1 00:00:00,560 --> 00:00:03,720 Speaker 1: This is Bloomberg Wall Street Week. We turn our attention 2 00:00:03,880 --> 00:00:08,320 Speaker 1: to the markets this week. USCPI members reinforcing concerns about inflation, 3 00:00:08,480 --> 00:00:11,600 Speaker 1: the financial stories that shape our work a really different 4 00:00:11,640 --> 00:00:14,560 Speaker 1: reaction to Mark. It's more indications of just how hot 5 00:00:14,600 --> 00:00:17,000 Speaker 1: the US economy really is. Through the eyes of the 6 00:00:17,040 --> 00:00:21,480 Speaker 1: most influential voices Larry Summers, the former Treasurer Secretary, Katherine Keating, 7 00:00:21,600 --> 00:00:24,680 Speaker 1: CEO of bny ME, and Sam zel Sharman and founder 8 00:00:24,720 --> 00:00:28,480 Speaker 1: of Aquatic Group Investment. Bloomberg Wall Street Week with David 9 00:00:28,520 --> 00:00:33,520 Speaker 1: Weston from Bloomberg Radio. China gets going, Banks keep going 10 00:00:33,680 --> 00:00:35,960 Speaker 1: and Fox Well Fox gets out of the trap that 11 00:00:36,040 --> 00:00:39,160 Speaker 1: it made for itself. This is Bloomberg Wall Street Week. 12 00:00:39,240 --> 00:00:43,000 Speaker 1: I'm David Weston. This week's special contributor Larry Summers and 13 00:00:43,040 --> 00:00:45,760 Speaker 1: why we aren't more worried about that debt ceiling. 14 00:00:46,120 --> 00:00:50,159 Speaker 2: We do need to have a fundamental conversation about the 15 00:00:50,200 --> 00:00:53,720 Speaker 2: future of government finances in our country. 16 00:00:54,120 --> 00:00:56,760 Speaker 1: Brian Winahan of Bank of America on what the bank 17 00:00:56,840 --> 00:00:59,760 Speaker 1: tremors did to regional and local banks. 18 00:01:00,080 --> 00:01:02,120 Speaker 3: The good news is the basic industry is to report 19 00:01:02,120 --> 00:01:03,920 Speaker 3: of good earnings across the board. 20 00:01:04,319 --> 00:01:06,640 Speaker 1: And Rick Reader of black Rock on whether the FED 21 00:01:06,840 --> 00:01:08,720 Speaker 1: is too focused on inflation. 22 00:01:09,120 --> 00:01:11,520 Speaker 4: FED needs too exhibit a bit more patients. We don't 23 00:01:11,560 --> 00:01:13,840 Speaker 4: have to hit the two percent target next month. 24 00:01:26,520 --> 00:01:29,920 Speaker 1: Global Wall Street waited for direction this week and spent 25 00:01:30,040 --> 00:01:32,840 Speaker 1: its time sorting through the tea leaves to find the 26 00:01:32,880 --> 00:01:37,080 Speaker 1: next big thing. China reported numbers showing its economy and 27 00:01:37,120 --> 00:01:41,440 Speaker 1: particularly its consumers, are starting up again after the COVID shutdown. 28 00:01:41,880 --> 00:01:46,240 Speaker 1: Looks like we are in China eighteen out a lot 29 00:01:46,640 --> 00:01:49,920 Speaker 1: and buying a lot of fancy pants jewelry. As Secretary, 30 00:01:50,000 --> 00:01:52,760 Speaker 1: Yellen tried to draw a line between US policy that 31 00:01:52,840 --> 00:01:56,280 Speaker 1: affects the Chinese economy and having a specific goal of 32 00:01:56,360 --> 00:01:57,440 Speaker 1: slowing its growth. 33 00:01:57,640 --> 00:02:01,160 Speaker 5: The United States will assert ourselves when our vital interests 34 00:02:01,200 --> 00:02:04,920 Speaker 5: are at stake, but we do not seek to decouple 35 00:02:05,040 --> 00:02:08,760 Speaker 5: our economy from China's. A full separation of our economies 36 00:02:08,800 --> 00:02:11,000 Speaker 5: would be disastrous for both countries. 37 00:02:11,400 --> 00:02:14,240 Speaker 1: Bank earnings continued, with Bank of America, Golden Sex, and 38 00:02:14,280 --> 00:02:17,600 Speaker 1: Morgan Stanley all posting some hits and some misses, but 39 00:02:17,760 --> 00:02:20,160 Speaker 1: not a lot of evidence of real trouble. Following the 40 00:02:20,240 --> 00:02:21,040 Speaker 1: tremors of. 41 00:02:21,040 --> 00:02:23,400 Speaker 3: March, we thought this would be the tea leaves we 42 00:02:23,400 --> 00:02:24,960 Speaker 3: were looking for, and then we get guidance. 43 00:02:25,000 --> 00:02:28,000 Speaker 1: It's kind of like, eh, We're not sure. Fox walked 44 00:02:28,080 --> 00:02:30,200 Speaker 1: right up to the brink of a libel trial with 45 00:02:30,280 --> 00:02:33,280 Speaker 1: one point six billion dollars on the line and got 46 00:02:33,320 --> 00:02:36,640 Speaker 1: away with paying Dominion only seven hundred and eighty seven 47 00:02:36,680 --> 00:02:41,320 Speaker 1: million dollars, still one of the largest libel awards in history. Well, 48 00:02:41,360 --> 00:02:43,800 Speaker 1: one thing Dominion earned, as they are now the world's 49 00:02:43,800 --> 00:02:47,160 Speaker 1: most famous voting machines. And the job cuts just kept 50 00:02:47,240 --> 00:02:50,639 Speaker 1: on coming, with Meta and Disney both cutting thousands of 51 00:02:50,760 --> 00:02:53,440 Speaker 1: jobs in a big pivot for both companies. 52 00:02:53,880 --> 00:02:56,400 Speaker 6: In a way, they're a little worse than you anticipated, 53 00:02:56,480 --> 00:03:00,240 Speaker 6: because while Meta is cutting ten thousand jobs now, they 54 00:03:00,240 --> 00:03:04,160 Speaker 6: already cut eleven thousand in November, Disney losing up to 55 00:03:04,560 --> 00:03:07,000 Speaker 6: seven thousand jobs across the board. 56 00:03:08,600 --> 00:03:10,679 Speaker 1: And what about the markets, Well, they pretty much moved 57 00:03:10,720 --> 00:03:13,160 Speaker 1: sideways through the week, with the SMP five hundred down 58 00:03:13,240 --> 00:03:16,000 Speaker 1: one tenth of a percent and just above forty one thirty, 59 00:03:16,200 --> 00:03:19,000 Speaker 1: the NASDA giving up four tenths of a percent, and 60 00:03:19,040 --> 00:03:21,640 Speaker 1: the yield on the tenure moving up about five basis 61 00:03:21,680 --> 00:03:24,360 Speaker 1: points to just under three point five seven percent by 62 00:03:24,360 --> 00:03:26,160 Speaker 1: the end of the week. For their reaction to what 63 00:03:26,200 --> 00:03:28,880 Speaker 1: we've seen welcome back now, Charmin most of our rock money. 64 00:03:29,080 --> 00:03:32,840 Speaker 1: She's Goldman Sachs Wealth Management CIO and head of investment Strategy. 65 00:03:33,080 --> 00:03:36,720 Speaker 1: And David Bianco, DWS Group, Chief Investment Officer. Welcome back 66 00:03:36,720 --> 00:03:38,640 Speaker 1: to both of you here in our studio, New York. 67 00:03:38,640 --> 00:03:40,600 Speaker 1: Great to have you. So let me start with you, David. 68 00:03:41,000 --> 00:03:43,600 Speaker 1: Does the equity market agree with the bond market about 69 00:03:43,600 --> 00:03:44,440 Speaker 1: where we're headed? 70 00:03:45,560 --> 00:03:46,280 Speaker 7: I don't think so. 71 00:03:46,640 --> 00:03:49,480 Speaker 8: And then sometimes there are good reasons for the bond 72 00:03:49,520 --> 00:03:53,680 Speaker 8: market and equity market looking like they're disagreeing when they're 73 00:03:53,680 --> 00:03:56,320 Speaker 8: really agreeing. But this time around, I think the equity 74 00:03:56,320 --> 00:03:58,920 Speaker 8: market is ignoring the recession signals that are flashing. 75 00:03:59,360 --> 00:04:02,240 Speaker 1: Well you think about that, Charmaine. Are there recession flashes 76 00:04:02,720 --> 00:04:05,480 Speaker 1: signals flashing and is the equity market disregarding it? 77 00:04:06,160 --> 00:04:09,760 Speaker 9: The cover of our outlook this year was Caution, heavy Fog, 78 00:04:10,200 --> 00:04:13,440 Speaker 9: and the whole point was that there's a lot of uncertainty, 79 00:04:13,480 --> 00:04:16,000 Speaker 9: there's heavy fog, and to have too much conviction on 80 00:04:16,040 --> 00:04:19,960 Speaker 9: the probability for a recession is not prudent. We actually 81 00:04:20,000 --> 00:04:22,800 Speaker 9: think the probability is forty five to fifty five percent. 82 00:04:23,160 --> 00:04:25,320 Speaker 9: We've never been this high and we've never had a 83 00:04:25,400 --> 00:04:29,200 Speaker 9: ten percentage point range. So our view is a recession 84 00:04:29,360 --> 00:04:33,440 Speaker 9: is not obvious, and clients shouldn't position themselves saying there's 85 00:04:33,480 --> 00:04:36,599 Speaker 9: a recession and let's go underweight equities, or there's no recession, 86 00:04:36,640 --> 00:04:39,320 Speaker 9: we should go overweight equities. And we actually don't think 87 00:04:39,360 --> 00:04:42,800 Speaker 9: the bond market and the equity market are sending mixed signals. 88 00:04:43,640 --> 00:04:47,200 Speaker 9: If you look at where the equity market is, where 89 00:04:47,200 --> 00:04:50,320 Speaker 9: interest rates are, and you compare them to appeared like 90 00:04:50,360 --> 00:04:53,640 Speaker 9: two thousand and three, four or five six that average period, 91 00:04:54,000 --> 00:04:58,480 Speaker 9: the equity risk premium, meaning the incremental earning zield relative 92 00:04:58,560 --> 00:05:01,440 Speaker 9: to treasuries is the same as it was then when 93 00:05:01,480 --> 00:05:03,760 Speaker 9: interest rates were the same level. So we don't think 94 00:05:03,800 --> 00:05:05,359 Speaker 9: it's actually an inconsistent message. 95 00:05:05,520 --> 00:05:07,360 Speaker 1: What about the so called credit crunch, love he was, 96 00:05:07,480 --> 00:05:08,839 Speaker 1: it's not a crunch at all, But at least there's 97 00:05:08,839 --> 00:05:11,480 Speaker 1: credit tightening already agrees with that Charmine. What is that 98 00:05:11,520 --> 00:05:13,560 Speaker 1: going to do? Does that make the likely to recession 99 00:05:13,640 --> 00:05:14,040 Speaker 1: go up? 100 00:05:14,720 --> 00:05:18,080 Speaker 9: There's no doubt that we are seeing tightening of lending. 101 00:05:18,400 --> 00:05:21,599 Speaker 9: So if you look at the loan officer surveys, more 102 00:05:21,640 --> 00:05:24,520 Speaker 9: people are pulling back on lending than not so quite right, 103 00:05:24,760 --> 00:05:27,640 Speaker 9: You see it across the board, all sectors, real estate 104 00:05:27,720 --> 00:05:31,000 Speaker 9: and otherwise. But the fact is is that already priced 105 00:05:31,000 --> 00:05:33,680 Speaker 9: in the market and is a growth rate of around 106 00:05:34,120 --> 00:05:36,359 Speaker 9: one point four or one point six percent. That's the 107 00:05:36,440 --> 00:05:40,120 Speaker 9: range we have actually reflecting that we believe it is. 108 00:05:40,480 --> 00:05:42,880 Speaker 9: Growth will probably be slower by about point four too 109 00:05:42,880 --> 00:05:46,640 Speaker 9: point five percent because of tightening of credit, but not 110 00:05:46,720 --> 00:05:48,080 Speaker 9: so much to cause a recession. 111 00:05:48,240 --> 00:05:50,760 Speaker 1: There were you on this unlikely to recession and particularly 112 00:05:50,839 --> 00:05:53,240 Speaker 1: let me tie in the credit tightening with what the 113 00:05:53,240 --> 00:05:55,160 Speaker 1: Fed's likely to do is just let the FED off 114 00:05:55,160 --> 00:05:55,960 Speaker 1: the hook a little bit. 115 00:05:56,480 --> 00:05:58,960 Speaker 8: Well, it's helping the Fed, but the Fed has more 116 00:05:59,000 --> 00:06:01,280 Speaker 8: work to do. We expect to another hike in May, 117 00:06:01,360 --> 00:06:03,719 Speaker 8: and there might be more hikes perhaps in the autumn 118 00:06:03,760 --> 00:06:07,920 Speaker 8: if inflation doesn't come down faster. I agree with Charman 119 00:06:08,000 --> 00:06:12,120 Speaker 8: that the equity market under the surface there has been 120 00:06:12,160 --> 00:06:15,320 Speaker 8: a defensive rotation, so there is some acknowledgment of the 121 00:06:15,440 --> 00:06:18,680 Speaker 8: risks ahead, and the equity risk premium is also a 122 00:06:18,680 --> 00:06:21,479 Speaker 8: healthy equity risk premu under normal conditions. But we're trying 123 00:06:21,480 --> 00:06:24,520 Speaker 8: to figure out if earnings are sustainable and if these 124 00:06:24,560 --> 00:06:28,000 Speaker 8: interest rates are sustainable. There's risk that interest rates go 125 00:06:28,120 --> 00:06:30,200 Speaker 8: up after this flight to safety that I think the 126 00:06:30,200 --> 00:06:33,680 Speaker 8: bond market is doing right now, and earnings are going downward. 127 00:06:33,760 --> 00:06:35,880 Speaker 8: We're in a profit receession. We'll talk more about it later, 128 00:06:36,000 --> 00:06:38,000 Speaker 8: but there's more risks to the earnings outlook. 129 00:06:37,720 --> 00:06:37,920 Speaker 7: Charm me. 130 00:06:38,040 --> 00:06:39,800 Speaker 1: Let's switch to China just for a moment. We've got 131 00:06:39,839 --> 00:06:43,520 Speaker 1: China data out this week. There were somewhat encouraging about growth. 132 00:06:44,040 --> 00:06:46,520 Speaker 1: You have a big report out actually on China. You 133 00:06:46,520 --> 00:06:48,520 Speaker 1: actually even have a chart in which you compare what 134 00:06:48,560 --> 00:06:50,520 Speaker 1: happens if you take one hundred million dollars at the 135 00:06:50,560 --> 00:06:53,120 Speaker 1: blow point of the Great Financial Crisis and investing in 136 00:06:53,160 --> 00:06:54,839 Speaker 1: different securities. Take us through that chart. 137 00:06:55,279 --> 00:06:57,280 Speaker 9: Yes, if I had to say, over the last twenty 138 00:06:57,360 --> 00:06:59,680 Speaker 9: years of being in private wealth management, it's one of 139 00:06:59,680 --> 00:07:02,920 Speaker 9: my favorite charts because we've had a US pre eminence 140 00:07:03,000 --> 00:07:06,479 Speaker 9: investment view and this chart bears the fact that this 141 00:07:06,640 --> 00:07:08,680 Speaker 9: is actually what is happening, and we think that's going 142 00:07:08,720 --> 00:07:11,320 Speaker 9: to continue, and that is very important in terms of 143 00:07:11,680 --> 00:07:14,600 Speaker 9: flow of funds into the US. What the chart actually 144 00:07:14,640 --> 00:07:17,160 Speaker 9: shows you is if you had put in let's say, 145 00:07:17,200 --> 00:07:19,600 Speaker 9: one hundred dollars in US equities, the S and P 146 00:07:19,720 --> 00:07:23,320 Speaker 9: five hundred versus one hundred dollars in emerging markets or 147 00:07:23,360 --> 00:07:26,800 Speaker 9: in developed non US markets or China, what would the 148 00:07:26,880 --> 00:07:27,640 Speaker 9: return have been. 149 00:07:27,840 --> 00:07:28,960 Speaker 1: You would have earned eight. 150 00:07:28,840 --> 00:07:32,000 Speaker 9: Hundred dollars if it was in US equities, and only 151 00:07:32,040 --> 00:07:35,000 Speaker 9: about two hundred and fifty in Chinese equities. So in 152 00:07:35,040 --> 00:07:38,720 Speaker 9: spite of all this growth and enthusiasm for China, it 153 00:07:38,720 --> 00:07:41,800 Speaker 9: has not been a good place to invest at all. 154 00:07:42,120 --> 00:07:45,720 Speaker 9: In fact, you'd only earn about a third. And going forward, 155 00:07:45,760 --> 00:07:49,440 Speaker 9: we think there's too much euphoria that this recovery from 156 00:07:49,520 --> 00:07:51,800 Speaker 9: the lockdowns would be that meaningful. We can have a 157 00:07:51,840 --> 00:07:54,400 Speaker 9: short term recovery, but generally we think China's going to 158 00:07:54,440 --> 00:07:59,840 Speaker 9: have a substantially sower trend growth and we encapsulated it 159 00:08:00,280 --> 00:08:03,680 Speaker 9: in our report called middle Kingdom middle income. They're not 160 00:08:03,800 --> 00:08:05,680 Speaker 9: going to escape the middle income trap. 161 00:08:05,800 --> 00:08:08,000 Speaker 1: David, too much euphoria over China, do you agree? 162 00:08:08,160 --> 00:08:10,480 Speaker 8: I think there's a bit of too much of your 163 00:08:11,400 --> 00:08:15,640 Speaker 8: euphoria over the reopening in China. And it's good for China, 164 00:08:15,640 --> 00:08:18,640 Speaker 8: it's good for China's service consumption, but I don't think 165 00:08:18,640 --> 00:08:20,880 Speaker 8: it's going to stop the profit recession that we expect 166 00:08:20,920 --> 00:08:21,200 Speaker 8: at the. 167 00:08:21,200 --> 00:08:21,480 Speaker 7: S and P. 168 00:08:22,160 --> 00:08:24,840 Speaker 8: And the interesting thing is America is the greatest and 169 00:08:25,080 --> 00:08:27,280 Speaker 8: US equities over the past ten fifteen years have been 170 00:08:27,320 --> 00:08:30,480 Speaker 8: the place to be large cats, growth stocks, tech stocks, 171 00:08:30,640 --> 00:08:32,880 Speaker 8: and so many investors have said, why should I just 172 00:08:32,960 --> 00:08:35,400 Speaker 8: deviate from what has worked so well over the past 173 00:08:35,440 --> 00:08:40,480 Speaker 8: ten years. The trouble is things are changing, and uncertainty 174 00:08:40,520 --> 00:08:42,720 Speaker 8: on the ability of profits to keep growing at a 175 00:08:42,720 --> 00:08:45,960 Speaker 8: strong pace and intrade straight stay low is the concern. 176 00:08:46,160 --> 00:08:47,680 Speaker 1: So I don't want to be cute about this, but 177 00:08:47,720 --> 00:08:49,360 Speaker 1: this is sort of like past performance is not a 178 00:08:49,360 --> 00:08:52,880 Speaker 1: predictor of future exactly right. As your point about Charmine's chart, 179 00:08:52,920 --> 00:08:54,679 Speaker 1: I mean that is all finding good going back to 180 00:08:54,720 --> 00:08:57,400 Speaker 1: great financhurises. Going forward, it might be quite different. We're 181 00:08:57,440 --> 00:09:00,160 Speaker 1: facing more challenges, Charmie. 182 00:09:00,360 --> 00:09:02,760 Speaker 9: So the gap between the US and the rest of 183 00:09:02,800 --> 00:09:05,240 Speaker 9: the world may not continue to be as big in 184 00:09:05,320 --> 00:09:08,360 Speaker 9: terms of outperformance. But the growth in the US is 185 00:09:08,440 --> 00:09:11,480 Speaker 9: driven by earnings per share growth. It's not driven just 186 00:09:11,520 --> 00:09:14,520 Speaker 9: by price action and multiple action. And if you look 187 00:09:14,679 --> 00:09:17,760 Speaker 9: at the earnings per share growth in the US, the 188 00:09:17,840 --> 00:09:19,640 Speaker 9: other countries don't even come close. 189 00:09:19,720 --> 00:09:20,400 Speaker 7: If you look. 190 00:09:20,240 --> 00:09:22,720 Speaker 9: At China, it has lacked. And it's not looking at 191 00:09:22,760 --> 00:09:26,200 Speaker 9: a particular window where earnings per share growth may have 192 00:09:26,240 --> 00:09:29,080 Speaker 9: been much higher. It's actually looking at long term earnings 193 00:09:29,080 --> 00:09:32,200 Speaker 9: growth in the US and sector bisector, most of them 194 00:09:32,200 --> 00:09:33,680 Speaker 9: have underperformed the US. 195 00:09:34,040 --> 00:09:34,840 Speaker 7: I love what you're saying. 196 00:09:34,840 --> 00:09:38,760 Speaker 8: I'm happy to elaborate on it. There's a difference between 197 00:09:38,760 --> 00:09:42,080 Speaker 8: growth and good return on capital. And the S and 198 00:09:42,120 --> 00:09:44,840 Speaker 8: P five hundred American companies, they know how to get 199 00:09:45,080 --> 00:09:49,920 Speaker 8: strong returns on their incremental investment spending, but a lot 200 00:09:50,000 --> 00:09:53,880 Speaker 8: of that has come through globalization, digitalization, and we have 201 00:09:53,920 --> 00:09:55,719 Speaker 8: to see how much more upside there is on those things. 202 00:09:55,800 --> 00:09:58,079 Speaker 1: Well, let's just end on that globalization question, because I'm 203 00:09:58,120 --> 00:10:00,640 Speaker 1: not saying we're going entirely away from globals, but it's 204 00:10:00,679 --> 00:10:01,960 Speaker 1: not going to be the way it was in the past. 205 00:10:01,960 --> 00:10:03,840 Speaker 1: It looks like it's going to be more divisive than 206 00:10:03,880 --> 00:10:05,720 Speaker 1: it was in the past. Sherman, how does that affect 207 00:10:05,720 --> 00:10:06,480 Speaker 1: your analysis? 208 00:10:06,760 --> 00:10:09,120 Speaker 9: If one has to think of which country in the 209 00:10:09,160 --> 00:10:13,240 Speaker 9: world has benefited the most from globalization, it has been China. 210 00:10:13,679 --> 00:10:17,440 Speaker 9: China's growth rate is completely dependent on globalization. They have 211 00:10:17,559 --> 00:10:21,440 Speaker 9: huge surpluses. They've used that surplus to build a property sector, 212 00:10:21,480 --> 00:10:25,000 Speaker 9: build the infrastructure infrastructure business that they have, and very 213 00:10:25,040 --> 00:10:29,200 Speaker 9: dependent on exports. If globalization at the margin decreases a 214 00:10:29,200 --> 00:10:33,720 Speaker 9: little bit, and globalization peaked in two thousand and eight before, 215 00:10:33,880 --> 00:10:36,800 Speaker 9: just at the peak of the global financial crisis. Then 216 00:10:36,960 --> 00:10:38,880 Speaker 9: they are going to be hurt the most and the 217 00:10:39,000 --> 00:10:44,080 Speaker 9: US hurt the least. So in fact, the slightly globalization 218 00:10:44,200 --> 00:10:47,440 Speaker 9: even would be very beneficial for the US and hurt China. 219 00:10:47,559 --> 00:10:49,760 Speaker 1: Okay, this is a great conversation, so let's continue it. 220 00:10:49,880 --> 00:10:51,880 Speaker 1: Coming up, we're going to continue this marketing conversation with 221 00:10:51,960 --> 00:10:53,760 Speaker 1: David Bianco and Sherman and most of them our cliny, 222 00:10:53,840 --> 00:10:57,120 Speaker 1: and we're going to bring back the iconic elves of 223 00:10:57,160 --> 00:10:59,560 Speaker 1: the original Wall Street Week, updated of course for twenty 224 00:10:59,600 --> 00:11:01,960 Speaker 1: twenty three. That's coming up next on Wall Street Week. 225 00:11:02,080 --> 00:11:14,360 Speaker 10: On Bloomberg, the continuing comeback of the volatile technology sector 226 00:11:14,720 --> 00:11:18,320 Speaker 10: left NASDAK with a gain for the week. Can't scare 227 00:11:18,360 --> 00:11:21,640 Speaker 10: our elves, though their consensus on the Dow's outlook for 228 00:11:21,679 --> 00:11:23,760 Speaker 10: the next three months remains an. 229 00:11:23,720 --> 00:11:25,360 Speaker 1: Ultra bullish plus six. 230 00:11:25,640 --> 00:11:28,000 Speaker 10: So quickly was the mood improving that one of our 231 00:11:28,040 --> 00:11:32,080 Speaker 10: bullish chief elves, Michael Metz, grew cautious and changed his 232 00:11:32,200 --> 00:11:35,720 Speaker 10: boat on the next six months to neutral, bringing urlves 233 00:11:35,720 --> 00:11:38,960 Speaker 10: index down a notch to a still bullish plus three. 234 00:11:39,520 --> 00:11:43,240 Speaker 10: There was no stopping nasdak Amex or Russell, which seemed 235 00:11:43,240 --> 00:11:47,800 Speaker 10: to be operating in an entirely different parallel universe, which, 236 00:11:47,840 --> 00:11:50,000 Speaker 10: come to think of it, may be where good elves 237 00:11:50,040 --> 00:11:53,920 Speaker 10: come from. Our crew are unchanged at are highly bullish 238 00:11:54,000 --> 00:11:54,720 Speaker 10: plus seven. 239 00:11:55,760 --> 00:11:58,840 Speaker 1: That, of course is lews Erguiser talking about hiconic elves 240 00:11:58,880 --> 00:12:00,880 Speaker 1: on the original version of Wall Street Week back in 241 00:12:00,960 --> 00:12:04,040 Speaker 1: January of nineteen ninety eight, and today today we are 242 00:12:04,080 --> 00:12:07,920 Speaker 1: bringing those elves back, modified and updated a bit. Instead 243 00:12:07,920 --> 00:12:10,480 Speaker 1: of ten technical factors crunched by a contributor, which is 244 00:12:10,480 --> 00:12:13,840 Speaker 1: what Lewis had, our elves are real people. They are 245 00:12:13,880 --> 00:12:16,800 Speaker 1: the twenty four equity and analysts Bloomberg has relied on 246 00:12:16,880 --> 00:12:19,120 Speaker 1: four years to come up with a consensus call on 247 00:12:19,200 --> 00:12:21,600 Speaker 1: where the SMP will end up the year, and as 248 00:12:21,600 --> 00:12:24,520 Speaker 1: of this week, the medium of their projections was foury 249 00:12:24,640 --> 00:12:27,640 Speaker 1: twenty five, with Tom Lee of Funstrat the highest at 250 00:12:27,640 --> 00:12:30,720 Speaker 1: four thousand and seven to fifty and Michael Cantowitz of 251 00:12:30,800 --> 00:12:33,800 Speaker 1: Piper Sandler the most conservative, projecting the s and P 252 00:12:33,960 --> 00:12:36,240 Speaker 1: five hundred will end the year at three two hundred 253 00:12:36,240 --> 00:12:38,360 Speaker 1: and twenty five. Every week we're going to check in 254 00:12:38,400 --> 00:12:40,640 Speaker 1: to see how they are doing and whether they have 255 00:12:40,800 --> 00:12:43,680 Speaker 1: moved their projections. Still with us are Charmin, most of 256 00:12:43,679 --> 00:12:46,440 Speaker 1: our rock Commanie of Goldbin Sachs, and David Bianco of 257 00:12:46,520 --> 00:12:50,920 Speaker 1: DWS Group. So it's great to have you here back. Charmin, 258 00:12:51,320 --> 00:12:53,079 Speaker 1: tell me of a David Constant. He's at four thousand, 259 00:12:53,120 --> 00:12:55,000 Speaker 1: right in the middle. Yes he is. 260 00:12:55,160 --> 00:12:57,640 Speaker 9: And we obviously chat to get with each other all 261 00:12:57,679 --> 00:12:59,720 Speaker 9: the time. We go through their earnings views and our 262 00:13:00,000 --> 00:13:03,840 Speaker 9: earnings used and why are they different than what's driving it. 263 00:13:03,840 --> 00:13:07,120 Speaker 9: It's interesting because Jan Hatzis are chief economist at Golobin 264 00:13:07,200 --> 00:13:09,959 Speaker 9: Sachs has a thirty five percent probability of a recession. 265 00:13:09,960 --> 00:13:12,640 Speaker 9: It's one of the lowest in the industry, actually compared 266 00:13:12,640 --> 00:13:15,679 Speaker 9: to somebody like Bill Dudley who's at sixty percent. So 267 00:13:15,840 --> 00:13:19,120 Speaker 9: it's very important what is actually being factored into David's numbers. 268 00:13:19,360 --> 00:13:22,280 Speaker 9: Our view is that there the S and P will 269 00:13:22,320 --> 00:13:24,320 Speaker 9: end up the year at forty two fifty, so a 270 00:13:24,440 --> 00:13:28,479 Speaker 9: thirteen percent total return. We allocate a fifty percent probability 271 00:13:28,520 --> 00:13:31,520 Speaker 9: to that, and then we have a twenty percent probability 272 00:13:31,559 --> 00:13:34,280 Speaker 9: that it actually does much better and you end up 273 00:13:34,280 --> 00:13:37,000 Speaker 9: with something like your return in the twenty plus percent. 274 00:13:37,320 --> 00:13:40,000 Speaker 9: Now there's a small probability to the downside, but nothing 275 00:13:40,080 --> 00:13:42,440 Speaker 9: like the lows you have with the NEU l's we 276 00:13:42,520 --> 00:13:45,200 Speaker 9: are more down like thirty there's a thirty percent probability 277 00:13:45,240 --> 00:13:49,400 Speaker 9: of thirty six hundred. Rview is that in the background 278 00:13:49,480 --> 00:13:52,600 Speaker 9: the backdrop for earnings is generally modestly positive. 279 00:13:52,760 --> 00:13:55,440 Speaker 1: David is actually you were an ELF. Yeah, that's it. 280 00:13:55,520 --> 00:14:00,760 Speaker 7: Was an ELF. Hopefully I haven't graduated control, but yeah, I. 281 00:14:00,760 --> 00:14:03,120 Speaker 8: Was one of those equity strategists for many years. 282 00:14:03,720 --> 00:14:05,640 Speaker 1: So you see a high and a low. What are 283 00:14:05,640 --> 00:14:07,680 Speaker 1: the factors are going to determine whether it's high or low? 284 00:14:07,960 --> 00:14:09,280 Speaker 1: From your point of view, David. 285 00:14:09,160 --> 00:14:11,440 Speaker 8: Whether whether the high turns out to be correct or 286 00:14:11,440 --> 00:14:15,480 Speaker 8: the lows. I think four thousand on the SMP at 287 00:14:15,520 --> 00:14:17,520 Speaker 8: the end of the year, a little bit above four 288 00:14:17,559 --> 00:14:20,440 Speaker 8: thousand for the SMP early twenty twenty four is a 289 00:14:20,520 --> 00:14:25,120 Speaker 8: fair reasonable outlook. But I think there's downside skewed risks 290 00:14:25,840 --> 00:14:28,320 Speaker 8: more than usual. I think it's quite possible the SMP 291 00:14:28,720 --> 00:14:31,320 Speaker 8: re visits thirty six hundred and thirty seven hundred before 292 00:14:31,360 --> 00:14:33,640 Speaker 8: it moves to something well above forty two hundred. 293 00:14:33,680 --> 00:14:35,960 Speaker 1: So Charmin, you have somebody supporting David Coston right at 294 00:14:36,000 --> 00:14:38,800 Speaker 1: four thousand, Thanks so much to David Bianco and Charmen 295 00:14:38,880 --> 00:14:42,640 Speaker 1: most of our RACHMANI. The failure of Silicon Valley Bank 296 00:14:42,760 --> 00:14:46,080 Speaker 1: sent shivers through the entire banking industry, particularly when it 297 00:14:46,120 --> 00:14:48,880 Speaker 1: comes to the trust depositors place in their own banks. 298 00:14:49,160 --> 00:14:51,600 Speaker 1: We spoke with Brian moynihan, Chair and CEO of Bank 299 00:14:51,680 --> 00:14:54,320 Speaker 1: of America about the lasting effects of what we've seen. 300 00:14:56,080 --> 00:14:58,640 Speaker 3: I think, at the end of the day, at crisis 301 00:14:58,720 --> 00:15:01,720 Speaker 3: is too strong a word. Words like that get used 302 00:15:01,760 --> 00:15:04,880 Speaker 3: a lot, but at the end of day, there was 303 00:15:04,920 --> 00:15:07,840 Speaker 3: a fair amount of disruption for a few weeks there. Well, 304 00:15:08,480 --> 00:15:12,160 Speaker 3: certain business models were sorted through. But on the other hand, 305 00:15:12,200 --> 00:15:14,480 Speaker 3: you could see and we could see the stability and 306 00:15:14,480 --> 00:15:17,120 Speaker 3: the other business models which would the way banking is 307 00:15:17,120 --> 00:15:19,400 Speaker 3: down Gray Grand or business and stuff. And so the 308 00:15:19,440 --> 00:15:22,480 Speaker 3: good news is you're seeing the earnings by the broad 309 00:15:22,480 --> 00:15:26,160 Speaker 3: industry come out this week. You're seeing things have sort 310 00:15:26,200 --> 00:15:28,920 Speaker 3: of played out that way, which is very specific business models. 311 00:15:28,960 --> 00:15:32,280 Speaker 3: Because the unique circumstances of the last twenty four months 312 00:15:32,280 --> 00:15:37,400 Speaker 3: of thirty six months of massive amounts of cash putting 313 00:15:37,440 --> 00:15:40,800 Speaker 3: the system and then rates changing caught people and. 314 00:15:40,920 --> 00:15:42,000 Speaker 7: Those had to be sorted out. 315 00:15:42,160 --> 00:15:44,440 Speaker 3: The good news is the basic industry is reported good 316 00:15:44,440 --> 00:15:48,680 Speaker 3: earnings across the board. Deposits have come down, but that's 317 00:15:48,720 --> 00:15:50,840 Speaker 3: intended by the FED taking money out of the system. 318 00:15:50,880 --> 00:15:53,360 Speaker 3: It's got to come out of somewhere. Banking system is 319 00:15:53,400 --> 00:15:55,960 Speaker 3: what they want to do to you, frankly, make credit 320 00:15:55,960 --> 00:15:58,440 Speaker 3: tighter and help slow down the economy. So that's gone on, 321 00:15:58,560 --> 00:16:01,200 Speaker 3: but you look at the cap pub liquidity and the 322 00:16:01,240 --> 00:16:03,320 Speaker 3: earnings power of all these companies have been tremendous, and 323 00:16:03,400 --> 00:16:06,160 Speaker 3: that's that's reassuring to people, and that's good news because 324 00:16:06,160 --> 00:16:08,000 Speaker 3: in the end of the day, the banking system reflects 325 00:16:08,760 --> 00:16:10,880 Speaker 3: economy and American accounties around the world, and. 326 00:16:12,360 --> 00:16:14,400 Speaker 7: You hope it's in good shape, and it is. There's 327 00:16:14,440 --> 00:16:15,200 Speaker 7: no question its good. 328 00:16:15,200 --> 00:16:18,760 Speaker 1: Shap our banks at an inherent disadvantage on their business model. 329 00:16:18,840 --> 00:16:22,320 Speaker 1: In this sense, you're funding by demand deposits that people 330 00:16:22,400 --> 00:16:25,000 Speaker 1: by definition can pull whenever they want. You're putting into 331 00:16:25,080 --> 00:16:29,040 Speaker 1: long term assets you know, that are long term as 332 00:16:29,040 --> 00:16:31,920 Speaker 1: opposed to some of the private credit ufits. You get 333 00:16:32,040 --> 00:16:34,960 Speaker 1: locked up capital for a long period of time that 334 00:16:35,000 --> 00:16:36,760 Speaker 1: they can match with the assets. Do you have an 335 00:16:36,800 --> 00:16:39,640 Speaker 1: inherent mismatch in the deposits versus the assets? 336 00:16:40,080 --> 00:16:42,880 Speaker 3: Well, and we manage that. That's why we have outcome 337 00:16:42,880 --> 00:16:45,320 Speaker 3: management and the team of people, and that's managed to 338 00:16:45,440 --> 00:16:48,440 Speaker 3: maintain the balance and that sensitivity. So up one hundred 339 00:16:48,560 --> 00:16:51,040 Speaker 3: basis points we make three billion dollars more in an 340 00:16:51,040 --> 00:16:53,720 Speaker 3: I and down we make three billion less on a 341 00:16:53,760 --> 00:16:57,080 Speaker 3: base of your fifty five billion dollars a year. 342 00:16:57,120 --> 00:16:58,240 Speaker 7: So it's a little bit of movement of. 343 00:16:58,160 --> 00:17:00,400 Speaker 3: Money, but that's how you balance it, because the entire 344 00:17:00,400 --> 00:17:02,440 Speaker 3: balance sheet moves, and everybody looks at certain parts of 345 00:17:02,480 --> 00:17:03,120 Speaker 3: it in this part. 346 00:17:04,680 --> 00:17:06,760 Speaker 7: So it's it's it's the way you manage money. 347 00:17:06,800 --> 00:17:10,200 Speaker 3: So our consumer customers, I don't know, eighty five percent 348 00:17:10,200 --> 00:17:12,480 Speaker 3: of balance have been here for customers. 349 00:17:12,040 --> 00:17:12,960 Speaker 7: For ten years plus. 350 00:17:14,320 --> 00:17:16,560 Speaker 3: You know, it's it's an even on a commercial side, 351 00:17:16,600 --> 00:17:18,560 Speaker 3: same thing. All the all the balance of people been 352 00:17:18,720 --> 00:17:20,720 Speaker 3: relationships for a long period of time. These customers run 353 00:17:20,760 --> 00:17:24,320 Speaker 3: around for decades, you know, decades and decades in some cases, 354 00:17:25,359 --> 00:17:28,000 Speaker 3: and so they're very stable. It's just a matter of 355 00:17:28,040 --> 00:17:30,440 Speaker 3: the ebbs and flows of the rate environment will change 356 00:17:30,480 --> 00:17:33,600 Speaker 3: the profitability. But you say, is a business model flawed. 357 00:17:34,160 --> 00:17:36,359 Speaker 3: There's only four companies that have made more than fifteen 358 00:17:36,359 --> 00:17:39,440 Speaker 3: billion dollars in America in the last eight years in 359 00:17:39,480 --> 00:17:41,280 Speaker 3: a row. Two of them are banks, and so I 360 00:17:41,280 --> 00:17:42,639 Speaker 3: don't think the business model's flawed. 361 00:17:42,840 --> 00:17:44,159 Speaker 1: As they head of Bank of America, you have a 362 00:17:44,240 --> 00:17:48,040 Speaker 1: almost unique UH insight into the American economy. It's specifically 363 00:17:48,040 --> 00:17:51,240 Speaker 1: the consumer. I know you said that March over March, 364 00:17:51,560 --> 00:17:55,560 Speaker 1: consumer spending is up. Same time you're taking more provisions against. 365 00:17:55,359 --> 00:17:57,879 Speaker 7: Possible some losses. It's the wanting. 366 00:17:58,400 --> 00:18:00,120 Speaker 1: What does that tell you? What's around the corner? Are 367 00:18:00,160 --> 00:18:03,200 Speaker 1: you seeing the end of the the spurt and consumer spending? 368 00:18:03,840 --> 00:18:04,280 Speaker 7: So the. 369 00:18:05,800 --> 00:18:09,639 Speaker 3: Three different topics. One is consumer spending in March was 370 00:18:09,720 --> 00:18:14,080 Speaker 3: up nine percent of the last March across all different forms. 371 00:18:15,400 --> 00:18:17,600 Speaker 3: In April, that's slowed down a little bit. We'll see 372 00:18:17,640 --> 00:18:19,280 Speaker 3: how it ends up, but that's slowed down. It was 373 00:18:19,320 --> 00:18:22,320 Speaker 3: slower in January, ferry picked back up in March. That 374 00:18:22,720 --> 00:18:26,959 Speaker 3: that means the consumers still doing things. They're traveling. It's 375 00:18:26,960 --> 00:18:30,199 Speaker 3: a lot more travel out. The home experience is so 376 00:18:30,320 --> 00:18:35,440 Speaker 3: called theaters, et cetera, concert tickets, any sporting events. Everything's 377 00:18:35,480 --> 00:18:39,600 Speaker 3: going strong there. When you look at April, you're seeing 378 00:18:39,600 --> 00:18:40,359 Speaker 3: it slow down a little bit. 379 00:18:40,400 --> 00:18:41,200 Speaker 7: The debate's going to. 380 00:18:41,119 --> 00:18:43,040 Speaker 3: Be is that due to some at tax timing and stuff, 381 00:18:43,040 --> 00:18:45,000 Speaker 3: because that's changed this year we'll see a play out. 382 00:18:45,040 --> 00:18:46,960 Speaker 7: But the consumers a good shape. 383 00:18:47,000 --> 00:18:48,600 Speaker 3: They have more money in accounts than they did by 384 00:18:48,600 --> 00:18:50,560 Speaker 3: them by multiples, especially. 385 00:18:50,200 --> 00:18:51,120 Speaker 7: The lower STRATEUSY. 386 00:18:51,119 --> 00:18:53,719 Speaker 3: The ones that don't have it are the wealthiest consumers 387 00:18:53,760 --> 00:18:55,879 Speaker 3: are on platform because they put the money into the 388 00:18:56,040 --> 00:18:58,800 Speaker 3: into the first in the market, now into the in 389 00:18:58,840 --> 00:19:03,119 Speaker 3: the money funds. They have money. The credit quality, our 390 00:19:03,240 --> 00:19:09,199 Speaker 3: charge our freight this quarter was a number which is 391 00:19:09,240 --> 00:19:11,480 Speaker 3: about a third under where it was nineteen. To give 392 00:19:11,480 --> 00:19:15,040 Speaker 3: you a centense saying it, but that's a fifty three 393 00:19:15,080 --> 00:19:21,040 Speaker 3: year low in nineteen. So the credit quality is ye, unbelievable, 394 00:19:21,040 --> 00:19:24,120 Speaker 3: and so that's good news. Are we putting up provisions, Yeah, 395 00:19:24,119 --> 00:19:25,600 Speaker 3: because we keep planning on this recession. 396 00:19:25,640 --> 00:19:26,040 Speaker 7: It seems to. 397 00:19:26,040 --> 00:19:28,160 Speaker 3: Always be out there that we haven't gotten to yet. 398 00:19:29,080 --> 00:19:31,720 Speaker 3: And then the third thing is the consumers have capacity 399 00:19:31,760 --> 00:19:33,960 Speaker 3: to borrow. So the usage of our lines are credit 400 00:19:34,000 --> 00:19:36,520 Speaker 3: on the consumer side, home micro loans are down by 401 00:19:36,840 --> 00:19:39,520 Speaker 3: from thirty billion in outstandings twenty billion outs standings during 402 00:19:39,520 --> 00:19:40,080 Speaker 3: the pandemic. 403 00:19:40,080 --> 00:19:41,280 Speaker 7: And the card lines are. 404 00:19:41,200 --> 00:19:44,440 Speaker 3: Down from probably a hundred and some billion down about 405 00:19:44,480 --> 00:19:46,200 Speaker 3: ninety billion. They were down as low as seventy you 406 00:19:46,320 --> 00:19:49,200 Speaker 3: come back up. So there's plenty of barring capacity for consumers. 407 00:19:49,240 --> 00:19:50,680 Speaker 3: So that means the consumer is going to be there 408 00:19:50,680 --> 00:19:52,840 Speaker 3: and are employee, which means the job of the FED 409 00:19:53,000 --> 00:19:55,040 Speaker 3: is tougher. And that's why the f FED has to 410 00:19:55,080 --> 00:19:57,359 Speaker 3: be more resilient, because the consumer drives the US economy, 411 00:19:57,359 --> 00:19:59,119 Speaker 3: and the consumer is still in the game, and the 412 00:19:59,119 --> 00:20:02,960 Speaker 3: consumers still employed, and we're paying our colleagues and teammates 413 00:20:02,960 --> 00:20:04,879 Speaker 3: more that they're in the room, and then they have 414 00:20:04,960 --> 00:20:07,480 Speaker 3: money in accouncilor spending. And that's not true for every 415 00:20:07,520 --> 00:20:10,000 Speaker 3: single human being in America, but it's the average is true. 416 00:20:10,000 --> 00:20:13,760 Speaker 1: That That was Brian moynihan, Chair and CEO of Back 417 00:20:13,800 --> 00:20:18,160 Speaker 1: of America coming up. Could the price of getting inflation 418 00:20:18,320 --> 00:20:20,520 Speaker 1: back down to two percent be too high for the 419 00:20:20,520 --> 00:20:23,720 Speaker 1: economy to pay well? As Rick Reader of black Rock. 420 00:20:24,080 --> 00:20:26,560 Speaker 1: That's coming up next on Wall Street Week on Bloomberg. 421 00:20:29,000 --> 00:20:33,240 Speaker 9: This is Bloomberg Wall Street Week with David Weston from 422 00:20:33,359 --> 00:20:34,280 Speaker 9: Bloomberg Radio. 423 00:20:41,720 --> 00:20:44,679 Speaker 1: Interest rates, they've been all over the place from the 424 00:20:44,720 --> 00:20:48,199 Speaker 1: negative rates that ECB President Leguard was gingerly trying to 425 00:20:48,240 --> 00:20:51,280 Speaker 1: recover from less than a year ago. We are turning 426 00:20:51,280 --> 00:20:54,400 Speaker 1: our back to negative interest rates we are moving very 427 00:20:54,600 --> 00:20:59,239 Speaker 1: likely into positive territory to rates going up higher and 428 00:20:59,320 --> 00:21:03,399 Speaker 1: faster than ever before, with uncertain effects. 429 00:21:03,080 --> 00:21:07,000 Speaker 11: The interest rate tool as a means of controlling inflations 430 00:21:07,000 --> 00:21:10,120 Speaker 11: of it's like having served you with a dull knife, 431 00:21:10,280 --> 00:21:13,479 Speaker 11: because you hit the housing sector, you hit the manufacturing sector, 432 00:21:13,800 --> 00:21:15,720 Speaker 11: you hit parts of the economy that have a very 433 00:21:15,800 --> 00:21:17,920 Speaker 11: high sense to be the interest rates. 434 00:21:17,960 --> 00:21:21,159 Speaker 1: And quantitative tightening like we've never seen before. 435 00:21:21,560 --> 00:21:24,439 Speaker 12: The Fed has to meet this now with raising rates 436 00:21:24,680 --> 00:21:27,119 Speaker 12: and QT. And the new part of this isn't the 437 00:21:27,200 --> 00:21:30,920 Speaker 12: raising rates, it's the QT. We've never had QE before 438 00:21:31,040 --> 00:21:34,520 Speaker 12: like this. Therefore, we've never had QT like this. 439 00:21:35,000 --> 00:21:37,480 Speaker 1: So now the question is where things will settle down. 440 00:21:38,000 --> 00:21:40,960 Speaker 1: Will we come back to the very low pre pandemic levels, 441 00:21:41,000 --> 00:21:45,080 Speaker 1: the way the IMF predicts in its latest World Economic Outlook, or, 442 00:21:45,119 --> 00:21:48,720 Speaker 1: as Nobel Prize winning economist Michael Spence's warned, are their 443 00:21:48,840 --> 00:21:53,159 Speaker 1: long term structural factors that favor continued inflation and higher 444 00:21:53,200 --> 00:21:53,919 Speaker 1: interest rates. 445 00:21:54,160 --> 00:21:56,520 Speaker 13: There's been a fundamental sort of structural shift on the 446 00:21:56,560 --> 00:22:00,320 Speaker 13: global economy, the world in which we had very wrong 447 00:22:00,400 --> 00:22:06,119 Speaker 13: deflationary pressures from just endless supplies of tradable goods coming 448 00:22:06,160 --> 00:22:09,960 Speaker 13: from emerging economies, those days are in fading, if not over. 449 00:22:12,880 --> 00:22:14,680 Speaker 1: And when it comes to interest rates, there is one 450 00:22:14,680 --> 00:22:16,919 Speaker 1: person we want to talk to. That is Rick Reader, 451 00:22:16,960 --> 00:22:20,240 Speaker 1: a Blackrock where he is a global CIO for fixed 452 00:22:20,280 --> 00:22:23,159 Speaker 1: income as well as head of global allocation there And 453 00:22:23,200 --> 00:22:24,919 Speaker 1: on top of all that, he was just named by 454 00:22:24,960 --> 00:22:28,400 Speaker 1: morning Star the Outstanding Portfolio Manager of twenty twenty three. 455 00:22:28,440 --> 00:22:29,600 Speaker 1: Congratulations by the way on the. 456 00:22:29,520 --> 00:22:31,359 Speaker 7: Award, Ravin, thanks a lot, thanks for having me. 457 00:22:31,440 --> 00:22:32,960 Speaker 1: So there's a lot of debate about where we're headed 458 00:22:32,960 --> 00:22:34,800 Speaker 1: with interestrates in the short term, but also in the 459 00:22:34,800 --> 00:22:36,760 Speaker 1: longer term, where we're going to settle down when all 460 00:22:36,760 --> 00:22:39,879 Speaker 1: this is over whenever that is. Give us your perspective, 461 00:22:40,200 --> 00:22:42,960 Speaker 1: not just on that question, but does the FED have 462 00:22:43,040 --> 00:22:44,959 Speaker 1: the right way of thinking about the question? 463 00:22:45,400 --> 00:22:48,239 Speaker 4: Yeah, I mean it's a pretty complex question because there 464 00:22:48,240 --> 00:22:50,000 Speaker 4: are so many factors that play today. 465 00:22:50,000 --> 00:22:53,280 Speaker 7: In fact, we introduced in the last month we introduced. 466 00:22:52,800 --> 00:22:55,760 Speaker 4: Something that wasn't part of the equation, that the financial sector, 467 00:22:55,840 --> 00:22:59,800 Speaker 4: instability and the banking system. So that introduced another dynamic 468 00:22:59,800 --> 00:23:00,760 Speaker 4: to the fact which quite. 469 00:23:00,600 --> 00:23:01,880 Speaker 7: Frankly, I think has an influence. 470 00:23:02,760 --> 00:23:05,240 Speaker 4: So listen, I think the FED is right to focus 471 00:23:05,280 --> 00:23:08,200 Speaker 4: on inflation we've got the funds rate up and the 472 00:23:08,520 --> 00:23:10,400 Speaker 4: market's projecting they're going to go to five and a quarter, 473 00:23:10,440 --> 00:23:12,280 Speaker 4: which seems about right in terms where the funds rate 474 00:23:12,400 --> 00:23:13,000 Speaker 4: is going to get to. 475 00:23:13,680 --> 00:23:16,400 Speaker 7: But now you got to think about you know, you've 476 00:23:16,440 --> 00:23:18,400 Speaker 7: gone from zero. I think about where we were last year. 477 00:23:18,440 --> 00:23:20,040 Speaker 4: The funds rate was at fifty base this time last 478 00:23:20,080 --> 00:23:22,159 Speaker 4: year were at fifty base points, and we're doing one 479 00:23:22,200 --> 00:23:23,399 Speaker 4: hundred and twenty billion a QI. 480 00:23:23,640 --> 00:23:25,280 Speaker 1: So if they're trying to figure out how much damage 481 00:23:25,280 --> 00:23:27,800 Speaker 1: are we doing? How much queen we tolerate? What factors 482 00:23:27,800 --> 00:23:30,320 Speaker 1: should they looking at? What is on their dashboard? Should 483 00:23:30,320 --> 00:23:32,200 Speaker 1: be on their dashboard saying wait a second, this is 484 00:23:32,280 --> 00:23:33,600 Speaker 1: damages is too much. 485 00:23:34,000 --> 00:23:35,960 Speaker 7: So I I think people underestimate. 486 00:23:36,000 --> 00:23:38,120 Speaker 4: First of all, commercial real estate is about a ten 487 00:23:38,359 --> 00:23:42,119 Speaker 4: trillion dollar market. Residential real estate it's about four times 488 00:23:42,119 --> 00:23:43,840 Speaker 4: the size. The other stat that I don't think people 489 00:23:43,960 --> 00:23:46,880 Speaker 4: realize the banking system is critically important, but it's only 490 00:23:47,040 --> 00:23:49,719 Speaker 4: about fifteen percent of bening on how you measure it, 491 00:23:50,080 --> 00:23:52,600 Speaker 4: of the financing in the country. So you got to 492 00:23:52,640 --> 00:23:54,760 Speaker 4: think about what other things. Boy, did you hurt the 493 00:23:54,760 --> 00:23:55,600 Speaker 4: banking system? 494 00:23:55,840 --> 00:23:56,760 Speaker 7: How much capital? 495 00:23:57,040 --> 00:23:58,920 Speaker 4: When you move rates this much, you think about other 496 00:23:58,960 --> 00:24:01,920 Speaker 4: areas venture capitalist. It's part of why we've never seen 497 00:24:02,520 --> 00:24:05,400 Speaker 4: rates move this much higher. We've never seen this much 498 00:24:05,480 --> 00:24:08,439 Speaker 4: QI put in and then let's back off, and so 499 00:24:08,640 --> 00:24:12,320 Speaker 4: there are so many considerations. Modern economy is incredibly complex. 500 00:24:12,400 --> 00:24:14,120 Speaker 1: Yeah, and as I understand, you're not saying we shouldn't 501 00:24:14,119 --> 00:24:15,840 Speaker 1: pay attention to inflation at all, but there are other 502 00:24:15,880 --> 00:24:17,720 Speaker 1: factors as well. And I know you have a different 503 00:24:17,720 --> 00:24:20,720 Speaker 1: sort of analysis comparing on the one hand, unemployment with 504 00:24:20,720 --> 00:24:23,280 Speaker 1: inflation sort of a traditional way of doing as opposed 505 00:24:23,320 --> 00:24:25,800 Speaker 1: to comparing employment with real wages. 506 00:24:26,359 --> 00:24:28,280 Speaker 4: So if you go back, yes, so you know traditional 507 00:24:28,359 --> 00:24:31,399 Speaker 4: misery index, unemployment, inflation, and the FED job is how 508 00:24:31,440 --> 00:24:33,840 Speaker 4: do we improve both of those for the general well 509 00:24:33,920 --> 00:24:36,600 Speaker 4: being of the economy. However, read a unique point in time, 510 00:24:36,640 --> 00:24:39,439 Speaker 4: why is inflation higher? You had two exogenous shocks. You 511 00:24:39,480 --> 00:24:42,000 Speaker 4: had a pandemic and they had massive monetary and fiscal 512 00:24:42,040 --> 00:24:44,360 Speaker 4: stimulus come and try to try. 513 00:24:44,160 --> 00:24:44,960 Speaker 7: And solve that. 514 00:24:45,600 --> 00:24:48,560 Speaker 4: And then you had a war, a global war that 515 00:24:48,640 --> 00:24:52,239 Speaker 4: inact infected food prices, energy prices, and by the way, 516 00:24:52,280 --> 00:24:55,399 Speaker 4: we'll create a deglobalization that creates some durable inflation. So 517 00:24:55,440 --> 00:24:59,399 Speaker 4: those were pretty extreme dynamics. So now we have to, like, 518 00:24:59,440 --> 00:25:01,160 Speaker 4: how does a FED that inflation down? But it's pretty 519 00:25:01,200 --> 00:25:05,960 Speaker 4: hard to bring those big macro structural dynamics down quickly. However, 520 00:25:06,480 --> 00:25:09,479 Speaker 4: if wages for the people that are being infected by 521 00:25:09,560 --> 00:25:14,159 Speaker 4: higher shelter food energy costs are higher, maybe we can 522 00:25:14,240 --> 00:25:17,840 Speaker 4: tolerate it a bit longer. And maybe the costs of 523 00:25:17,920 --> 00:25:21,320 Speaker 4: bringing that inflation down unilaterally to a two percent goal 524 00:25:21,520 --> 00:25:25,280 Speaker 4: is too painful to create, to take two or three 525 00:25:25,280 --> 00:25:28,639 Speaker 4: million people out of work to the people are getting hurt. 526 00:25:28,520 --> 00:25:31,359 Speaker 7: By this inflation. There's a trade off today is as. 527 00:25:31,280 --> 00:25:33,080 Speaker 4: Long as wages are up, as long as we're moving 528 00:25:33,119 --> 00:25:36,760 Speaker 4: capital to labor, which is happening today and has been happening. 529 00:25:36,800 --> 00:25:37,879 Speaker 7: That's really effective. 530 00:25:37,920 --> 00:25:40,000 Speaker 4: So I just think FED needs to exhibit a bit 531 00:25:40,000 --> 00:25:42,600 Speaker 4: more patience. We don't have to hit the two percent 532 00:25:42,640 --> 00:25:43,880 Speaker 4: target next month. 533 00:25:44,280 --> 00:25:46,320 Speaker 1: So time is really important to what you just said. 534 00:25:46,440 --> 00:25:48,880 Speaker 1: How much time does the FED have with the two percent? 535 00:25:48,960 --> 00:25:51,280 Speaker 1: They've sort of put that marker down, they can't just 536 00:25:51,320 --> 00:25:53,320 Speaker 1: walk away from it, but how much time do they 537 00:25:53,359 --> 00:25:54,240 Speaker 1: have to get there? 538 00:25:54,400 --> 00:25:54,680 Speaker 10: Yeah? 539 00:25:54,760 --> 00:25:56,760 Speaker 4: I mean I FED, you know, if it gets a 540 00:25:57,320 --> 00:25:59,359 Speaker 4: there are a lot of critics and a lot of criticism, 541 00:25:59,640 --> 00:26:02,160 Speaker 4: and can we pause for a year. Can we pause 542 00:26:02,200 --> 00:26:04,560 Speaker 4: for six months? You're going to see real credit contraction. 543 00:26:04,600 --> 00:26:07,240 Speaker 4: The banking system is going to amplify that credit contraction. 544 00:26:07,720 --> 00:26:10,480 Speaker 4: You're going to see the natural forces, and you're seeing 545 00:26:10,600 --> 00:26:12,840 Speaker 4: things like trucking. You think about how pressurized that was. 546 00:26:12,880 --> 00:26:14,960 Speaker 4: I've seen some dabta about trucking be in a recession. 547 00:26:15,000 --> 00:26:15,160 Speaker 7: Now. 548 00:26:15,520 --> 00:26:19,240 Speaker 4: A lot of supply chain issues are alleviating themselves. Give 549 00:26:19,240 --> 00:26:21,320 Speaker 4: it a bit of time, and you know some of 550 00:26:21,320 --> 00:26:23,120 Speaker 4: the things like food costs that comes down. 551 00:26:23,280 --> 00:26:25,600 Speaker 1: And so let's be specific here when you say pause, 552 00:26:25,640 --> 00:26:29,760 Speaker 1: pause now before the may this issue. And by the way, 553 00:26:29,840 --> 00:26:31,160 Speaker 1: when do they start coming down again? 554 00:26:31,240 --> 00:26:32,080 Speaker 7: So I think the debate. 555 00:26:32,080 --> 00:26:33,399 Speaker 4: I think they're going to get in a room, and 556 00:26:33,440 --> 00:26:35,920 Speaker 4: I think they're different constituents on that FED committee. I 557 00:26:35,920 --> 00:26:37,240 Speaker 4: think they're going to get in a room and hash 558 00:26:37,280 --> 00:26:41,040 Speaker 4: out can we pause now? My sense is as long 559 00:26:41,040 --> 00:26:43,040 Speaker 4: as the economy is okay, as long as you don't 560 00:26:43,040 --> 00:26:45,359 Speaker 4: see more stress in the banking system. My senses they 561 00:26:45,359 --> 00:26:47,800 Speaker 4: want to do one more and then I think that 562 00:26:47,880 --> 00:26:48,720 Speaker 4: will be the compromise. 563 00:26:48,720 --> 00:26:50,040 Speaker 7: We're going to do one more and then we're going 564 00:26:50,240 --> 00:26:52,679 Speaker 7: they're gonna put it on hold. Listen. I don't the 565 00:26:52,720 --> 00:26:54,720 Speaker 7: markets are priced in that the Fed's going to ease. 566 00:26:55,280 --> 00:26:57,120 Speaker 4: It's a lot of it's come out recently, but it's 567 00:26:57,160 --> 00:26:58,919 Speaker 4: priced in they're going to start easing. It was in 568 00:26:58,960 --> 00:27:02,199 Speaker 4: the summer so and I think the Fed is going 569 00:27:02,280 --> 00:27:03,720 Speaker 4: to start easing next year. 570 00:27:04,200 --> 00:27:05,520 Speaker 7: It's possible in December. 571 00:27:05,720 --> 00:27:09,160 Speaker 1: What are the markets telling you, Rick reader about coming down? 572 00:27:09,240 --> 00:27:12,040 Speaker 1: Because there was something in the last Fed minutes I 573 00:27:12,119 --> 00:27:14,399 Speaker 1: suggested some of what we're seeing in the FED fund's 574 00:27:14,400 --> 00:27:17,560 Speaker 1: futures right now is a matter of liquidity injection because 575 00:27:17,600 --> 00:27:20,080 Speaker 1: of the financial issues with Silicon Valley Bank and the likes. 576 00:27:20,359 --> 00:27:22,160 Speaker 1: Wasn't so much about an anticipating cut. 577 00:27:22,560 --> 00:27:23,680 Speaker 7: No, you hear people all. 578 00:27:23,600 --> 00:27:26,720 Speaker 4: The time saying the markets are stupid. They think the 579 00:27:26,760 --> 00:27:28,199 Speaker 4: Fed's going to ease. Of course, the Fed's not going 580 00:27:28,240 --> 00:27:31,120 Speaker 4: to ease. Markets aren't actually not that stupid. What they're 581 00:27:31,119 --> 00:27:33,200 Speaker 4: doing is they're pricing in two things. One, the liquidity 582 00:27:33,280 --> 00:27:36,280 Speaker 4: is immense. People are piling huge amounts of money, and 583 00:27:36,320 --> 00:27:38,720 Speaker 4: we haven't seen these short term interest rates. I mean 584 00:27:38,760 --> 00:27:40,439 Speaker 4: you can buy I have been buying commercial paper it's 585 00:27:40,520 --> 00:27:43,080 Speaker 4: six percent, and so people are like, get me, I 586 00:27:43,119 --> 00:27:45,240 Speaker 4: want to lock in maybe a little longer term. 587 00:27:45,800 --> 00:27:46,800 Speaker 7: If I can lock in these. 588 00:27:46,680 --> 00:27:49,600 Speaker 4: Short term interesting there's a massive amount of liquidity that's 589 00:27:49,600 --> 00:27:53,800 Speaker 4: come in. That's one second being when when the Fed 590 00:27:53,840 --> 00:27:55,680 Speaker 4: cuts rates, people don't believe it's going to be a 591 00:27:55,680 --> 00:27:58,560 Speaker 4: wellable start easing gradually twenty five base points. If the 592 00:27:58,560 --> 00:28:01,480 Speaker 4: banking system is a problem, if you have more to 593 00:28:01,560 --> 00:28:03,720 Speaker 4: rest in the system, they're going to cut interest rates 594 00:28:03,840 --> 00:28:04,600 Speaker 4: really quickly. 595 00:28:04,840 --> 00:28:06,640 Speaker 7: You know, it's a one hundred based once at a time. 596 00:28:06,760 --> 00:28:09,280 Speaker 4: So what the markets are doing is a probability adjusted 597 00:28:10,080 --> 00:28:12,560 Speaker 4: ratio of actually, maybe they're. 598 00:28:12,320 --> 00:28:14,280 Speaker 7: Not going to cut rates gradually, maybe they cut them 599 00:28:14,280 --> 00:28:14,520 Speaker 7: a lot. 600 00:28:14,600 --> 00:28:16,720 Speaker 1: Well, if they start cutting rates because of some pressure 601 00:28:16,720 --> 00:28:19,040 Speaker 1: on the blankets, how does it work? Does that ease 602 00:28:19,040 --> 00:28:21,119 Speaker 1: some of the mark to market problems we saw, for example, 603 00:28:21,119 --> 00:28:23,479 Speaker 1: as Silicon Valley Bank, we have treasuries on their books. 604 00:28:23,680 --> 00:28:25,199 Speaker 1: They're not worth as much as they used to be. 605 00:28:25,480 --> 00:28:28,200 Speaker 4: Yeah, this was a unique I don't I'll describe it 606 00:28:28,200 --> 00:28:30,800 Speaker 4: as crisis. This is a unique period in the banking system. 607 00:28:31,359 --> 00:28:33,000 Speaker 4: And so you think about what happened. The banks were 608 00:28:33,000 --> 00:28:36,160 Speaker 4: getting hurt onto, but with quality assets, treasuries, agency mortgages 609 00:28:36,200 --> 00:28:39,760 Speaker 4: to a large extent, a commercial real estate being an issue, obviously, do. 610 00:28:39,720 --> 00:28:41,280 Speaker 1: You have an advantage over the banks. What does it 611 00:28:41,280 --> 00:28:42,360 Speaker 1: mean for the future of banking? 612 00:28:43,560 --> 00:28:46,080 Speaker 7: How much time you have this is? I mean that 613 00:28:46,280 --> 00:28:47,360 Speaker 7: that is a tricky question. 614 00:28:47,440 --> 00:28:48,640 Speaker 4: And you know, one of the things I think about 615 00:28:48,640 --> 00:28:51,080 Speaker 4: all the time is it gets a capital It's what 616 00:28:51,120 --> 00:28:51,800 Speaker 4: are your assets? 617 00:28:51,800 --> 00:28:51,840 Speaker 9: Is? 618 00:28:52,040 --> 00:28:53,160 Speaker 7: What are your asses? A liability? 619 00:28:53,200 --> 00:28:55,400 Speaker 4: Your cost? What are you getting paid on your asses? 620 00:28:55,440 --> 00:28:59,280 Speaker 4: Again paying your liability? And what's the term of each sad. 621 00:28:59,280 --> 00:29:00,840 Speaker 4: I think something's going to happen on the backside of that. 622 00:29:00,880 --> 00:29:03,280 Speaker 4: You're going to see capital raised in the banking system. 623 00:29:03,280 --> 00:29:07,520 Speaker 4: But I think regulation and efficient regulation will be how 624 00:29:07,520 --> 00:29:08,479 Speaker 4: do you manage duration? 625 00:29:08,720 --> 00:29:09,200 Speaker 7: Well? 626 00:29:09,240 --> 00:29:13,680 Speaker 1: How much downward pressure on the real economy is the 627 00:29:13,720 --> 00:29:14,760 Speaker 1: uncertainty imposing? 628 00:29:15,000 --> 00:29:17,080 Speaker 4: Yeah, so you know this is part of the reason 629 00:29:17,120 --> 00:29:19,440 Speaker 4: why I think the FED has the pause, because nobody 630 00:29:19,480 --> 00:29:23,000 Speaker 4: has the playbook for this, and nobody really knows. Listen, 631 00:29:23,040 --> 00:29:26,440 Speaker 4: I think when you stress it, you think about you 632 00:29:26,440 --> 00:29:28,479 Speaker 4: know you're going to get credit contraction. How much does 633 00:29:28,520 --> 00:29:31,760 Speaker 4: it affect GDP? You know, I've seen numbers all you know, 634 00:29:31,880 --> 00:29:34,080 Speaker 4: I'd say it's not a bad assessment to say it's 635 00:29:34,120 --> 00:29:36,880 Speaker 4: fifty basin points on GDP. Let's say you were running 636 00:29:38,240 --> 00:29:40,280 Speaker 4: real GDP, there was going to be about one percent 637 00:29:40,320 --> 00:29:40,920 Speaker 4: this year. 638 00:29:40,720 --> 00:29:42,120 Speaker 7: You're taking about half off of it. 639 00:29:42,640 --> 00:29:46,120 Speaker 4: What does it mean for investment though, is incredibly stratified. 640 00:29:46,720 --> 00:29:48,920 Speaker 4: There are cyclical parts of the economy and non cyclic 641 00:29:48,920 --> 00:29:50,800 Speaker 4: parts parts of the economy. They're interest sensitive parts of 642 00:29:50,840 --> 00:29:53,440 Speaker 4: the economy, non interestensive. You know, today a lot of 643 00:29:53,480 --> 00:29:56,120 Speaker 4: the equity investments were making things like defense. 644 00:29:55,800 --> 00:30:00,680 Speaker 7: Healthcare, parts of technology, not that interest rate sensitive. I'd 645 00:30:00,840 --> 00:30:01,960 Speaker 7: rather stay there for a while. 646 00:30:02,000 --> 00:30:04,680 Speaker 4: See how the cyclicals play out, See how what is 647 00:30:04,720 --> 00:30:07,520 Speaker 4: censitative sensitive the interest rate plays out, and so it 648 00:30:07,600 --> 00:30:09,840 Speaker 4: changes the investment paradigm. The other one that changes the 649 00:30:09,840 --> 00:30:12,920 Speaker 4: investment paradigm is you can buy short term interest rates. 650 00:30:13,400 --> 00:30:15,000 Speaker 4: It's like you can sit in you know, people say, 651 00:30:15,040 --> 00:30:16,840 Speaker 4: you know, what are you doing right? Your cash? My 652 00:30:16,960 --> 00:30:19,520 Speaker 4: cash is my best friend today. I mean, because I'm garnering, 653 00:30:19,520 --> 00:30:21,720 Speaker 4: I'll talk about commercially. Were at six percent five and 654 00:30:21,720 --> 00:30:24,120 Speaker 4: a half to six for three months, six month, nine 655 00:30:24,120 --> 00:30:27,280 Speaker 4: month paper. It changes how you build a portfolio today 656 00:30:27,320 --> 00:30:27,880 Speaker 4: in a big way. 657 00:30:28,480 --> 00:30:30,080 Speaker 1: Rick, thank you so much for being back on walls. 658 00:30:30,360 --> 00:30:30,760 Speaker 7: Great area. 659 00:30:30,800 --> 00:30:35,000 Speaker 1: That's Rick reader of black Rock coming up. When the 660 00:30:35,040 --> 00:30:38,200 Speaker 1: best of intentions may not lead to the best of results. 661 00:30:41,000 --> 00:30:51,040 Speaker 1: That's the next down on Wall Street Week on Bloomberg. Finally, 662 00:30:51,240 --> 00:30:54,720 Speaker 1: one more thought. The law of unintended consequences when we 663 00:30:54,720 --> 00:30:56,520 Speaker 1: set out to do one thing and it leads to 664 00:30:56,560 --> 00:31:00,680 Speaker 1: an outcome we never anticipated. American sociologist Robert Merton first 665 00:31:00,760 --> 00:31:03,200 Speaker 1: laid it out in a paperback in nineteen thirty six, 666 00:31:03,480 --> 00:31:06,600 Speaker 1: though it's been kicking around since sixteen ninety two, when 667 00:31:06,680 --> 00:31:09,720 Speaker 1: John Locke wrote about how a law restricting interest rates 668 00:31:09,840 --> 00:31:13,400 Speaker 1: might well have the unintended consequence of hurting borrowers by 669 00:31:13,440 --> 00:31:17,800 Speaker 1: discouraging lending. These days, consequences we didn't intend are everywhere 670 00:31:17,800 --> 00:31:20,720 Speaker 1: we look. Take the FED who tried to get inflation 671 00:31:20,800 --> 00:31:23,280 Speaker 1: back under control by raising interest rates and managed to 672 00:31:23,360 --> 00:31:27,040 Speaker 1: sideswipe a Silicon Valley bank and tech startups in the process. 673 00:31:27,520 --> 00:31:30,360 Speaker 8: What's most predictable is that they're going to come down, 674 00:31:30,840 --> 00:31:34,120 Speaker 8: except we can never seem to predict what seems to 675 00:31:34,120 --> 00:31:35,080 Speaker 8: be most predictable. 676 00:31:35,280 --> 00:31:38,560 Speaker 1: Not to mention rich New Yorkers getting interest only mortgages 677 00:31:38,600 --> 00:31:40,760 Speaker 1: for their Hampton's estates. 678 00:31:40,480 --> 00:31:43,840 Speaker 5: They were tons of loans to wealthy clientele that were 679 00:31:43,840 --> 00:31:45,560 Speaker 5: interest only mortgage payments. 680 00:31:45,800 --> 00:31:48,920 Speaker 1: Or the Walt Disney Company thinking it was standing up 681 00:31:48,920 --> 00:31:52,240 Speaker 1: for LGBTQ plus members of the community by taking a 682 00:31:52,240 --> 00:31:55,880 Speaker 1: position against proposed Florida legislation, only to wind up with 683 00:31:56,000 --> 00:31:59,480 Speaker 1: the governor threatening to build a prison next to Disney World. 684 00:32:00,080 --> 00:32:04,240 Speaker 14: People have said, you know, maybe have another maybe create 685 00:32:04,240 --> 00:32:08,280 Speaker 14: a state park, maybe try to do more amusement parts. 686 00:32:08,800 --> 00:32:11,719 Speaker 14: Someone even said like, maybe you need another state prison. 687 00:32:11,760 --> 00:32:12,280 Speaker 7: Who knows. 688 00:32:12,360 --> 00:32:16,200 Speaker 14: I mean, I just think that the possibilities are endless. 689 00:32:16,520 --> 00:32:19,200 Speaker 1: Netflix had the best of intentions to create a mega 690 00:32:19,280 --> 00:32:22,360 Speaker 1: hit with Love Is Blind, a franchise built with the 691 00:32:22,360 --> 00:32:26,160 Speaker 1: premise of getting people who'd never seen each other get engaged, 692 00:32:26,640 --> 00:32:29,440 Speaker 1: only have a crash and burn its own network. 693 00:32:29,760 --> 00:32:31,560 Speaker 7: A huge disaster for Netflix. 694 00:32:31,600 --> 00:32:33,840 Speaker 2: I mean, they've you know, made a big deal about 695 00:32:33,840 --> 00:32:35,440 Speaker 2: We're going to do more live events. 696 00:32:35,480 --> 00:32:37,080 Speaker 7: This is not a great start. 697 00:32:36,720 --> 00:32:39,960 Speaker 1: And maybe the most ironic of them all Major League Baseball, 698 00:32:40,120 --> 00:32:42,560 Speaker 1: and we already talked about that new pitch clock they 699 00:32:42,680 --> 00:32:44,680 Speaker 1: rolled out when spring training began. 700 00:32:45,280 --> 00:32:46,880 Speaker 15: Essentially all events in the game are going to have 701 00:32:46,920 --> 00:32:49,920 Speaker 15: a clock on them, and batters and pitchers are going 702 00:32:49,960 --> 00:32:52,840 Speaker 15: to have to comply with those requirements. Deliver pitches on time, 703 00:32:52,920 --> 00:32:54,640 Speaker 15: get in the box on time, things like that, which 704 00:32:54,680 --> 00:32:56,440 Speaker 15: we you know, think and hope is going to create 705 00:32:56,480 --> 00:32:58,480 Speaker 15: a better pace of play, cut out some dead time, 706 00:32:59,000 --> 00:33:01,240 Speaker 15: and really like highlight bring forward like the best parts 707 00:33:01,240 --> 00:33:03,640 Speaker 15: of our game. Which is right, guy's playing the actual game, 708 00:33:03,680 --> 00:33:05,360 Speaker 15: not just standing around fixing their bating lobes. 709 00:33:05,520 --> 00:33:07,720 Speaker 1: But now it turns out that it has been so 710 00:33:07,760 --> 00:33:10,920 Speaker 1: successful that fans don't have time to go get a beer, 711 00:33:11,680 --> 00:33:14,920 Speaker 1: leading four teams to extend beer sales into the eighth inning. 712 00:33:15,320 --> 00:33:18,840 Speaker 1: Philly's pitcher Matt Strom, is concerned about the fans. 713 00:33:19,280 --> 00:33:22,640 Speaker 2: So now, with a faster paced game and me just 714 00:33:22,680 --> 00:33:25,480 Speaker 2: being a man of common sense, if the game is 715 00:33:25,520 --> 00:33:28,920 Speaker 2: going to finish quicker, what would we not move the 716 00:33:28,920 --> 00:33:31,400 Speaker 2: beer sales back to the sixth inning to give our 717 00:33:31,440 --> 00:33:33,280 Speaker 2: fans time sober, open trifle. 718 00:33:33,160 --> 00:33:36,680 Speaker 1: Talk about unintended consequences. That does it for this episode 719 00:33:36,720 --> 00:33:39,080 Speaker 1: of Wall Street Week. I'm David Weston. This is Bloomberg. 720 00:33:39,280 --> 00:33:40,040 Speaker 1: See you next week.