fair point um. Look, you can't even forecast the forecasting errors, Lisa,
Speaker 1: they're so far off the map. I was just reading
Speaker 1: an article a few minutes ago about, you know how
Speaker 1: some of the best uh A of real time high
Speaker 1: frequency forecasters missed the employment UM numbers last Friday by
Speaker 1: a factor of two, three and four. You know, forecasting
Speaker 1: is always hazardous, especially as Yogi told us, when it
Speaker 1: involves the future. But this time is ridiculous. Steve Roach
Speaker 1: Alexander became very close to nailing that forecast at Morgan
Speaker 1: Stanley and I want to talk, as Lisa mentions about
Speaker 1: all the miscalls that were made in the pandemic, we
Speaker 1: need to look forward. You own the high ground on
Speaker 1: the macroeconomic analysis of saveings. When you hear people talk
Speaker 1: about we have an abundance of savings, or they talk
Speaker 1: about we're using our savings up too quickly. How do
Speaker 1: you respond to what that means for two thousand and
Speaker 1: twenty four. Well, I'm looking at it again right now, Tom.
Speaker 1: What I prefer to look at is UM, the overall
Speaker 1: domestic savings rate, which is the sum of business, household
Speaker 1: and government dis savings reflecting these large deficits. I look
Speaker 1: at it in net terms because I want to take
Speaker 1: out the depreciation that goes for the wear and tear
Speaker 1: of capital stock, and so I look at the net
Speaker 1: domestic savings rate as a gauge for how we can
Speaker 1: domestically fund economic growth going forward. UH. And you know
Speaker 1: it's exceptionally low. It's about running about two over the
Speaker 1: last year. Ticked up a little bit UH to UH
Speaker 1: slightly above three percent in the third quarter of last year.
Speaker 1: But you know that that's less than half the average
Speaker 1: net domestic savings rate in the final three decades of
Speaker 1: the twentieth century. So lacking and saving UH and wanting
Speaker 1: to invest in grow, we have to import surplus savings
Speaker 1: from abroad. We run these massive current account deficits to
Speaker 1: attract the capital UM and that will eventually not last
Speaker 1: year as I another bad forecast of mine. Uh incorrectly
Speaker 1: felt that the current account would put pressure downward pressure
Speaker 1: on the dollar. But that's coming. Hold on, you will
Speaker 1: see it. Stephen Ruch, we will waite gry to catch up.
Speaker 1: Ass O white A University, Thank you very much said
Speaker 1: what was Monday and Tuesday? Gloom gloomish? Gloomish? I like it.
Speaker 1: That's a I've never heard that gloomish. It was gloomish.
Speaker 1: For those of you the want to push against gloomish,
Speaker 1: what you need is someone who chisels a sixty forty
Speaker 1: portfolio and says climb on board and made me think,
Speaker 1: see that's a concision of the Northern Trust Company. And
Speaker 1: we are thrilled that Jim McDonald can join us and
Speaker 1: this one. Jim, I love, love, love your research. Note
Speaker 1: that says the way you can act in this market
Speaker 1: is to put it down on paper. How do you
Speaker 1: get from sixty to equity? Something else? Short time? Thank
Speaker 1: you for the time this morning. So it really is
Speaker 1: comprised of three primary bets. We like the emerging the
Speaker 1: developed markets over emerging markets. So we want equity exposure
Speaker 1: with robson corporate earnings and relatively steady interest rates. The
Speaker 1: second pieces that we like the credit exposure over duration,
Speaker 1: so we like how you bonds over mcgrade. And then
Speaker 1: the final pieces we like natural resources here for tips
Speaker 1: as an inflation hedge. So you had all those up
Speaker 1: and you get to our belief is that while inflation
Speaker 1: is the biggest risk facing the markets, that people are
Speaker 1: being a little superficial in their analysis, so that what
Speaker 1: really matters is what will inflation lead to earnings problems?
Speaker 1: Where it will lead to interest rate problems, and right
Speaker 1: now we're reasonably comfortable on both fronts. Superficial, Paul is
Speaker 1: cocktail talk for static analysis. I used to be, Jim.
Speaker 1: I had such a beleaguered childhood. My mother was at
Speaker 1: New Trier or one of those schools out there that
Speaker 1: I would be lectured at the dining room table on
Speaker 1: static versus dynamic analysis explains a lot, a lot. That
Speaker 1: was the agony and geek. Hey, Jim, you know, we
Speaker 1: we got that inflation data this morning right kind of
Speaker 1: in line with expectations, but a big headline number. How
Speaker 1: do you think our Federal Reserve is gonna kind of
Speaker 1: interpret the data we saw this morning? Well, in some
Speaker 1: respects they're probably a little bit happy in that it
Speaker 1: really makes their job very simple. In the March meeting,
Speaker 1: there is a very very high likelihood that they're going
Speaker 1: to raise rates and that they're going to take what
Speaker 1: the market gives them. We think that that's a critical
Speaker 1: part of analyzing what the Fed's gonna do is realizing
Speaker 1: the market does have some constraining impact on them. And
Speaker 1: I think that actually they're probably pretty happy right now
Speaker 1: with where rates are because it's so relarly clearing the
Speaker 1: path for them to start their hip cycle. We're gonna
Speaker 1: get some earnings starting up in just a matter of days, Jim,
Speaker 1: I mean, and that kind of brings back into focus
Speaker 1: for some folks evaluation And how do you think evaluation
Speaker 1: in this equity market? Do we need these earnings to
Speaker 1: really blast through expectations to support the evaluation here? Well,
Speaker 1: it's kind of funny. The longer I've been doing this,
Speaker 1: the more I've come to the conclusion that valuations a
Speaker 1: result of people's actions as opposed to a driver of
Speaker 1: people actions. We have found no statistical relationship between valuations
Speaker 1: and one year returns in the equity markets. You've got
Speaker 1: to go out to five years before it starts to
Speaker 1: register in the ten years. It's it's pretty good. The
Speaker 1: interesting thing about the earning season is we're gonna see
Speaker 1: really good revenue growth and margin expansion, and that's really
Speaker 1: what underpens are continued constructive view on the equity markets
Speaker 1: is one percent margin expansion in this inflationary environment is supportive.
Speaker 1: Dial up hundred four points sixteen thousand. Excuse me, thirty
Speaker 1: six thousand. My eyes are failing me, folks. It's because
Speaker 1: I'm the only one in the room that actually remembers
Speaker 1: I have the tiger thirty six thousand, three six on
Speaker 1: the nastack up almost one percent. You know, I look
Speaker 1: at this gym and you allude there to revenues, which
Speaker 1: to me is nominal GDP And David Bianco DWS was
Speaker 1: brilliant on you know, we're trying to get back to
Speaker 1: the golden ratio of one point six percent excuse me,
Speaker 1: one point six ratio real g d P and a
Speaker 1: lesser inflation of one one point six to one, sort
Speaker 1: of a traditional gold ratio of a good economy. What's
Speaker 1: your wedeness on that? When do we get back to
Speaker 1: normal that gives you that revenue impulse in the equity
Speaker 1: markets well, actually, if you go out five years in
Speaker 1: our capital market assumptions, we actually don't have that expectation.
Speaker 1: We think that we're gonna see inflation and nominal GDP
Speaker 1: relatively comparable. And if you look at what's happening today,
Speaker 1: we're gonna we're gonna seecent revenue growth in the fourth quarter.
Speaker 1: That's probably not that that's definitely higher than nominal GDP,
Speaker 1: but as a reflection of the higher inflationary environment. But
Speaker 1: you're talking about four or five years out on an
Speaker 1: institutional basis or paulse Sweeney's lousy four own k the bait.
Speaker 1: Excuse me, I should say, John Tuckers, we haven't had
Speaker 1: the opening of the envelope recently. We have to have
Speaker 1: that ceremony with John Tucker. But to the under investor
Speaker 1: Jim McDonald, this is critical. You're talking about a revenue
Speaker 1: impulse to drive stock market optimism due to an elevated
Speaker 1: nominal GDP. Sure that say, it's absolutely what's driving economics
Speaker 1: right now, and as as we look at over the
Speaker 1: intermediate to longer term rise and that's where the valuations
Speaker 1: that you mentioned definitely do come into play. The only
Speaker 1: thing I will caution and we were similar to others
Speaker 1: five years ago, and we thought that US equities would
Speaker 1: only deliver about a five or six percent return annually
Speaker 1: over the next five years. What did they deliver? Eight? Now?
Speaker 1: Four percent of that annually was pre pandemic, and it's
Speaker 1: because companies did better than expectations and we had some
Speaker 1: valuation expansion. It's unrealistic to think we're gonna get a
Speaker 1: further level of valuation expansion from here though. Hey, Jim,
Speaker 1: in your seventy one percent equities, what's the real core
Speaker 1: of that? Are you kind of along the traditional growth
Speaker 1: names have worked so well for so long, or are
Speaker 1: you in that cyclical camp again that that's a camp
Speaker 1: that's worked really well over the past couple of years.
Speaker 1: How do you think about that as we start up here? Sure? So,
Speaker 1: I would definitely be much more balanced in two And
Speaker 1: the reason for that is, well, it seems like value
Speaker 1: should have another good year because we're having higher interest
Speaker 1: rates and a cyclical recovery, et cetera. The Russell one
Speaker 1: thousand growth earnings expectations are at Russell Value at just
Speaker 1: seven Now. Part of that's artificial because it's being held
Speaker 1: back by very strong earnings from reserve releases out of
Speaker 1: the banks in the market will look through that. So
Speaker 1: the fourteen versus seven is exaggerated, but it does point
Speaker 1: out that the big earnings games on the value stocks
Speaker 1: are probably behind us. Jim McDonald, thank you so much,
Speaker 1: State Warm in Chicago, Jim McDonald with a Northern Trust
Speaker 1: their chief investment strategist BACTI, and Saudi with a snow
Speaker 1: on this pandemic. Associate Professor Emergency Medicine at Johns Hopkins University.
Speaker 1: Back to a completely unfair question, but it came up,
Speaker 1: I think three times yesterday. What is your timeline of
Speaker 1: when amacron ends? Is it weeks? Is it months? Is
Speaker 1: it all of two thousand twenty? What's your what's your
Speaker 1: scope of the the X axis of a macron? Absolutely
Speaker 1: so if you look at South Africa, I would have
Speaker 1: said thirty days. However, we've peaked much higher and our
Speaker 1: population is inherently different, So I'm really thinking months. I
Speaker 1: am not thinking that this is going to affect my
Speaker 1: summer plans um so I remain hopeful. Right then we're
Speaker 1: gonna get past this peak soon. So seriously, you think
Speaker 1: I'm acron will be wiped away by the fourth of July. Absolutely,
Speaker 1: Why do you say absolutely? How do you get to
Speaker 1: that certitude? So? I think the fact is that when
Speaker 1: it peaks so quick clear, we expect the full to
Speaker 1: be just as significant. Um, we're already seen in New
Speaker 1: York and in Washington, d C. That there is now
Speaker 1: a reduction in cases, which you know, it's very very early,
Speaker 1: but it makes me hopeful. Plus, you know, again we're
Speaker 1: looking at South Africa and United Kingdom. So United Kingdom
Speaker 1: of started seeing a tape South Africa from the first
Speaker 1: rise in the peak to the end was around thirty days. Um,
Speaker 1: you know, so the viral transmission cycle here is smaller,
Speaker 1: which makes us more hopeful that this will end sooner.
Speaker 1: As we are more hopeful that the pandemic will end
Speaker 1: more broadly and become endemic. We're left with a health
Speaker 1: care system that has been transformed. I'm struck by the
Speaker 1: number of employees who have left the profession about the
Speaker 1: wage increases that they're demanding in order to stay there.
Speaker 1: How much does this healthcare sector look completely different than
Speaker 1: what we saw two years ago. So I think like
Speaker 1: the healthcare workforce is just one piece of this puzzle.
Speaker 1: The health system here in the United States extremely complicated
Speaker 1: with what is the role of insurers right and how
Speaker 1: have they supported the COVID ninating response UM. Now we're
Speaker 1: also hearing that some insurance are going to start covering
Speaker 1: COVID tests UM, which I think is helpful right for
Speaker 1: future pandemics, but it is not going to be the norm.
Speaker 1: And how will they set up in the future. And
Speaker 1: what is the power of the health system versus the
Speaker 1: state versus the individual hospitals in developing your search preparedness plans.
Speaker 1: I think there is a lot of learning to be
Speaker 1: done UM. I think we've talked about series after action
Speaker 1: reports UM, and hopefully there's a new way of us
Speaker 1: thinking about how do we how does the health system
Speaker 1: support in a more unified, utalitarian manner. What's the answer
Speaker 1: to getting people in the doors at hospitals at a
Speaker 1: time when we see massive numbers of vacancies that frankly
Speaker 1: a lot of health executives have said are unprecedented. You know,
Speaker 1: I don't think money is the only answer. It's very
Speaker 1: easy to say, we'll just pay you more, but you
Speaker 1: need to make this work environment kind of right. Healthcare
Speaker 1: workers are also human beings. We have the same needs.
Speaker 1: So let's talk about what it means to be able
Speaker 1: to have children when you're a healthcare worker looking after
Speaker 1: patients who are infected. How do we manage sickly, how
Speaker 1: do we give people time to recover? What psychosocial supports
Speaker 1: services are available? So it's really not just more money
Speaker 1: that is a stop gap measure. We need to look
Speaker 1: at the healthcare workforce as a whole and think how
Speaker 1: does this become a place that people want to work
Speaker 1: and how do we bring back the passion of medicine. Doctor,
Speaker 1: Can I just squeeze in a final question and go
Speaker 1: to the statement from Novak Djokovic, the tennis star who
Speaker 1: tested positive with a PCR test and the following day,
Speaker 1: on December eighteenth, he went to his tennis center in
Speaker 1: Bowl Grade fulfill a longstanding commitment for an interview and
Speaker 1: photo shoot. He found obliged to go ahead and conduct
Speaker 1: the interview. He did ensure he was socially distance and
Speaker 1: war masks except from when his photograph was taken. Doctor,
Speaker 1: for someone in your industry, right now, how do you
Speaker 1: react when you hear something like that? You know, I
Speaker 1: thing there's cognitive dissonance, right? They haven't seen the worst
Speaker 1: of the pandemic, the worst of the pandemics. That's a
Speaker 1: nice us behind closed doors. So you know, he treats
Speaker 1: it like a common cold. And that is why we
Speaker 1: are here where we are right because of individuals that
Speaker 1: make decisions like that. Um. I think my eyes roll over,
Speaker 1: you know, to be honest, um, and I think, oh,
Speaker 1: I hope you just don't come to the most problem
Speaker 1: protest dor good luck, thank you for being with us.
Speaker 1: We appreciate it. Dr Batty and Sati there of John's
Speaker 1: Helpkins University, Melody, I'm sent of Chicago and Aerial Investments,
Speaker 1: a co chief executive office there, and of course many
Speaker 1: other werethy items for her Princeton University and around this nation.
Speaker 1: A philanthropist, of course, I should note with Bloomberg philanthropies
Speaker 1: as well. But there is a different story. It's a
Speaker 1: story that David Rubinstein dives into. And this is the
Speaker 1: youngest kid of a single mom in Chicago, who, among
Speaker 1: the struggle of painting apartment wall, said I want my
Speaker 1: daughter to go to better schools. Melody, I think more
Speaker 1: than anyone I know in the game, his excelled people
Speaker 1: have forgotten about her past. Did you explore that with
Speaker 1: Melody Hobson. I did now, of course, she has not
Speaker 1: forgotten her past. The youngest of six children, and she
Speaker 1: was frequently finding their parents. Her mother was being evicted
Speaker 1: and they had to basically worry about where the food
Speaker 1: was coming from. She got a Princeton degree, She became
Speaker 1: a co CEO, as you pointed, out of arial investments.
Speaker 1: I'm man already owned investment firm in Chicago, married George Lucas.
Speaker 1: Now she's actively involved in philanthropy, but also she's the
Speaker 1: co the co chairman or the chairman i should say,
Speaker 1: of Starbucks, and is the co CEO of her firm.
Speaker 1: I take immense issue with people that say, well, it's
Speaker 1: George Lucas or whatever Princeton. It's about a character set
Speaker 1: from her childhood. What did you discuss with her about
Speaker 1: the best practices she learned enjoying of action in Chicago, Well,
Speaker 1: among other things, she learned how to work hard, and
Speaker 1: study and be very loyal. She joined Ariel right out
Speaker 1: of college and she's been there ever since. She's the
Speaker 1: only person her class at Princeton who has the same
Speaker 1: telephone number they had upon graduation. She hasn't changed jobs.
Speaker 1: The only person in her class, she said, hasn't changed jobs. David,
Speaker 1: how is that view from her perspective? Growing up from
Speaker 1: uh much less beneficial or less wealthy past into where
Speaker 1: she is now color her view on how companies should
Speaker 1: operate themselves, on how they should pay their employees. Well,
Speaker 1: she believes that the companies need to do a much
Speaker 1: better job of getting minorities on their board and also
Speaker 1: minorities in their executive suites. And that's one of her
Speaker 1: areas of focus. She's also on the JP Morgan board
Speaker 1: and she with JP Morgan have been making a major
Speaker 1: effort to have investments made a minority owned firms. But
Speaker 1: she hasn't forgotten her past. Although she can go out
Speaker 1: and see anybody in the world today back because she's
Speaker 1: so well known, and she she did this interview with
Speaker 1: me when she just flew in from a conference in Dubai,
Speaker 1: got off the plane, cleaned up, and then did the interview. Um,
Speaker 1: then she was off to I think the West Coast.
Speaker 1: So she's an incredible person. But she hasn't forgotten her pass.
Speaker 1: Many people who come from or circumstances sometimes they forget
Speaker 1: their pass, but she does not. She's very close to
Speaker 1: her family, and she's also very close to giving back
Speaker 1: to a lot of uh parts of Chicago where she's based,
Speaker 1: in terms of making certain that people there have better
Speaker 1: chances than maybe she hadn't as a young person. David,
Speaker 1: it's a fascinating time to speak with her, especially as
Speaker 1: we do seem to be at a pivot point in
Speaker 1: the economy with a change landscape for inflation. We just
Speaker 1: get that inflation read and real wages still negative deeply,
Speaker 1: so some of the most negative reads and real wages
Speaker 1: year over year going back decades. What's her view on
Speaker 1: how to invest in such an uncertain economy. Well, her
Speaker 1: firm has been a what's called a value investment firm,
Speaker 1: which is to say they look at companies that are
Speaker 1: not the high tech high flyers, but ones that clearly
Speaker 1: are going to do well when the economy is in
Speaker 1: reasonable shape, are not growing so well. That's what they've
Speaker 1: been doing for some twenty plus years that she's been there.
Speaker 1: And her view is you just can't just chase the
Speaker 1: high flyers. But she does think their values out there,
Speaker 1: and and she's a very cautious and very careful investor,
Speaker 1: and she's not somebody who does travels around the world
Speaker 1: and tells people, Look, I'm married to George Lucas. Look,
Speaker 1: I'm very good friends with Bill Bradley. She actually does
Speaker 1: a lot of hard work and she's very very knowledge
Speaker 1: about what she's talking about. Aerial investments faces the challenges
Speaker 1: of active in my management. I remember as clear as
Speaker 1: a bell in the early nineties when John Rodgers launched
Speaker 1: a strange experiment. They have to deal in the new
Speaker 1: financial world. And Mr Rubenstein, we have to have you
Speaker 1: comment a new and fresh investment to Citadel Securities, not
Speaker 1: the hedge fund, but the order flow robin hood part
Speaker 1: of it. Please discuss Sequoia Paradigm and how they have
Speaker 1: chosen to invest in Citadel well. Sequoia is perhaps the
Speaker 1: leading venture firm the United States. In recent years, they've
Speaker 1: done extremely well. Uh they have made day with another firm,
Speaker 1: a one and a half billion dollar investment into the
Speaker 1: Citadel Securities, a company that that was built by a
Speaker 1: very very talented person, Ken Griffin. Ken Griffin has run
Speaker 1: Citadel's hedge fund for a long time. It's about forty
Speaker 1: three billion dollar hedge fund. But a separate business which
Speaker 1: is extremely profitable is Citadel Securities, which trades, uh and
Speaker 1: clear security trading all over the world. Now, it's amazing
Speaker 1: how you finessed this. I'm going to stop the show, folks.
Speaker 1: David Rubinstein here is dropping the the lead line here.
Speaker 1: Federsham came out of Duke University and did paradigm. What
Speaker 1: is it like the Duke University could generate a guy
Speaker 1: like Fred who did coin base, did this, did this
Speaker 1: and now takes part in Citadel. Well, I'm sure the
Speaker 1: development people at Duke will be in touch with him
Speaker 1: very curtly. Um, But obviously we're proud to have people
Speaker 1: like that come from Duke University. Uh. Ken Griffin is
Speaker 1: a gradual Harvard. He came from modest circumstances, did very
Speaker 1: well at Harvard and trading. Ever since send he's become
Speaker 1: one of the most successful people in the financial service world.
Speaker 1: For Shop for Sure, David Show, David join us in
Speaker 1: studio today, David Rubinstein, of course of Carlisle and an
Speaker 1: important interview Melody Hobson, who has lived at board member.
Speaker 1: I should mention for Bloomberg Philanthropies as well. This is
Speaker 1: the Bloomberg Surveillance Podcast. Thanks for listening. Join us live
Speaker 1: weekdays from seven to ten am Eastern on Bloomberg Radio
Speaker 1: and on Bloomberg Television each day from six to nine
Speaker 1: am for insight from the best in economics, finance, investment,
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Speaker 1: Apple podcast, SoundCloud, Bloomberg dot com, and of course, on
Speaker 1: the terminal. I'm Tom Keene, and this is Bloomberg