1 00:00:00,520 --> 00:00:03,760 Speaker 1: This is Bloomberg Wall Street Week. We turn our attention 2 00:00:03,880 --> 00:00:07,120 Speaker 1: to the markets this week. U s CPIM members reinforcing 3 00:00:07,160 --> 00:00:10,639 Speaker 1: concerns about inflation. The financial stories that chief are worth 4 00:00:10,720 --> 00:00:13,480 Speaker 1: a really different reaction to Mark. It's more indications of 5 00:00:13,640 --> 00:00:16,239 Speaker 1: just how hot the U. S. Economy really is. Through 6 00:00:16,239 --> 00:00:19,520 Speaker 1: the eyes of the most influential voices Larry Summers, the 7 00:00:19,560 --> 00:00:22,880 Speaker 1: former Treachery Secretary, Katherine Keating, CEO of v n Y Moms, 8 00:00:22,960 --> 00:00:26,160 Speaker 1: Sam's l Sharmon and founder of a creating group Investment 9 00:00:26,200 --> 00:00:30,280 Speaker 1: in Bloomberg Wall Street Week with David Weston from Bloomberg Radio, 10 00:00:31,120 --> 00:00:34,519 Speaker 1: giving thanks for what we've been through, for downs as 11 00:00:34,560 --> 00:00:37,599 Speaker 1: well as ups, and for the opportunities yet ahead of us. 12 00:00:38,040 --> 00:00:41,240 Speaker 1: This is a special Thanksgiving edition of Bloomberg Wall Street Week. 13 00:00:41,600 --> 00:00:58,280 Speaker 1: I'm David Weston. This week, America celebrates that holiday known 14 00:00:58,320 --> 00:01:02,200 Speaker 1: as Thanksgiving, when we gather with family and friends, remembering 15 00:01:02,240 --> 00:01:05,560 Speaker 1: a time nearly four hundred years ago when British settlers 16 00:01:05,600 --> 00:01:08,560 Speaker 1: feasted to celebrate their survival and to give thanks to 17 00:01:08,600 --> 00:01:12,119 Speaker 1: the American Indians who made it possible. This year, most 18 00:01:12,160 --> 00:01:14,120 Speaker 1: of us can be thankful that we haven't had to 19 00:01:14,160 --> 00:01:18,520 Speaker 1: survive scenarios anything like those early Massachusetts colonists. Though we 20 00:01:18,600 --> 00:01:21,319 Speaker 1: are mindful of all those who have lost loved ones 21 00:01:21,360 --> 00:01:24,880 Speaker 1: to the pandemic over the last three years. We all 22 00:01:25,040 --> 00:01:31,080 Speaker 1: lost something, a collective suffrage, a collective sacrifice, a year 23 00:01:31,400 --> 00:01:35,440 Speaker 1: filled with the loss of life, the loss of livy, 24 00:01:35,600 --> 00:01:38,399 Speaker 1: and to Ukrainians who have spent most of the year 25 00:01:38,560 --> 00:01:41,680 Speaker 1: valiantly fighting off Russian invaders at a great cost of 26 00:01:41,720 --> 00:01:45,360 Speaker 1: blood and treasure. We will not give up, We will 27 00:01:45,400 --> 00:01:48,600 Speaker 1: not lose. We will fight till the end, at sea, 28 00:01:49,000 --> 00:01:51,800 Speaker 1: in the air. We will continue fighting for our land, 29 00:01:52,320 --> 00:01:54,960 Speaker 1: whatever the cost. But for the rest of us, it 30 00:01:55,000 --> 00:01:57,880 Speaker 1: has been a year of great uncertainty as the economy 31 00:01:57,880 --> 00:02:00,960 Speaker 1: has come back, but at the cost of mounting inflation. 32 00:02:01,400 --> 00:02:05,600 Speaker 1: Inflation is extremely high. The levels were at we're unimaginable 33 00:02:05,800 --> 00:02:08,480 Speaker 1: eighteen months ago, and so we have to get that 34 00:02:08,560 --> 00:02:11,919 Speaker 1: under control and the beginning of belt tightening that has 35 00:02:11,919 --> 00:02:14,760 Speaker 1: played havoc with the plans of so many, as reflected 36 00:02:14,800 --> 00:02:17,880 Speaker 1: in markets that have struggled week to week. One of 37 00:02:17,880 --> 00:02:20,560 Speaker 1: the places on global Wall Street, particularly hard hit by 38 00:02:20,560 --> 00:02:24,480 Speaker 1: the higher rates and greater uncertainty has been mergers and acquisitions, 39 00:02:25,280 --> 00:02:27,880 Speaker 1: And we sat down with one of the consummate dealmakers. 40 00:02:28,000 --> 00:02:30,919 Speaker 1: Sam Zell to talk about the climate and how it's 41 00:02:30,960 --> 00:02:35,560 Speaker 1: affected his business. Let's talk about what investor does in 42 00:02:35,600 --> 00:02:39,440 Speaker 1: this new environment of increased inflation and increased interest rates. 43 00:02:39,520 --> 00:02:42,040 Speaker 1: First of all, tell me what's going on with your company. 44 00:02:42,200 --> 00:02:45,600 Speaker 1: Are you seeing less deal flow? Now just the opposite. 45 00:02:46,400 --> 00:02:51,919 Speaker 1: We're seeing more deal flow. We're seeing more situations where 46 00:02:52,440 --> 00:02:58,040 Speaker 1: companies are having difficulty figuring out what to do. Uh. 47 00:02:58,200 --> 00:03:04,399 Speaker 1: We're seeing situations where nine months ago, financing a transaction 48 00:03:04,720 --> 00:03:08,720 Speaker 1: of X y Z size was nothing. You know, it 49 00:03:08,840 --> 00:03:12,640 Speaker 1: was you know, as you said, money was free. What's 50 00:03:12,840 --> 00:03:17,160 Speaker 1: changed dramatically? I mean, think about the impact of the 51 00:03:17,280 --> 00:03:20,880 Speaker 1: doubling of interest rates in eight weeks double you know, 52 00:03:20,919 --> 00:03:24,720 Speaker 1: it's just eight weeks earlier, interest rates were you know, 53 00:03:24,800 --> 00:03:26,839 Speaker 1: two and a half to three, and now they're five 54 00:03:26,880 --> 00:03:30,840 Speaker 1: and a half to six. That's an enormous change, and 55 00:03:30,919 --> 00:03:35,360 Speaker 1: it's gonna slow down everybody's activity. It's gonna for sure 56 00:03:35,960 --> 00:03:41,240 Speaker 1: impact getting deals done. But in our particular case, because 57 00:03:41,880 --> 00:03:46,120 Speaker 1: I've oftentime told the world that when I'm liquid, the 58 00:03:46,160 --> 00:03:49,040 Speaker 1: stock market can't go down. It only goes down when 59 00:03:49,040 --> 00:03:52,280 Speaker 1: I'm ill liquid. And here I am sitting there with 60 00:03:52,360 --> 00:03:55,520 Speaker 1: a level of liquidity I've never experienced in my life 61 00:03:56,040 --> 00:03:59,640 Speaker 1: because my focus for the last three and a half 62 00:03:59,720 --> 00:04:04,520 Speaker 1: here has been nothing more important than loquality. So you've 63 00:04:04,520 --> 00:04:06,920 Speaker 1: got a significant deal flow, if anything is bigger than 64 00:04:06,920 --> 00:04:09,200 Speaker 1: it was before. What about the quality of deals? Are 65 00:04:09,240 --> 00:04:11,760 Speaker 1: they different from what they were? For example, preach a prandemic. 66 00:04:12,080 --> 00:04:15,080 Speaker 1: I think they are because they think they're a little 67 00:04:15,160 --> 00:04:22,440 Speaker 1: more realistic. I think in prepaymandemic, when money was free, 68 00:04:22,880 --> 00:04:26,640 Speaker 1: we did as back and chose not to take it 69 00:04:26,680 --> 00:04:29,680 Speaker 1: to the next level. Because when we did this back 70 00:04:30,480 --> 00:04:34,440 Speaker 1: spac seemed like a very interesting way to in effect 71 00:04:34,560 --> 00:04:40,800 Speaker 1: monetize opportunity. Uh. It very quickly became a highly speculative 72 00:04:41,440 --> 00:04:47,560 Speaker 1: scenario dependent on preposterous valuations that ultimately led to the 73 00:04:47,600 --> 00:04:51,440 Speaker 1: crash of the whole spack market. World has changed a 74 00:04:51,440 --> 00:04:57,240 Speaker 1: lot since then, and and the change is basically modifying 75 00:04:57,320 --> 00:05:00,599 Speaker 1: what you can do. On the other hand, is always 76 00:05:00,640 --> 00:05:04,720 Speaker 1: demand for capital, uh, And there's always that demand is 77 00:05:04,760 --> 00:05:07,599 Speaker 1: always on the on the the shoulders of those that 78 00:05:07,680 --> 00:05:11,240 Speaker 1: have preserved the couidity. So let's talk about some specific 79 00:05:11,279 --> 00:05:14,479 Speaker 1: investment of serious energy. I mean, you know energy terribly well. 80 00:05:15,040 --> 00:05:16,800 Speaker 1: You see opportunities of energy ight. Now, there's been a 81 00:05:16,800 --> 00:05:19,719 Speaker 1: lot of tumult in the marketplace because of Russia and 82 00:05:19,839 --> 00:05:23,080 Speaker 1: Ukraine and all sorts of versions. Yeah. I I mean 83 00:05:23,120 --> 00:05:28,120 Speaker 1: we continue to do something in the energy space, not 84 00:05:28,279 --> 00:05:30,800 Speaker 1: as much as I would have thought when we when 85 00:05:30,839 --> 00:05:36,360 Speaker 1: this period began. The volatility and the energy space has 86 00:05:36,400 --> 00:05:40,000 Speaker 1: been so extreme. Uh. I mean you just think about it. 87 00:05:40,040 --> 00:05:43,880 Speaker 1: Within a twelve month period, the price of oil. Uh 88 00:05:44,000 --> 00:05:49,560 Speaker 1: you know, you know, vascillated between thirty and twenty. Uh. 89 00:05:49,600 --> 00:05:55,839 Speaker 1: That's an incredible level of volatility. Makes making investments extraordinarily 90 00:05:55,839 --> 00:05:58,680 Speaker 1: difficult and challenging. Do you see a prospect of a 91 00:05:58,680 --> 00:06:00,679 Speaker 1: little less volatil because you up on the one plus 92 00:06:00,680 --> 00:06:03,080 Speaker 1: o pl plus trying to live with things. Now you've 93 00:06:03,080 --> 00:06:05,039 Speaker 1: got the U. S. Government, which it was not trying 94 00:06:05,080 --> 00:06:06,800 Speaker 1: to regulate the price of oil. It looks kind of 95 00:06:06,839 --> 00:06:08,800 Speaker 1: like it is because it says when it's gonna selone's 96 00:06:08,800 --> 00:06:11,120 Speaker 1: gonna buy. So it looks like it's got a bid 97 00:06:11,120 --> 00:06:14,560 Speaker 1: and ass price. Yeah. But we also have a allegedly 98 00:06:14,640 --> 00:06:19,880 Speaker 1: we also have an administration it's very anti oil and 99 00:06:19,880 --> 00:06:24,240 Speaker 1: and and too. In my judgment, that anti oil provision 100 00:06:24,600 --> 00:06:27,080 Speaker 1: is only going to hurt the United States. I mean, 101 00:06:27,440 --> 00:06:31,560 Speaker 1: we were producing eleven million barrels a day of oil. UH. 102 00:06:31,600 --> 00:06:33,400 Speaker 1: I don't know what we're doing now, but I think 103 00:06:33,440 --> 00:06:37,000 Speaker 1: it's down two or three million barrels a day. UH 104 00:06:37,080 --> 00:06:40,640 Speaker 1: as we've cut back on uh, capital for the for 105 00:06:40,640 --> 00:06:44,920 Speaker 1: for fracking, etcetera. Uh. Not a healthy set of circumstances. 106 00:06:45,160 --> 00:06:48,520 Speaker 1: That was Sam's l founder and chairman of Equity Group Investments. 107 00:06:50,279 --> 00:06:52,640 Speaker 1: Coming up, we'll turn to energy and the quest to 108 00:06:52,680 --> 00:06:56,160 Speaker 1: get more of it with less emissions with Christine Todd Whitman, 109 00:06:56,240 --> 00:06:59,880 Speaker 1: former EPA administrator and former governor of New Jersey. That 110 00:07:00,120 --> 00:07:02,920 Speaker 1: next on this special Thanksgiving edition of Wall Street Week 111 00:07:03,160 --> 00:07:09,320 Speaker 1: on Bloomberg. This is Bloomberg Wall Street Week with David 112 00:07:09,360 --> 00:07:13,440 Speaker 1: Weston from Bloomberg Radio. This is a special Thanksgiving edition 113 00:07:13,520 --> 00:07:16,640 Speaker 1: of Wall Street Week. I'm David Weston. Energy has been 114 00:07:16,720 --> 00:07:18,800 Speaker 1: much on the minds of Wall Street this year as 115 00:07:18,880 --> 00:07:21,960 Speaker 1: Russia's war in Ukraine made the price of natural gas 116 00:07:22,120 --> 00:07:25,120 Speaker 1: spike up. The President gets it. He's been working to 117 00:07:25,440 --> 00:07:28,000 Speaker 1: get prices gas prices down, so as a result, they've 118 00:07:28,040 --> 00:07:29,920 Speaker 1: been coming down for the last three weeks or so. 119 00:07:30,360 --> 00:07:32,360 Speaker 1: But we understand that that's partially due to the war 120 00:07:32,400 --> 00:07:34,000 Speaker 1: in New Train and we need to keep oil on 121 00:07:34,040 --> 00:07:36,840 Speaker 1: the market. And President Biden tried to keep the price 122 00:07:36,880 --> 00:07:40,679 Speaker 1: of gasoline down by releases from the Strategic Petroleum Reserve 123 00:07:41,560 --> 00:07:45,920 Speaker 1: additional fifteen million barrels four December out of the SPR. 124 00:07:46,160 --> 00:07:48,480 Speaker 1: But the President was doing this even as he tried 125 00:07:48,520 --> 00:07:51,560 Speaker 1: to continue his push for more investment in energy sources 126 00:07:51,600 --> 00:07:55,600 Speaker 1: that didn't add to carbon emissions. We're proving a good 127 00:07:55,640 --> 00:08:00,720 Speaker 1: climate pology is good economic policy. It's a strong foundation 128 00:08:02,400 --> 00:08:07,360 Speaker 1: for durable, resilient, inclusive economic growth. Much of Mr Biden's 129 00:08:07,360 --> 00:08:10,920 Speaker 1: effort was focused on renewables like wind and solar, but 130 00:08:11,040 --> 00:08:13,840 Speaker 1: many of those who take the zero emissions goals seriously 131 00:08:13,880 --> 00:08:17,640 Speaker 1: agree that we can't get there ultimately without nuclear energy. 132 00:08:18,120 --> 00:08:20,680 Speaker 1: One of those who has been consistently advocating for the 133 00:08:20,800 --> 00:08:24,560 Speaker 1: role of nuclear energy is Christine Todd Whitman, former Governor 134 00:08:24,600 --> 00:08:26,880 Speaker 1: of New Jersey and former administrator of the e p 135 00:08:26,960 --> 00:08:29,520 Speaker 1: A and Governor. Whitman joined us on Wall Street Week 136 00:08:29,600 --> 00:08:34,680 Speaker 1: to explain how it could work. You've dealt with nuclear 137 00:08:34,760 --> 00:08:38,080 Speaker 1: energy for years now, so give us your sense of 138 00:08:38,160 --> 00:08:42,520 Speaker 1: the role of nuclear energy potentially in getting to net zero. Well. 139 00:08:42,520 --> 00:08:45,000 Speaker 1: I think nuclear can play a huge role, at least 140 00:08:45,000 --> 00:08:49,839 Speaker 1: in a transition from fossil fuels to renewables. Renewables are 141 00:08:49,880 --> 00:08:54,240 Speaker 1: not yet base energy. They're peak shaving and we're seven society, 142 00:08:54,240 --> 00:08:57,280 Speaker 1: as is the rest of the world the world, and 143 00:08:57,480 --> 00:09:00,839 Speaker 1: nuclear is the only form of base power that releases 144 00:09:00,960 --> 00:09:06,440 Speaker 1: no regulated pollutants or greenhouse gases, wireless producing power. And 145 00:09:06,720 --> 00:09:11,080 Speaker 1: we have an incredible safety record here in this country 146 00:09:11,080 --> 00:09:15,080 Speaker 1: on nuclear and actually with a few obviously very huge 147 00:09:15,120 --> 00:09:20,800 Speaker 1: exceptions being Chernobyl and what happened in Fukushima, Daishi, overall 148 00:09:20,840 --> 00:09:23,680 Speaker 1: worldwide it's been it's been safe and getting safe for 149 00:09:23,720 --> 00:09:26,360 Speaker 1: all the time. I mean, the US Nuclear Regulatory Commission 150 00:09:26,559 --> 00:09:31,839 Speaker 1: is considered the gold standard on regulatory oversight of nuclear reactors. 151 00:09:32,320 --> 00:09:35,040 Speaker 1: I don't think, given costs and time, that we're going 152 00:09:35,080 --> 00:09:37,800 Speaker 1: to see any more large reactors built in this country. 153 00:09:37,840 --> 00:09:40,600 Speaker 1: Certainly they are being built in China, They're being built 154 00:09:40,600 --> 00:09:42,560 Speaker 1: around the world, and we can certainly play a part 155 00:09:42,760 --> 00:09:46,800 Speaker 1: in developing the parts for those reactors. But I see 156 00:09:46,800 --> 00:09:49,400 Speaker 1: the future for nuclear right now being in the small 157 00:09:49,480 --> 00:09:52,520 Speaker 1: modular reactors. Well, let's get to that, and we first 158 00:09:52,520 --> 00:09:54,640 Speaker 1: of all give us a sense of the scope of it. Already. 159 00:09:54,800 --> 00:09:57,000 Speaker 1: One of the things that I have learned is nuclear 160 00:09:57,080 --> 00:09:59,360 Speaker 1: is actually one of the few things that really don't 161 00:09:59,480 --> 00:10:01,480 Speaker 1: have a mission that can be taken to scale. I 162 00:10:01,520 --> 00:10:04,000 Speaker 1: think something like energy in the United States and generated 163 00:10:04,040 --> 00:10:07,520 Speaker 1: but in France, right. And you know, you saw an 164 00:10:07,559 --> 00:10:10,320 Speaker 1: example of what happens when you take nuclear offline when 165 00:10:10,400 --> 00:10:15,520 Speaker 1: California took the Santino Frey nuclear reactor offline. Their missions 166 00:10:15,559 --> 00:10:17,679 Speaker 1: went up and the cost of their energy went up. 167 00:10:17,920 --> 00:10:21,079 Speaker 1: I mean, it was totally counter to everything that they 168 00:10:21,080 --> 00:10:24,400 Speaker 1: were hoping to achieve in my mind, and so what 169 00:10:24,440 --> 00:10:27,080 Speaker 1: I found over time is that if you have an 170 00:10:27,080 --> 00:10:30,240 Speaker 1: opportunity to talk to people and answer they're very real questions. 171 00:10:30,240 --> 00:10:33,040 Speaker 1: I mean, it's it's normal to have questions about the 172 00:10:33,040 --> 00:10:35,559 Speaker 1: safety and you should ask them. But the answers are 173 00:10:35,600 --> 00:10:38,199 Speaker 1: really good, and they're based on our history. You can 174 00:10:38,280 --> 00:10:41,240 Speaker 1: prove that in fact, these things work, and once you 175 00:10:41,320 --> 00:10:43,520 Speaker 1: do that with people, they get much more comfortable with 176 00:10:43,559 --> 00:10:45,880 Speaker 1: the idea of nuclear It's just that for so long, 177 00:10:46,440 --> 00:10:49,480 Speaker 1: um it's been used as frankly a fundraiser a lot 178 00:10:49,520 --> 00:10:52,280 Speaker 1: of times for the environmental groups, and we need to 179 00:10:52,320 --> 00:10:55,600 Speaker 1: get the public to understand. Particularly with the new small 180 00:10:55,679 --> 00:10:59,439 Speaker 1: modular reactors that are built in a contained facility, they 181 00:10:59,440 --> 00:11:03,040 Speaker 1: can be played east on site. They're much safer technology. 182 00:11:03,320 --> 00:11:06,800 Speaker 1: They are a much safer way to produce the nuclear energy. 183 00:11:07,240 --> 00:11:11,920 Speaker 1: So overall, there are really I believe, have the potential 184 00:11:12,040 --> 00:11:15,200 Speaker 1: to make a huge difference, particularly if you think about 185 00:11:16,200 --> 00:11:19,640 Speaker 1: the rural parts of America where you're not on the 186 00:11:19,679 --> 00:11:23,120 Speaker 1: grid or you're not close to the grid. You can 187 00:11:23,200 --> 00:11:26,559 Speaker 1: take a small modular reactor and provide power for an 188 00:11:26,679 --> 00:11:30,520 Speaker 1: entire talent or an entire business. So they have a 189 00:11:30,520 --> 00:11:33,360 Speaker 1: lot of potential there. So let's pursue that question of 190 00:11:33,360 --> 00:11:35,400 Speaker 1: safety because that is on a lot of people's minds 191 00:11:35,440 --> 00:11:37,480 Speaker 1: without a doubt, and as you've mentioned, we've had some 192 00:11:37,520 --> 00:11:41,200 Speaker 1: horrific instances. Is the issue with safety that people don't 193 00:11:41,200 --> 00:11:43,760 Speaker 1: realize that actually the tracker is quite good for nuclear 194 00:11:43,920 --> 00:11:47,320 Speaker 1: or is it technological developments such as as you're referring 195 00:11:47,360 --> 00:11:50,160 Speaker 1: to small module reactors now. I think it's because people 196 00:11:50,200 --> 00:11:52,800 Speaker 1: just don't know, they don't understand. I mean, I get 197 00:11:52,800 --> 00:11:54,960 Speaker 1: a lot of questions I used to in the past 198 00:11:54,960 --> 00:11:58,600 Speaker 1: about well what about the spent rods, And first of all, 199 00:11:58,600 --> 00:12:00,880 Speaker 1: I tell them from all but when the time when 200 00:12:00,880 --> 00:12:02,800 Speaker 1: we had a hundred and two nuclear reactors in this 201 00:12:02,920 --> 00:12:05,560 Speaker 1: country and you took all those spent rods and you 202 00:12:05,600 --> 00:12:08,240 Speaker 1: put them in one place, you'd fill up one football 203 00:12:08,280 --> 00:12:10,040 Speaker 1: field to the height of the goal posts. They may 204 00:12:10,080 --> 00:12:13,160 Speaker 1: have gotten slightly above that now because this was data 205 00:12:13,240 --> 00:12:16,480 Speaker 1: from several years ago, but the point being, it's not 206 00:12:16,640 --> 00:12:19,680 Speaker 1: this massive thing the size of the state of Vermont 207 00:12:19,840 --> 00:12:22,480 Speaker 1: that people kind of have in their minds. And the 208 00:12:22,559 --> 00:12:26,040 Speaker 1: other thing is that what's in those spent rods is 209 00:12:26,720 --> 00:12:30,480 Speaker 1: eight seven to ninety percent fishing noble material, meaning unused energy. 210 00:12:30,880 --> 00:12:33,080 Speaker 1: And in France and Japan they figured out how to 211 00:12:33,120 --> 00:12:36,360 Speaker 1: reprocess that and to get the energy out of those rods, 212 00:12:36,640 --> 00:12:40,080 Speaker 1: rendering that what you have is the quote unquote bad 213 00:12:40,120 --> 00:12:45,679 Speaker 1: stuff too down to let's say, and it can't be 214 00:12:45,760 --> 00:12:48,600 Speaker 1: used in a nuclear weapon, so it's much easier to store, 215 00:12:48,720 --> 00:12:51,120 Speaker 1: much less to store. You have a lot of unused 216 00:12:51,120 --> 00:12:54,280 Speaker 1: power just sitting there. And they spent rods um and 217 00:12:54,320 --> 00:12:57,520 Speaker 1: we should be using that technology as well. And people 218 00:12:57,600 --> 00:12:59,760 Speaker 1: have to understand. And when you explain it to them, 219 00:12:59,760 --> 00:13:03,160 Speaker 1: you take one of these rods from a nuclear reactor 220 00:13:03,200 --> 00:13:06,320 Speaker 1: and put it in a missile, it's not the same technology. 221 00:13:06,400 --> 00:13:08,800 Speaker 1: It won't work that way. And the other thing that 222 00:13:08,920 --> 00:13:13,280 Speaker 1: explained to them because one of the most immediate issues 223 00:13:13,320 --> 00:13:16,320 Speaker 1: that we had in this country was three Mile Island, 224 00:13:16,840 --> 00:13:21,800 Speaker 1: and when that went down, the operators in the utility itself, 225 00:13:22,040 --> 00:13:25,960 Speaker 1: in the reactor itself, were never exposed to high levels 226 00:13:25,960 --> 00:13:29,000 Speaker 1: of radiation and they've been tracked ever since, and there 227 00:13:29,000 --> 00:13:32,800 Speaker 1: were no releases into the community, and even those who 228 00:13:32,800 --> 00:13:36,880 Speaker 1: were right there in the reactor had no adverse reaction 229 00:13:36,920 --> 00:13:39,360 Speaker 1: to what happened. And in fact, it was because they 230 00:13:39,400 --> 00:13:42,320 Speaker 1: overrode the system. Really that you had the partial meltdown 231 00:13:42,640 --> 00:13:47,160 Speaker 1: fo Kushima Daishi. That wasn't because of the earthquake. It 232 00:13:47,200 --> 00:13:49,760 Speaker 1: was because of the tsunami, and that was because they 233 00:13:49,800 --> 00:13:54,520 Speaker 1: had their backup power, their generator located physically in the 234 00:13:54,600 --> 00:13:58,880 Speaker 1: reactor building. After nine eleven, our Nuclear Regulatory Commission said 235 00:13:58,920 --> 00:14:01,520 Speaker 1: to our nuclear industry, you've got to move those out 236 00:14:01,720 --> 00:14:04,880 Speaker 1: that cannot be co located with the reactor itself, so 237 00:14:04,960 --> 00:14:08,320 Speaker 1: we that kind of thing can't happen here anymore. Just 238 00:14:08,440 --> 00:14:10,960 Speaker 1: this week we saw an announcement of a deal to 239 00:14:11,080 --> 00:14:15,160 Speaker 1: acquire Westinghouse Electric basically on the premise, in effect, we're 240 00:14:15,160 --> 00:14:17,640 Speaker 1: going to have more nuclear energy. Do you anticipate at 241 00:14:17,640 --> 00:14:20,360 Speaker 1: that in the United States? Well, I certainly hope we do. 242 00:14:20,560 --> 00:14:23,520 Speaker 1: But it was what not even ten years ago. I 243 00:14:23,560 --> 00:14:26,720 Speaker 1: guess there were four proposed reactors to in Georgia and 244 00:14:26,760 --> 00:14:28,960 Speaker 1: two in South Carolina, and we were very hopeful if 245 00:14:28,960 --> 00:14:32,240 Speaker 1: those are going to come in on budget and on time, 246 00:14:32,280 --> 00:14:35,240 Speaker 1: and they both ran over and the utilities decided in 247 00:14:35,280 --> 00:14:37,760 Speaker 1: each case that it just wasn't worth going forward. So 248 00:14:38,160 --> 00:14:41,800 Speaker 1: it is a question of cost and regulatory hurdles. But 249 00:14:41,840 --> 00:14:44,440 Speaker 1: you want to have those regulations in place because that's 250 00:14:44,440 --> 00:14:46,760 Speaker 1: what protects the community, to make sure that things are 251 00:14:46,800 --> 00:14:51,200 Speaker 1: safe and streamline how you approach them. That was Christine 252 00:14:51,240 --> 00:14:53,880 Speaker 1: Todd Whitman, former governor of New Jersey and e P 253 00:14:54,040 --> 00:14:59,080 Speaker 1: A administrator, coming up. Higher interest rates this year have 254 00:14:59,360 --> 00:15:02,200 Speaker 1: really at the real estate market hard. We get the 255 00:15:02,240 --> 00:15:05,040 Speaker 1: overview from Tom Shapiro of G T I S Partners. 256 00:15:05,200 --> 00:15:08,280 Speaker 1: That's next on this special Thanksgiving edition of Wall Street 257 00:15:08,320 --> 00:15:13,240 Speaker 1: Week on Bloomberg. This is Bloomberg Wall Street Week with 258 00:15:13,440 --> 00:15:17,680 Speaker 1: David Weston from Bloomberg Radio. This is a special Thanksgiving 259 00:15:17,840 --> 00:15:20,640 Speaker 1: edition of Wall Street Week. I'm David Weston. Real estate 260 00:15:20,720 --> 00:15:23,240 Speaker 1: is never far from the mind of Global Wall Street. 261 00:15:23,320 --> 00:15:26,240 Speaker 1: In the United States, construction accounts for three point nine 262 00:15:26,240 --> 00:15:28,800 Speaker 1: percent of all g d P and one point three 263 00:15:28,840 --> 00:15:31,800 Speaker 1: percent of the jobs so when you start the year 264 00:15:31,880 --> 00:15:34,920 Speaker 1: with mortgage rates around three point three percent and they 265 00:15:34,960 --> 00:15:37,320 Speaker 1: reach seven by the end of the year, it can 266 00:15:37,400 --> 00:15:39,680 Speaker 1: make for a bit of a rough ride. One of 267 00:15:39,720 --> 00:15:42,720 Speaker 1: those feeling the ride most directly is Tom Shapiro. He's 268 00:15:42,760 --> 00:15:46,000 Speaker 1: co founder and chief investment officer of GTS Partners, and 269 00:15:46,040 --> 00:15:47,960 Speaker 1: he joined us on Wall Street Week to take us 270 00:15:47,960 --> 00:15:51,560 Speaker 1: through some of the struggles but also some high points 271 00:15:51,600 --> 00:15:56,720 Speaker 1: for real estate adjusting to higher interest rates. First of all, 272 00:15:56,800 --> 00:15:58,600 Speaker 1: I want to start with your take on where the 273 00:15:58,600 --> 00:16:01,360 Speaker 1: housing market is right now. We've seen some slowing even 274 00:16:01,400 --> 00:16:03,920 Speaker 1: this week, with some new housing sales as well as 275 00:16:03,920 --> 00:16:07,400 Speaker 1: existing housing sales. Sure that first, thank you so much 276 00:16:07,440 --> 00:16:09,880 Speaker 1: for having me on the show. Why don't I just 277 00:16:09,920 --> 00:16:12,640 Speaker 1: give you a little anecdotal evidence of what we're seeing 278 00:16:12,640 --> 00:16:15,680 Speaker 1: in the field right now. Our home sales are down 279 00:16:15,720 --> 00:16:19,960 Speaker 1: about fifteen but that's a headline number, and you know, 280 00:16:20,000 --> 00:16:22,080 Speaker 1: I think it would be helpful to kind of dig 281 00:16:22,240 --> 00:16:25,120 Speaker 1: a little bit deeper into that number. The reason, for 282 00:16:25,160 --> 00:16:28,440 Speaker 1: the most part it's down is because we can't deliver homes. 283 00:16:28,480 --> 00:16:32,720 Speaker 1: We're still having tremendous supply chain issues. Also, we find 284 00:16:32,720 --> 00:16:35,120 Speaker 1: that a lot of home builders are actually holding back 285 00:16:35,400 --> 00:16:38,120 Speaker 1: on the number of homes they want to deliver, and 286 00:16:38,160 --> 00:16:41,120 Speaker 1: that is for a couple of reasons. One inflation because 287 00:16:41,160 --> 00:16:42,800 Speaker 1: costs keep going up and they don't know what it's 288 00:16:42,840 --> 00:16:46,320 Speaker 1: gonna actually cost to finish the house. And and too 289 00:16:46,840 --> 00:16:49,680 Speaker 1: they want to ride up the home price appreciation. So 290 00:16:50,000 --> 00:16:52,080 Speaker 1: I would say for the most part, right now, while 291 00:16:52,080 --> 00:16:55,920 Speaker 1: we see a fifteen slow down in sales, you're over year. 292 00:16:56,280 --> 00:16:59,920 Speaker 1: A lot of that is because of other extraneis issue. 293 00:17:00,200 --> 00:17:03,280 Speaker 1: It's more of a delivery issue than is a demand issue. 294 00:17:03,360 --> 00:17:06,640 Speaker 1: With that said, we're definitely starting to see a pullback. 295 00:17:07,200 --> 00:17:10,359 Speaker 1: We're starting to have to go deeper into our wait lists. 296 00:17:10,680 --> 00:17:12,919 Speaker 1: But every house at this point that we deliver in 297 00:17:12,920 --> 00:17:16,120 Speaker 1: the markets were in, we are selling. But I think 298 00:17:16,200 --> 00:17:18,800 Speaker 1: we have to be careful about what we see, you know, 299 00:17:18,840 --> 00:17:20,920 Speaker 1: on a going forward basis, because definitely we're starting to 300 00:17:20,960 --> 00:17:23,200 Speaker 1: see things slowing down. That's a really helpful way of 301 00:17:23,200 --> 00:17:25,920 Speaker 1: putting up because we're having those discussions about the overall economy. 302 00:17:26,000 --> 00:17:28,200 Speaker 1: Is it supply, is it demand? Is I understand you've 303 00:17:28,200 --> 00:17:30,960 Speaker 1: got a supply problem because the supply change. People say 304 00:17:31,000 --> 00:17:32,760 Speaker 1: that's going to go away? Is it going away? And 305 00:17:32,760 --> 00:17:37,000 Speaker 1: how's it? Well, it's not I mean, we definitely have issues. 306 00:17:37,080 --> 00:17:41,520 Speaker 1: We have problems getting trusses and windows and appliances. Um, 307 00:17:41,600 --> 00:17:45,400 Speaker 1: we're delivering homes with plywood windows at times. Um, it's 308 00:17:45,200 --> 00:17:47,439 Speaker 1: it's we're having all sorts of issues. And of course 309 00:17:47,840 --> 00:17:49,960 Speaker 1: you know the war in Ukraine and what's going on 310 00:17:50,000 --> 00:17:54,080 Speaker 1: in China, and the work stoppage is there. Um, the 311 00:17:54,119 --> 00:17:58,119 Speaker 1: deliveries and transportation is an issue, and jobs are an issue, 312 00:17:58,160 --> 00:18:01,520 Speaker 1: and trades are an issue. So it's gotten marginally better, 313 00:18:01,920 --> 00:18:05,480 Speaker 1: but we still have tremendous supply chain issues. Uh. And 314 00:18:05,680 --> 00:18:09,080 Speaker 1: look if you look at how many houses were delivering 315 00:18:09,400 --> 00:18:12,600 Speaker 1: a year in total, this is all all forms, it's 316 00:18:12,640 --> 00:18:16,120 Speaker 1: about one point two million housing units a year, which 317 00:18:16,200 --> 00:18:21,639 Speaker 1: is sort of inequilibrium. So Tom, some of the issue 318 00:18:21,720 --> 00:18:23,640 Speaker 1: can be on the demand side. At some point. We've 319 00:18:23,640 --> 00:18:26,040 Speaker 1: heard about mortgage rates going up to what five point 320 00:18:26,080 --> 00:18:28,560 Speaker 1: five percent something like that, so that must affect it 321 00:18:28,600 --> 00:18:30,840 Speaker 1: to some extent. How are you seeing some effects with 322 00:18:30,920 --> 00:18:32,800 Speaker 1: that because we also have the FED is going to 323 00:18:32,840 --> 00:18:36,800 Speaker 1: start selling off some of those mortgeback securities. Yeah for sure. 324 00:18:36,800 --> 00:18:39,199 Speaker 1: I mean, look, the consumer stretched, so why are they 325 00:18:39,200 --> 00:18:42,640 Speaker 1: stretched a stretch because of inflation? So we have all 326 00:18:42,680 --> 00:18:45,679 Speaker 1: sorts of issues. We have gas prices are more expensive, 327 00:18:45,880 --> 00:18:48,920 Speaker 1: and we have the costs of food is more expensive, 328 00:18:48,960 --> 00:18:50,919 Speaker 1: and of course, as you point out, mortgage rates are 329 00:18:51,200 --> 00:18:54,120 Speaker 1: our own issues. So the consumer is stretch and that 330 00:18:54,280 --> 00:18:56,280 Speaker 1: is certainly going to be an issue on a going 331 00:18:56,320 --> 00:18:59,000 Speaker 1: forward basis on housing. But we are seeing, you know, 332 00:18:59,080 --> 00:19:02,440 Speaker 1: people taking less options, they're going to slightly smaller unit 333 00:19:02,480 --> 00:19:06,120 Speaker 1: types um and their renting. So we aren't necessarily seeing 334 00:19:06,160 --> 00:19:08,480 Speaker 1: a slow down at this point because of Morgan traits. 335 00:19:08,520 --> 00:19:11,160 Speaker 1: But again, I think we have to be careful. I think, 336 00:19:11,440 --> 00:19:13,280 Speaker 1: you know, the crystal ball says it's going to get 337 00:19:13,280 --> 00:19:15,560 Speaker 1: a lot worse. We're not seeing it today, but I 338 00:19:15,600 --> 00:19:17,000 Speaker 1: think in the future where I'm going to see a 339 00:19:17,040 --> 00:19:19,160 Speaker 1: slow down. When you say things are going to get worse, 340 00:19:19,280 --> 00:19:21,120 Speaker 1: a lot of us go back to two thousand and eight, 341 00:19:21,480 --> 00:19:24,280 Speaker 1: the last time we really thought hard about housing crisis 342 00:19:24,520 --> 00:19:28,240 Speaker 1: in this country. And there are some anecdotal incidents where 343 00:19:28,280 --> 00:19:30,280 Speaker 1: it sort of feels like two thousands six or seven 344 00:19:30,320 --> 00:19:33,400 Speaker 1: where people are outbidding each other houses. They're going away 345 00:19:33,480 --> 00:19:36,199 Speaker 1: but above the asking price. Are there parallels with what 346 00:19:36,240 --> 00:19:39,840 Speaker 1: happened in two doesn't eight? It's an amazing it's really 347 00:19:39,840 --> 00:19:41,960 Speaker 1: really good questions. So so why don't we go back 348 00:19:41,960 --> 00:19:44,119 Speaker 1: in history because I think, you know, we really have 349 00:19:44,240 --> 00:19:48,040 Speaker 1: to analyze where did we end up in a eight 350 00:19:48,119 --> 00:19:50,439 Speaker 1: and why did we end up there? So if you 351 00:19:50,560 --> 00:19:52,600 Speaker 1: if you look back to two thousand and five, we 352 00:19:52,760 --> 00:19:57,840 Speaker 1: produced two million housing units, So in general, we produce 353 00:19:58,040 --> 00:20:01,520 Speaker 1: one point two million households or what's a household? Your 354 00:20:01,560 --> 00:20:04,680 Speaker 1: kid graduates college and moves into an apartment. Uh, A 355 00:20:05,160 --> 00:20:07,800 Speaker 1: couple moves out of their parents house and they and 356 00:20:08,080 --> 00:20:11,040 Speaker 1: they've taken apartment, there's a divorce, etcetera. And that creates 357 00:20:11,240 --> 00:20:14,800 Speaker 1: a need for housing units. So against a total need 358 00:20:14,880 --> 00:20:17,879 Speaker 1: of one point two million units, we produced to and 359 00:20:17,920 --> 00:20:20,240 Speaker 1: then it did slow down because remember after five even 360 00:20:20,280 --> 00:20:22,840 Speaker 1: before the GFC we started to have a housing slow down, 361 00:20:22,920 --> 00:20:25,320 Speaker 1: we still produced one point five million housing units, so 362 00:20:25,359 --> 00:20:31,399 Speaker 1: we had a massive oversupply going into then a demand shock. 363 00:20:31,920 --> 00:20:35,000 Speaker 1: So it was really the perfect storm and that is 364 00:20:35,080 --> 00:20:39,399 Speaker 1: why we end up with the global financial crisis. That 365 00:20:39,480 --> 00:20:41,720 Speaker 1: was Tom Shapiro, president and co founder of G T 366 00:20:41,840 --> 00:20:46,840 Speaker 1: I S Partners, coming up. The tight labor market has 367 00:20:46,880 --> 00:20:50,000 Speaker 1: continued throughout the year. We talked about the causes, including 368 00:20:50,040 --> 00:20:52,720 Speaker 1: some that may not be going away anytime soon with 369 00:20:52,800 --> 00:20:55,800 Speaker 1: special Wall Street we contributed larryus Summers of Harvard and 370 00:20:55,880 --> 00:20:59,720 Speaker 1: with economist Melissa Carney of the University of Maryland. That's 371 00:20:59,760 --> 00:21:02,400 Speaker 1: next on this special Thanksgiving addition of Wall Street Reek 372 00:21:02,640 --> 00:21:08,879 Speaker 1: on Bloomberg. This is Bloomberg Will Street Week with David 373 00:21:08,920 --> 00:21:13,359 Speaker 1: Weston from Bloomberg Radio. This is water Rag. I'm David Weston. 374 00:21:13,760 --> 00:21:16,480 Speaker 1: Even as the markets and investors have struggled to come 375 00:21:16,520 --> 00:21:19,240 Speaker 1: to grips with higher interest rates and less fiscal stimulus 376 00:21:19,320 --> 00:21:22,040 Speaker 1: coming from the government, even as inflation is cut into 377 00:21:22,080 --> 00:21:25,480 Speaker 1: wages and profits, the labor market this year has continued 378 00:21:25,520 --> 00:21:29,240 Speaker 1: to be robust. The labor market is still strong, but 379 00:21:29,480 --> 00:21:33,000 Speaker 1: it requires a fed that has a lot more skill 380 00:21:33,359 --> 00:21:36,280 Speaker 1: and a lot more luck. Some of that maybe, as 381 00:21:36,280 --> 00:21:40,080 Speaker 1: they say, transitory, they continued, aftermath of the pandemic and 382 00:21:40,119 --> 00:21:43,160 Speaker 1: a dramatic snap back in the economy. There are also 383 00:21:43,280 --> 00:21:46,720 Speaker 1: more structural, longer forces at play, and we turn to 384 00:21:46,760 --> 00:21:49,439 Speaker 1: our special comtinuter Larry Summers of Harvard and his fellow 385 00:21:49,440 --> 00:21:52,520 Speaker 1: economists from Maryland Melissa Carney, to take us through some 386 00:21:52,680 --> 00:21:55,960 Speaker 1: of those longer term labor market issues. They joined us 387 00:21:56,000 --> 00:22:00,880 Speaker 1: from the Aspen Economic Strategy Groups meeting in Colorado. Let's 388 00:22:00,920 --> 00:22:03,240 Speaker 1: start with the question of where growth will come on 389 00:22:03,280 --> 00:22:05,040 Speaker 1: the other side of whatever it is we're going through, 390 00:22:05,040 --> 00:22:07,439 Speaker 1: because that's ultimately going to be the question here, I 391 00:22:07,520 --> 00:22:09,600 Speaker 1: understand from what conness like you, it comes from one 392 00:22:09,600 --> 00:22:12,560 Speaker 1: of two sources, either more workers or more productivity. Are 393 00:22:12,600 --> 00:22:14,800 Speaker 1: we going to get more workers. We're looking to at 394 00:22:14,880 --> 00:22:18,040 Speaker 1: both fewer workers and lower productivity, as you know, So 395 00:22:18,240 --> 00:22:21,600 Speaker 1: let me focus on the fewer workers aspect for a moment. 396 00:22:22,200 --> 00:22:25,479 Speaker 1: The real issue demographic issue facing the US is we 397 00:22:25,520 --> 00:22:29,280 Speaker 1: have a plummeting birth rate, and so total fertility in 398 00:22:29,320 --> 00:22:33,240 Speaker 1: the US is now below the level required to keep 399 00:22:33,320 --> 00:22:37,000 Speaker 1: population growth constant. And so the issue here is that 400 00:22:37,080 --> 00:22:40,280 Speaker 1: on average now a woman in the US is expected 401 00:22:40,320 --> 00:22:44,000 Speaker 1: to have one point six five children over her lifetime. 402 00:22:44,200 --> 00:22:46,560 Speaker 1: So women used to have three kids, then it fell 403 00:22:46,640 --> 00:22:49,399 Speaker 1: to two. Women were having comfortably above two kids for 404 00:22:49,440 --> 00:22:53,240 Speaker 1: many decades. With a with a fertility rate below too, 405 00:22:53,760 --> 00:22:56,840 Speaker 1: that means our population is going to age and it's 406 00:22:56,880 --> 00:22:59,280 Speaker 1: not going to grow, and so eventually we're going to 407 00:22:59,320 --> 00:23:06,080 Speaker 1: have a shrink working age population unless Melissa, we have immigration. 408 00:23:06,600 --> 00:23:09,520 Speaker 1: And that's why immigration, I think many of us at 409 00:23:09,520 --> 00:23:13,920 Speaker 1: this conference feel is so very very important. What's your 410 00:23:13,960 --> 00:23:19,680 Speaker 1: sense of what economists would say the politics apart um 411 00:23:19,760 --> 00:23:24,640 Speaker 1: about the immigration policy. Economists love immigration. We think immigration 412 00:23:24,800 --> 00:23:27,880 Speaker 1: is a is a potential answer to our demographic challenges 413 00:23:28,200 --> 00:23:32,480 Speaker 1: as well as our productivity innovation challenges. Since immigrants come in, 414 00:23:32,600 --> 00:23:36,840 Speaker 1: they work, they're more likely than native born Americans to 415 00:23:36,880 --> 00:23:40,040 Speaker 1: be entrepreneurs and innovators. Of course, as you know Larry, 416 00:23:40,520 --> 00:23:43,480 Speaker 1: immigration rates our way down. So we used to bring 417 00:23:43,520 --> 00:23:46,919 Speaker 1: in as you know, sixteen we hit as many as 418 00:23:46,920 --> 00:23:50,040 Speaker 1: a million new people coming into the country every year. 419 00:23:50,280 --> 00:23:53,040 Speaker 1: That number is now below two d and fifty thousand, 420 00:23:53,440 --> 00:23:57,000 Speaker 1: and so the combination of a declining native war in 421 00:23:57,080 --> 00:24:02,000 Speaker 1: population and a decline in immigration portends even worse demographic 422 00:24:02,040 --> 00:24:04,480 Speaker 1: challenges than if we were just facing one versus the other. 423 00:24:04,560 --> 00:24:06,800 Speaker 1: Let me see if I can do a little arithmetic 424 00:24:06,840 --> 00:24:11,280 Speaker 1: based on what you said, from one million, so that's 425 00:24:11,280 --> 00:24:15,200 Speaker 1: about seven fifty thousand people a year, so that's about 426 00:24:15,240 --> 00:24:20,560 Speaker 1: half a percent of our workforce, maybe a little less, 427 00:24:20,560 --> 00:24:25,200 Speaker 1: So half a percent slower labor force UH growth over 428 00:24:25,280 --> 00:24:30,280 Speaker 1: time can accumulate to something UH that is very that 429 00:24:30,440 --> 00:24:33,720 Speaker 1: is very large. And and if we go back to 430 00:24:33,720 --> 00:24:36,560 Speaker 1: the birth rates, we have about five dred thousand fewer 431 00:24:36,600 --> 00:24:41,040 Speaker 1: babies being born a year than in the not distant past. Melissa, 432 00:24:41,160 --> 00:24:46,520 Speaker 1: if you um, what would you say about about this? Um? 433 00:24:46,680 --> 00:24:50,480 Speaker 1: Most people are scared that immigrants come and they take 434 00:24:50,560 --> 00:24:54,600 Speaker 1: jobs for Americans, and that if they're more immigrants, then 435 00:24:55,119 --> 00:24:57,439 Speaker 1: there aren't gonna be as many jobs for Americans, or 436 00:24:57,480 --> 00:25:01,760 Speaker 1: if there are jobs, because there's more compet titian, Uh, 437 00:25:01,800 --> 00:25:05,639 Speaker 1: they're going to be paid less. And that's true whether 438 00:25:05,720 --> 00:25:10,959 Speaker 1: the job people think is working at McDonald's or is 439 00:25:11,840 --> 00:25:16,040 Speaker 1: working doing computer programming at Microsoft. What how do you 440 00:25:16,320 --> 00:25:19,679 Speaker 1: how should people feel? Shouldn't they have shouldn't they have 441 00:25:19,800 --> 00:25:21,720 Speaker 1: this worry that they're going to be poorer if we 442 00:25:21,800 --> 00:25:24,520 Speaker 1: take all the immigrants, just like they get hurt if 443 00:25:24,560 --> 00:25:26,680 Speaker 1: we take a lot of local a lot of trade 444 00:25:27,119 --> 00:25:30,160 Speaker 1: from other countries where they have much lower wages. So so, 445 00:25:30,600 --> 00:25:33,919 Speaker 1: the reason economists are so bolish on immigration is because 446 00:25:33,960 --> 00:25:36,560 Speaker 1: we have so much evidence that immigrants are good for 447 00:25:36,600 --> 00:25:39,480 Speaker 1: the economy. They are good for most workers. But it 448 00:25:39,640 --> 00:25:42,920 Speaker 1: is true that there are some groups in some places 449 00:25:43,359 --> 00:25:46,240 Speaker 1: that will feel wage pressures. And I think the way 450 00:25:46,280 --> 00:25:49,680 Speaker 1: we the way we solve this issue is to make 451 00:25:49,720 --> 00:25:53,040 Speaker 1: sure that we recognize the disparate impacts of certain groups. 452 00:25:53,320 --> 00:25:57,080 Speaker 1: We recognize that low wage workers in certain sectors might 453 00:25:57,160 --> 00:26:01,679 Speaker 1: not experience the benefits. The were all benefits that immigrants 454 00:26:01,760 --> 00:26:05,320 Speaker 1: bring to the economy, and we take steps to help them. 455 00:26:05,359 --> 00:26:07,600 Speaker 1: I mean, it's not it's not dissimilar to what we 456 00:26:07,640 --> 00:26:10,640 Speaker 1: have to do with trade to you know, more imports 457 00:26:10,720 --> 00:26:12,879 Speaker 1: is good for most people, but some people are harmed 458 00:26:12,880 --> 00:26:15,000 Speaker 1: by it. We're going to see this too with the 459 00:26:15,000 --> 00:26:19,399 Speaker 1: shift of green a greener economy. Some people are going 460 00:26:19,480 --> 00:26:21,800 Speaker 1: to lose their jobs even though it's better for everyone. 461 00:26:21,920 --> 00:26:25,240 Speaker 1: And so I mean, I think acknowledging that some people 462 00:26:25,320 --> 00:26:28,240 Speaker 1: feel and are harmed by this, but that's a small 463 00:26:28,320 --> 00:26:32,040 Speaker 1: concentrated group, and taking steps to address that allows us 464 00:26:32,080 --> 00:26:34,840 Speaker 1: to do things that make the economy grow and be 465 00:26:34,920 --> 00:26:38,000 Speaker 1: more productive. I wanted to come back to fertility. Larry's 466 00:26:38,040 --> 00:26:41,359 Speaker 1: pointed out a way in which economics, whether misperceived or not, 467 00:26:41,600 --> 00:26:44,520 Speaker 1: may affect our willingness to have immigration. What about fertility? 468 00:26:44,680 --> 00:26:49,119 Speaker 1: Are there economic causes for the reduction and fertility? So 469 00:26:49,240 --> 00:26:52,800 Speaker 1: the decline in US fertility and it's really being driven 470 00:26:52,840 --> 00:26:55,560 Speaker 1: by a plummeting of birth rates Since two thousand seven, 471 00:26:55,600 --> 00:26:59,600 Speaker 1: births fell after the Great Recession, they haven't recovered. Um, 472 00:26:59,640 --> 00:27:03,720 Speaker 1: you ken a point to any any policy or economic 473 00:27:03,760 --> 00:27:07,080 Speaker 1: factor that's changed since two thousand seven. So sometimes people 474 00:27:07,119 --> 00:27:09,560 Speaker 1: will say things like childcare has become more expensive, and 475 00:27:09,600 --> 00:27:12,959 Speaker 1: if we just made childcare less expensive, people would return 476 00:27:13,000 --> 00:27:16,679 Speaker 1: to having more than two kids. None. That is just 477 00:27:16,720 --> 00:27:19,879 Speaker 1: not the case, right, There's nothing, uh, there's nothing that 478 00:27:20,080 --> 00:27:22,960 Speaker 1: easy that we could point to. And in fact, us 479 00:27:23,000 --> 00:27:27,080 Speaker 1: women now are just having births in the same way 480 00:27:27,119 --> 00:27:30,560 Speaker 1: that women in other high income countries have reduced their 481 00:27:30,600 --> 00:27:33,639 Speaker 1: birth rates long before, in the eighties and nineties. So 482 00:27:33,720 --> 00:27:35,439 Speaker 1: I don't think this is going to be easy to 483 00:27:35,480 --> 00:27:38,920 Speaker 1: turn around. Lots of other countries have taken direct steps 484 00:27:38,960 --> 00:27:42,840 Speaker 1: to try and incentivize people to have more kids. There's 485 00:27:42,840 --> 00:27:45,480 Speaker 1: a lot of countries that have experimented with baby bonuses 486 00:27:45,520 --> 00:27:48,760 Speaker 1: a few thousand dollars. Birth rates go up a little 487 00:27:48,760 --> 00:27:52,600 Speaker 1: bit in the following year, but nothing like the increase 488 00:27:52,640 --> 00:27:57,600 Speaker 1: in infertility we would need to get back to replacement level. Also, 489 00:27:57,720 --> 00:28:00,320 Speaker 1: having an expert like you here, I can't is this 490 00:28:00,680 --> 00:28:03,960 Speaker 1: h stepping out of our mutual lane as economists to 491 00:28:04,000 --> 00:28:06,800 Speaker 1: ask a question I suspect is on many people's minds. 492 00:28:07,560 --> 00:28:10,879 Speaker 1: Do you think that the recent Supreme Court decision and 493 00:28:10,960 --> 00:28:12,760 Speaker 1: the steps that are going to be taken in a 494 00:28:12,840 --> 00:28:16,040 Speaker 1: number of states. Do you think that's going to materially 495 00:28:16,040 --> 00:28:18,639 Speaker 1: affect the number of births in the United States? The 496 00:28:19,560 --> 00:28:22,280 Speaker 1: We do have estimates on this based based on you know, 497 00:28:22,359 --> 00:28:25,800 Speaker 1: lots of data we have about how abortion restrictions you know, 498 00:28:26,000 --> 00:28:28,199 Speaker 1: lead to more birth rates. I expect there will be 499 00:28:28,280 --> 00:28:31,560 Speaker 1: about a hundred thousand more births a year. This is 500 00:28:31,560 --> 00:28:34,200 Speaker 1: not going to bring fertility rates back to where they were. 501 00:28:34,600 --> 00:28:37,360 Speaker 1: This is going to mean that some women who wouldn't 502 00:28:37,359 --> 00:28:40,520 Speaker 1: want to have a child now are going to um. 503 00:28:40,680 --> 00:28:44,000 Speaker 1: Since you raise the issue, I will say that this 504 00:28:44,200 --> 00:28:48,080 Speaker 1: makes the imperative of doing more to support kids and 505 00:28:48,160 --> 00:28:52,920 Speaker 1: low income women in this country that much stronger. That 506 00:28:53,000 --> 00:28:56,280 Speaker 1: was Special Wall Street. We contributed Larry Summers and University 507 00:28:56,280 --> 00:28:59,719 Speaker 1: of Maryland Professor of Economics Melissa Karney. Getting money for 508 00:28:59,720 --> 00:29:02,320 Speaker 1: free or close to it can be nice. It allows 509 00:29:02,360 --> 00:29:04,880 Speaker 1: us to pursue hopes and dreams that we otherwise might 510 00:29:04,920 --> 00:29:07,719 Speaker 1: not be able to afford, leading to investments that couldn't 511 00:29:07,760 --> 00:29:11,720 Speaker 1: be made with higher hurdle rates. I outline everything from 512 00:29:11,960 --> 00:29:16,320 Speaker 1: community college block grants to aid to communities, to reform 513 00:29:16,400 --> 00:29:19,480 Speaker 1: of the earned income tax credit to support work All 514 00:29:19,520 --> 00:29:22,560 Speaker 1: of that is probably about a hundred billion dollars a year. 515 00:29:22,840 --> 00:29:26,200 Speaker 1: That's real money. But what happens when the music stops 516 00:29:26,480 --> 00:29:28,760 Speaker 1: or at leak slows down a fair amount, as interest 517 00:29:28,800 --> 00:29:31,800 Speaker 1: rates shoot up and the bankers and other lenders get 518 00:29:31,840 --> 00:29:35,720 Speaker 1: out their sharp pencils. Then, as Warren Buffett famously said, 519 00:29:35,760 --> 00:29:38,680 Speaker 1: we find out who's been swimming without their trunks, and 520 00:29:38,760 --> 00:29:40,520 Speaker 1: at the front of the line of the so called 521 00:29:40,760 --> 00:29:44,120 Speaker 1: zombie companies, the ones who aren't throwing off enough cash 522 00:29:44,200 --> 00:29:47,200 Speaker 1: to meet their interest payments, much less pay off their principle. 523 00:29:47,560 --> 00:29:50,760 Speaker 1: Sonya Gibbs, Managing director at the Institute of International Finance, 524 00:29:51,040 --> 00:29:53,400 Speaker 1: joined us on Wall Street Week this year to take 525 00:29:53,480 --> 00:29:55,720 Speaker 1: us through the problem and what it may mean for 526 00:29:55,760 --> 00:29:59,120 Speaker 1: the rest of us. Let me start with those basic 527 00:29:59,160 --> 00:30:02,280 Speaker 1: of questions, what exactly is a zombie company and how 528 00:30:02,280 --> 00:30:05,240 Speaker 1: many of them are they're out there? First of all, 529 00:30:05,280 --> 00:30:07,200 Speaker 1: to take a step back, what you need to think 530 00:30:07,240 --> 00:30:10,280 Speaker 1: about is that over the past ten or fifteen years, 531 00:30:10,680 --> 00:30:15,120 Speaker 1: global debt levels have skyrocketed. We've had very low interest rates, 532 00:30:15,440 --> 00:30:18,800 Speaker 1: and for example, non financial corporate debt around the world 533 00:30:18,840 --> 00:30:21,560 Speaker 1: is now close to a cent of g d P 534 00:30:22,360 --> 00:30:25,400 Speaker 1: and that's more than double what it was a decade ago, 535 00:30:25,560 --> 00:30:28,960 Speaker 1: So that's a very worrying backdrop. And so what we 536 00:30:29,000 --> 00:30:32,680 Speaker 1: mean by zombie companies is a company that essentially has 537 00:30:32,760 --> 00:30:37,120 Speaker 1: to borrow to keep going. They're highly leveraged, they're not 538 00:30:37,200 --> 00:30:39,840 Speaker 1: growing very fast, their revenues are not up to power, 539 00:30:40,600 --> 00:30:43,800 Speaker 1: and at the moment they face a very difficult situation. 540 00:30:44,240 --> 00:30:48,000 Speaker 1: You've got higher input costs, so your commodity prices are higher, 541 00:30:48,160 --> 00:30:52,360 Speaker 1: wages are rising. At the same time, you don't earn 542 00:30:52,520 --> 00:30:56,120 Speaker 1: enough revenue to cover all of these higher costs and 543 00:30:56,280 --> 00:31:00,160 Speaker 1: your debt service. So if you have a ratio of 544 00:31:00,240 --> 00:31:03,840 Speaker 1: revenues to interest costs that's one or less. If you 545 00:31:03,880 --> 00:31:06,600 Speaker 1: can barely cover your debt service costs, we call you 546 00:31:06,640 --> 00:31:09,520 Speaker 1: a zombie company. And it's a very good name. It's 547 00:31:09,600 --> 00:31:13,120 Speaker 1: very evocative. And for how many I mean, it's difficult 548 00:31:13,160 --> 00:31:16,080 Speaker 1: to calculate, right because for a lot of firms that, 549 00:31:16,160 --> 00:31:20,000 Speaker 1: for example, aren't publicly listed, the information might be less available. 550 00:31:20,280 --> 00:31:24,280 Speaker 1: They might be smaller non public companies. But the Federal 551 00:31:24,320 --> 00:31:28,760 Speaker 1: Reserve estimates that between five and ten percent of US 552 00:31:28,800 --> 00:31:32,160 Speaker 1: firms fall into this category. And it's also important to 553 00:31:32,160 --> 00:31:35,680 Speaker 1: remember that this is not a static world. It's not 554 00:31:36,040 --> 00:31:40,840 Speaker 1: once a zombie, always a zombie. Conditions change, and in fact, 555 00:31:41,000 --> 00:31:44,120 Speaker 1: becoming a zombie company is a little bit cyclical in 556 00:31:44,160 --> 00:31:47,200 Speaker 1: the sense that when times are good, maybe interest rates 557 00:31:47,200 --> 00:31:50,320 Speaker 1: are low, growth is high, maybe you're not a zombie. 558 00:31:51,000 --> 00:31:55,080 Speaker 1: But then you know, bad things happen. Pandemics happen, shocks happen, 559 00:31:55,480 --> 00:31:58,680 Speaker 1: interest rates go up, and a company that was formally 560 00:31:59,040 --> 00:32:04,080 Speaker 1: doing reasonably oh might suddenly fall into the zombie category. 561 00:32:05,160 --> 00:32:08,200 Speaker 1: That was Sonya Gibbs of the Institute of International Finance, 562 00:32:08,680 --> 00:32:11,000 Speaker 1: that does it. For this special Thanksgiving edition of Wall 563 00:32:11,000 --> 00:32:13,920 Speaker 1: Street Week, I'm David Weston. This is Bloomberg. See you 564 00:32:14,040 --> 00:32:14,440 Speaker 1: next week.