1 00:00:00,240 --> 00:00:05,000 Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes, 2 00:00:05,040 --> 00:00:07,400 Speaker 1: The economy is in the process of rebounding. Will the 3 00:00:07,400 --> 00:00:10,479 Speaker 1: Federal Reserve have its own digital currency? The financial stories 4 00:00:10,520 --> 00:00:12,879 Speaker 1: that cheap hard work. Many people think the eels are 5 00:00:12,880 --> 00:00:15,080 Speaker 1: just going to keep marching up. We have more spending 6 00:00:15,120 --> 00:00:17,160 Speaker 1: coming out of Congress. One of the big questions I 7 00:00:17,200 --> 00:00:19,880 Speaker 1: think on investor's minds inflation through the eyes of the 8 00:00:19,880 --> 00:00:23,560 Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary 9 00:00:23,640 --> 00:00:27,240 Speaker 1: Bryan Wenthan a backup America, Will Smart CEO Charlie Sharp, 10 00:00:27,360 --> 00:00:31,560 Speaker 1: Bloomberg wool Street Week with David Weston from Bloomberg Radio 11 00:00:31,800 --> 00:00:35,080 Speaker 1: coming to terms with the pandemic that just won't quit, 12 00:00:35,479 --> 00:00:38,839 Speaker 1: and with a Russian threat to Ukraine. This is Bloomberg 13 00:00:38,880 --> 00:00:42,519 Speaker 1: Wall Street Week. I'm David Weston. The week began with 14 00:00:42,600 --> 00:00:46,560 Speaker 1: President Biden confronting Russian President Putin over Russia's military build 15 00:00:46,600 --> 00:00:50,360 Speaker 1: up along Ukraine's borders, with National Security Advisor Jake Sullivan 16 00:00:50,560 --> 00:00:53,280 Speaker 1: reporting the US made it clear that it would take 17 00:00:53,320 --> 00:00:57,880 Speaker 1: action in response to any invasion. Told President Putin directly 18 00:00:57,880 --> 00:01:00,640 Speaker 1: that if Russia further invade Ukraine, the United States and 19 00:01:00,680 --> 00:01:04,720 Speaker 1: our European allies would respond to strong economic measures, but 20 00:01:04,840 --> 00:01:09,000 Speaker 1: as important as geopolitics are, the continued fight over COVID 21 00:01:09,120 --> 00:01:13,160 Speaker 1: remains the number one thing we all confront with Spikes 22 00:01:13,160 --> 00:01:16,400 Speaker 1: and cases and fears of O Macron leading to shutdowns, 23 00:01:16,600 --> 00:01:19,720 Speaker 1: as British Prime Minister Boris Johnson said his country was 24 00:01:19,800 --> 00:01:23,839 Speaker 1: urging people to stay home from Monday. You should work 25 00:01:23,840 --> 00:01:27,160 Speaker 1: from him if you can, But there was also hope, 26 00:01:27,560 --> 00:01:31,280 Speaker 1: hope that vaccinations and boosters would offer us a better 27 00:01:31,319 --> 00:01:34,920 Speaker 1: alternative to shutting down and staying home, and Johnson and 28 00:01:35,000 --> 00:01:38,600 Speaker 1: Johnson CEO Alex Gorski expressed confidence that science will help 29 00:01:38,720 --> 00:01:42,360 Speaker 1: us get past the crisis in the new year. Obviously 30 00:01:42,360 --> 00:01:45,479 Speaker 1: we're navigating our way through the pandemic uh and there's 31 00:01:45,520 --> 00:01:47,640 Speaker 1: likely to be twists and turns and ups and downs. 32 00:01:48,080 --> 00:01:53,000 Speaker 1: That being said, I'm optimistic and in the end, despite 33 00:01:53,040 --> 00:01:56,320 Speaker 1: some high inflation numbers, the markets decided to choose hope 34 00:01:56,360 --> 00:01:59,160 Speaker 1: over anxiety this week, giving equities their best rally in 35 00:01:59,240 --> 00:02:02,600 Speaker 1: ten months and take the sp all time high, getting 36 00:02:02,600 --> 00:02:05,160 Speaker 1: over three point eight percent on the week, with an 37 00:02:05,160 --> 00:02:08,440 Speaker 1: etact just behind posting three point six percent gains, while 38 00:02:08,480 --> 00:02:10,880 Speaker 1: the yield curves steepen just a little bit, leaving the 39 00:02:10,919 --> 00:02:14,320 Speaker 1: ten year yields still below one. To explain what she 40 00:02:14,440 --> 00:02:17,680 Speaker 1: makes all this, we welcome now our contributor Asani Beschelas. 41 00:02:17,720 --> 00:02:20,440 Speaker 1: She's the founder and CEO of Rock Creek, So Asani, 42 00:02:20,639 --> 00:02:23,000 Speaker 1: we really need your advice here. What's going on the 43 00:02:23,000 --> 00:02:25,040 Speaker 1: market is really on the tear this week by and 44 00:02:25,120 --> 00:02:27,040 Speaker 1: large after last week, sort of selling up a bit, 45 00:02:27,280 --> 00:02:32,840 Speaker 1: despite the inflation, despite the despite the virus. Why David, 46 00:02:32,960 --> 00:02:35,840 Speaker 1: great to be on with you today, and it's again 47 00:02:35,880 --> 00:02:39,000 Speaker 1: about COVID. Right, COVID news were really bad when we 48 00:02:39,080 --> 00:02:43,200 Speaker 1: heard about omicron and COVID news this week as people 49 00:02:43,320 --> 00:02:46,240 Speaker 1: got more data on omicron and not that it's not 50 00:02:46,280 --> 00:02:50,040 Speaker 1: a problem, but seems to be milder, seems to be spreading, 51 00:02:50,120 --> 00:02:53,680 Speaker 1: but not uh, you know, not as scary as some 52 00:02:53,840 --> 00:02:57,320 Speaker 1: variants could have been. I think has calmed the market 53 00:02:57,639 --> 00:02:59,920 Speaker 1: so as people are sort of moving on where there's 54 00:03:00,000 --> 00:03:04,360 Speaker 1: more clarity on the FED position on both taper and 55 00:03:04,400 --> 00:03:08,160 Speaker 1: probably interest rate increases. But of course we have the 56 00:03:08,200 --> 00:03:11,880 Speaker 1: inflation scared at the same time coming up well, and 57 00:03:11,919 --> 00:03:14,040 Speaker 1: there was the question how sure are we about the Fed? 58 00:03:14,160 --> 00:03:16,440 Speaker 1: I mean, j Pow has made it clear they're going 59 00:03:16,480 --> 00:03:18,799 Speaker 1: to advance. It appears in the next meeting coming up, 60 00:03:19,360 --> 00:03:21,800 Speaker 1: the tapering of the bond buying. But some people are 61 00:03:21,800 --> 00:03:23,799 Speaker 1: saying he's going to go faster than even he thinks, 62 00:03:23,880 --> 00:03:26,080 Speaker 1: and they may end up at a higher point. What 63 00:03:26,120 --> 00:03:28,480 Speaker 1: do you think? And can he do that without really 64 00:03:28,560 --> 00:03:31,000 Speaker 1: rocking the boat so much that it hurts the economy. 65 00:03:31,560 --> 00:03:35,640 Speaker 1: I agree that tapering will start sooner and go faster 66 00:03:35,960 --> 00:03:40,080 Speaker 1: than was his original plan, and um and I think 67 00:03:40,440 --> 00:03:45,800 Speaker 1: that it is overdue. But the important thing is that 68 00:03:45,840 --> 00:03:48,800 Speaker 1: the Fed has really had got two jobs right. It's 69 00:03:48,840 --> 00:03:53,080 Speaker 1: inflation and employment. And on the employment side there is 70 00:03:53,120 --> 00:03:56,720 Speaker 1: sort of a new twist that both you may remember 71 00:03:56,880 --> 00:04:00,720 Speaker 1: Treasury Secretary Janet Yellen has been emphasizing it, so has 72 00:04:01,080 --> 00:04:05,840 Speaker 1: um FED chair power, which is equitable employment and more 73 00:04:05,880 --> 00:04:10,560 Speaker 1: equity in growth. And I think that is where, you know, 74 00:04:10,680 --> 00:04:14,400 Speaker 1: it may lead to slightly different actions, which might mean 75 00:04:14,640 --> 00:04:18,160 Speaker 1: that while inflation you know, is what about six point 76 00:04:18,240 --> 00:04:21,200 Speaker 1: eight percent, it might go up too close to seven 77 00:04:21,279 --> 00:04:24,640 Speaker 1: percent and peak around seven percent. But my view is 78 00:04:24,680 --> 00:04:27,000 Speaker 1: that it will come down to about half of that 79 00:04:27,680 --> 00:04:29,840 Speaker 1: um you know, towards the end of next year, as 80 00:04:29,839 --> 00:04:33,720 Speaker 1: the supply chains go away, but also as some hopefully 81 00:04:33,760 --> 00:04:37,400 Speaker 1: some of the build back better UM actual actions get 82 00:04:37,440 --> 00:04:40,480 Speaker 1: implemented and we start having some of the supply chain 83 00:04:40,839 --> 00:04:44,920 Speaker 1: issues get resolved a little faster. I've signed you at 84 00:04:45,000 --> 00:04:47,320 Speaker 1: Rock Creek are an investor rather than a trader, so 85 00:04:47,360 --> 00:04:50,040 Speaker 1: you look over the longer term. You're not in another market, 86 00:04:50,080 --> 00:04:52,240 Speaker 1: as I understand it. Constantly. At the same time, some 87 00:04:52,279 --> 00:04:55,240 Speaker 1: people are saying that we should get used to higher inflation, 88 00:04:55,360 --> 00:04:58,120 Speaker 1: not six point eight percent, but signalically higher than we 89 00:04:58,160 --> 00:05:00,600 Speaker 1: have on trend. If it's true, if we're set for 90 00:05:00,760 --> 00:05:04,320 Speaker 1: three percent or even four percent, lurry summers, and what 91 00:05:04,400 --> 00:05:07,120 Speaker 1: does that do to investor? How has that changed your portfolio? 92 00:05:08,360 --> 00:05:12,240 Speaker 1: So two things. One is depends on how this inflation 93 00:05:12,279 --> 00:05:14,960 Speaker 1: gets translated. For example, a lot of people say, you know, 94 00:05:15,000 --> 00:05:17,359 Speaker 1: wages are going up and that's a bad thing, but 95 00:05:17,520 --> 00:05:20,560 Speaker 1: really in economics one on one depends on exactly where 96 00:05:20,560 --> 00:05:22,800 Speaker 1: the wage growth is happening. If the wage growth is 97 00:05:22,800 --> 00:05:27,279 Speaker 1: happening at the lowest income levels, and that is actually 98 00:05:27,520 --> 00:05:31,640 Speaker 1: the case, um, but don't forget those income Those wages 99 00:05:31,680 --> 00:05:36,440 Speaker 1: are so very low that you know, increase is very 100 00:05:36,480 --> 00:05:39,120 Speaker 1: little on a on a very small base, right, So 101 00:05:39,240 --> 00:05:42,040 Speaker 1: if you have higher growth on wages. What you're going 102 00:05:42,040 --> 00:05:46,479 Speaker 1: to have is potentially more ability to buy goods by 103 00:05:46,520 --> 00:05:49,480 Speaker 1: that group, which has a higher consumption rate than higher 104 00:05:49,560 --> 00:05:54,080 Speaker 1: income goods and UH and higher growth in the longer run. Now, 105 00:05:54,440 --> 00:05:57,359 Speaker 1: the other side of this is as I think some 106 00:05:57,480 --> 00:06:00,440 Speaker 1: of these very short short I would call it short term, 107 00:06:00,520 --> 00:06:03,080 Speaker 1: not just supply chain, you know, but the fact that 108 00:06:03,160 --> 00:06:06,440 Speaker 1: people were reading about inflation got them to buying more. 109 00:06:06,880 --> 00:06:10,360 Speaker 1: The fact that we have some issues with specific issues 110 00:06:10,440 --> 00:06:14,200 Speaker 1: because of COVID that happened with for example, not you know, 111 00:06:14,240 --> 00:06:18,960 Speaker 1: car companies selling their fleets or not investing last year. 112 00:06:19,200 --> 00:06:22,599 Speaker 1: We're seeing that impact this year as they invest next year, 113 00:06:22,880 --> 00:06:25,560 Speaker 1: we're not going to have those same pictures. So you know, 114 00:06:25,720 --> 00:06:30,039 Speaker 1: we might be closer to my my assumption is closer 115 00:06:30,120 --> 00:06:32,719 Speaker 1: to three or three and a half percent, but that 116 00:06:32,800 --> 00:06:35,800 Speaker 1: will go down over time, so not so concerned about that. 117 00:06:36,120 --> 00:06:37,719 Speaker 1: Thank you. So it's always a pleasure to have you 118 00:06:37,800 --> 00:06:40,400 Speaker 1: with us. As Sonny Bachelors, she is the founder and 119 00:06:40,480 --> 00:06:44,120 Speaker 1: the CEO of Rock Creek. Coming up, we get a 120 00:06:44,120 --> 00:06:46,480 Speaker 1: preview of what to expect in the new year from 121 00:06:46,520 --> 00:06:50,479 Speaker 1: the Chairman and CEO of Bank America, Bryan moynihan. That's 122 00:06:50,520 --> 00:07:01,880 Speaker 1: next on Water with on Bloomberg. This is Bloomberg Wall 123 00:07:01,920 --> 00:07:05,880 Speaker 1: Street Week with David Weston from Bloomberg Radio. This is 124 00:07:05,880 --> 00:07:09,560 Speaker 1: Wall Stree Week. I'm David Weston. Two twenty one has 125 00:07:09,560 --> 00:07:13,440 Speaker 1: been another wild year with a continued fight against the pandemic, 126 00:07:13,760 --> 00:07:19,000 Speaker 1: continued fiscal and monetary stimulus, and growing inflation concerns buffeting investors. 127 00:07:19,360 --> 00:07:21,160 Speaker 1: But as we come to the end of the year, 128 00:07:21,400 --> 00:07:24,040 Speaker 1: we asked Brian moynihan at Back of America to take 129 00:07:24,080 --> 00:07:28,679 Speaker 1: a look at what he sees ahead in twenty two. So, Brian, 130 00:07:28,720 --> 00:07:30,200 Speaker 1: it's coming to the end of the year, let's look 131 00:07:30,240 --> 00:07:32,960 Speaker 1: forward to two thousand twenty two and what you could anticipate. 132 00:07:33,080 --> 00:07:35,400 Speaker 1: First of all, let me ask you how uncertain is it? 133 00:07:35,480 --> 00:07:37,640 Speaker 1: Because right now we're looking at the various banks and 134 00:07:37,640 --> 00:07:40,160 Speaker 1: the projections, for example on SMP five where it ends up, 135 00:07:40,280 --> 00:07:42,040 Speaker 1: it's a wider range we've seen a long time. It 136 00:07:43,040 --> 00:07:45,560 Speaker 1: does that indicate there's less certainty about where we're headed 137 00:07:45,560 --> 00:07:49,000 Speaker 1: in two. I think if you look at the economic projections, 138 00:07:49,000 --> 00:07:52,200 Speaker 1: they're close or bunched. Those have to do with multiple 139 00:07:52,680 --> 00:07:55,240 Speaker 1: evaluations coming in some of the you know, you've seen 140 00:07:55,240 --> 00:07:56,760 Speaker 1: the I p O S trade down, and I think 141 00:07:56,800 --> 00:07:58,760 Speaker 1: people are starting to say, Okay, this just can't keep 142 00:07:58,760 --> 00:08:01,000 Speaker 1: going in one direction. So you're seeing start to people 143 00:08:01,000 --> 00:08:03,640 Speaker 1: start to disperse. I think around this question of where 144 00:08:03,680 --> 00:08:06,440 Speaker 1: they think the market evaluation is and whether the earnings 145 00:08:06,480 --> 00:08:08,720 Speaker 1: growth can sustain. And if you earning growth slows down, 146 00:08:08,800 --> 00:08:11,520 Speaker 1: theoretically market evaluation how to slow down, first by just 147 00:08:11,720 --> 00:08:14,480 Speaker 1: math and then by multiple contractions. So I think I 148 00:08:14,480 --> 00:08:16,440 Speaker 1: think that's more of the thing. But if you look 149 00:08:16,440 --> 00:08:19,640 Speaker 1: at the economy side, you know, we're at four two 150 00:08:19,680 --> 00:08:21,560 Speaker 1: percent for next year and two point two for the 151 00:08:21,800 --> 00:08:25,120 Speaker 1: year after, and I think you know that's you know, 152 00:08:25,160 --> 00:08:28,040 Speaker 1: that's a slowdown from this year. But the roalities sort 153 00:08:28,040 --> 00:08:29,840 Speaker 1: of has to slow down. I mean, in in in 154 00:08:29,880 --> 00:08:32,400 Speaker 1: the federal raised rates to make sure it does because 155 00:08:32,440 --> 00:08:35,000 Speaker 1: inflation and other things. So I think we we feel 156 00:08:35,040 --> 00:08:37,800 Speaker 1: very strongly what we see in our customer base is 157 00:08:37,800 --> 00:08:41,240 Speaker 1: is consistent with four plus growth. What we see on 158 00:08:41,280 --> 00:08:43,320 Speaker 1: the commercial side and consumer side. Now, the risk of 159 00:08:43,320 --> 00:08:45,200 Speaker 1: that is still this pandemic. And so the other thing 160 00:08:45,240 --> 00:08:47,240 Speaker 1: you see this dispersion when you have a you know, 161 00:08:47,280 --> 00:08:50,400 Speaker 1: this new variant surface and people you see people taking 162 00:08:50,400 --> 00:08:52,440 Speaker 1: different actions around the world, and we'll shut down and 163 00:08:52,440 --> 00:08:54,960 Speaker 1: will not people start to make decisions based on that 164 00:08:55,160 --> 00:08:58,040 Speaker 1: and in terms of their valuations and points. And the 165 00:08:58,040 --> 00:09:02,520 Speaker 1: good news is between because the great health care systems 166 00:09:02,520 --> 00:09:05,360 Speaker 1: we have and great science we have. You know, the 167 00:09:05,440 --> 00:09:08,080 Speaker 1: vaccines out there, it's effective. It may have to be 168 00:09:08,320 --> 00:09:10,600 Speaker 1: changed and play with, but you're seeing the impact less 169 00:09:10,600 --> 00:09:12,880 Speaker 1: so far. Alcome what and we'll see what happens. But 170 00:09:12,880 --> 00:09:15,560 Speaker 1: that's a big uncertainty that that Trump's every other thing 171 00:09:15,600 --> 00:09:18,640 Speaker 1: you're talking about. You're not an epidemiologist, as far as 172 00:09:18,640 --> 00:09:21,000 Speaker 1: I know, I'm not, Goodness knows. But you talk to 173 00:09:21,040 --> 00:09:22,880 Speaker 1: a lot of experts. You have people you touch to 174 00:09:22,920 --> 00:09:25,200 Speaker 1: all the time. Your best guest, do you think by 175 00:09:25,240 --> 00:09:28,080 Speaker 1: the end of two we will have this largely behind 176 00:09:28,200 --> 00:09:30,240 Speaker 1: its the pandemic, Not to say it's all gone, but 177 00:09:30,280 --> 00:09:31,559 Speaker 1: we won't have to deal with the day in and 178 00:09:31,640 --> 00:09:33,319 Speaker 1: day out, you know. I think the risk is the 179 00:09:33,600 --> 00:09:36,320 Speaker 1: variant that the vaccines really don't work against. And and 180 00:09:36,440 --> 00:09:40,800 Speaker 1: so if you unwind the decision path by the people 181 00:09:40,840 --> 00:09:43,280 Speaker 1: in charge of government and making rules, it's gonna be 182 00:09:43,679 --> 00:09:45,600 Speaker 1: if my I c U s are overwhelmed, if my 183 00:09:45,640 --> 00:09:49,079 Speaker 1: hospitals are overwhelmed, I have to slow down activity to 184 00:09:49,160 --> 00:09:51,520 Speaker 1: keep people away from each other, you know, to avoid 185 00:09:51,559 --> 00:09:53,360 Speaker 1: that outcome because you can't have people dying in the hall. 186 00:09:53,400 --> 00:09:55,720 Speaker 1: That's just not fair. And so remember back in the 187 00:09:55,760 --> 00:09:58,360 Speaker 1: early pandemic, the field hospitals were being built. We need 188 00:09:58,360 --> 00:10:00,320 Speaker 1: thirty thousand ventilators. We didn't use them, all of it. 189 00:10:00,600 --> 00:10:02,320 Speaker 1: And but the good news as the treatments in the 190 00:10:02,360 --> 00:10:05,120 Speaker 1: monoclona and advising pills and all those things. So I'm 191 00:10:05,120 --> 00:10:08,520 Speaker 1: not I can't make the uh, the medical prediction, but 192 00:10:08,559 --> 00:10:11,640 Speaker 1: our experts say this, we are. We've come from that 193 00:10:11,640 --> 00:10:13,400 Speaker 1: where it was just immediately had to get people away 194 00:10:13,480 --> 00:10:18,360 Speaker 1: with all these tools, the treatment, vaccines, understanding disease better, 195 00:10:18,360 --> 00:10:20,240 Speaker 1: the speed at which it can be adapted to to 196 00:10:20,360 --> 00:10:22,800 Speaker 1: where you know, so the waggle around and outcomes faster. Right, 197 00:10:22,880 --> 00:10:25,360 Speaker 1: So if you look the market, there's a chart the 198 00:10:25,440 --> 00:10:26,920 Speaker 1: other day you saw, you know, it took this long 199 00:10:27,000 --> 00:10:28,880 Speaker 1: for the market to recover the first time, and it's 200 00:10:28,920 --> 00:10:30,559 Speaker 1: gone any edge time and new variants come up, and 201 00:10:30,559 --> 00:10:32,240 Speaker 1: that's because of confidence that you can get behind it. 202 00:10:32,480 --> 00:10:34,520 Speaker 1: I think that means you're in an you know, the 203 00:10:34,600 --> 00:10:38,120 Speaker 1: endemic type of situation as opposed to the pandemic, which 204 00:10:38,120 --> 00:10:40,040 Speaker 1: means we're gonna be living with this and there's gonna 205 00:10:40,040 --> 00:10:41,880 Speaker 1: be ebbs and flows, and I think that's what people 206 00:10:41,880 --> 00:10:43,640 Speaker 1: are for seeing. Twenty two is about now take a 207 00:10:43,679 --> 00:10:45,720 Speaker 1: wool a wat to get used to that fact, you know, 208 00:10:45,840 --> 00:10:47,720 Speaker 1: and and and and that will be interesting to see 209 00:10:47,760 --> 00:10:50,320 Speaker 1: how society adopts. But you know, with with what's going 210 00:10:50,320 --> 00:10:51,959 Speaker 1: on in other countries, you see in them start to 211 00:10:52,000 --> 00:10:55,679 Speaker 1: adjust because there's one fundamental differences. The vaccine levels are 212 00:10:55,720 --> 00:10:57,360 Speaker 1: just not there they are in the United States. So 213 00:10:57,440 --> 00:11:00,400 Speaker 1: the judgment by a person here given this aime set 214 00:11:00,440 --> 00:11:02,800 Speaker 1: of facts could be different based on that fact alone. 215 00:11:03,280 --> 00:11:05,480 Speaker 1: Putting aside the pandemic, and recognize that's a big thing 216 00:11:05,520 --> 00:11:07,040 Speaker 1: to put aside, but put takeing that out of the 217 00:11:07,080 --> 00:11:09,400 Speaker 1: careation for a second. When you take a look at 218 00:11:09,400 --> 00:11:14,040 Speaker 1: the markets, typically valuations were based on corporate earnings and 219 00:11:14,080 --> 00:11:16,240 Speaker 1: that should be a function of growth. You say, growth 220 00:11:16,240 --> 00:11:18,000 Speaker 1: looks pretty solid. Maybe it won't be as high as 221 00:11:18,040 --> 00:11:20,240 Speaker 1: it was this year, but pretty solid. But there's another 222 00:11:20,240 --> 00:11:23,480 Speaker 1: factor which is also margins and profitability. How concerned are 223 00:11:23,480 --> 00:11:28,320 Speaker 1: you going about inflation and their ability to erode corporate margins. 224 00:11:28,360 --> 00:11:30,199 Speaker 1: So at the end of the consumer they have more 225 00:11:30,200 --> 00:11:32,640 Speaker 1: money to spend their all their employed and wages are 226 00:11:32,640 --> 00:11:35,920 Speaker 1: growing fast. They ability to absorb price increases, you know, 227 00:11:36,120 --> 00:11:38,400 Speaker 1: is there now people don't like to give them price increases, 228 00:11:38,440 --> 00:11:42,160 Speaker 1: and that's white companies have different strategies and different pricing schemes. 229 00:11:42,160 --> 00:11:44,600 Speaker 1: But the reality is is you'd be more afraid if 230 00:11:44,720 --> 00:11:47,760 Speaker 1: if the I'm not sure if the pressure came through 231 00:11:47,760 --> 00:11:50,520 Speaker 1: on the supply side without the consumers and the condition 232 00:11:50,559 --> 00:11:53,200 Speaker 1: they're in, I'd be more afraid of that question. And 233 00:11:53,280 --> 00:11:55,520 Speaker 1: right now, if companies tell us they're able to pass 234 00:11:55,559 --> 00:11:57,680 Speaker 1: through price, either be two B or B two. See 235 00:11:57,679 --> 00:12:00,319 Speaker 1: in other words, that um and and shortages. I mean 236 00:12:00,360 --> 00:12:04,079 Speaker 1: people buy no matter what. So restaurant pricing, hotel pricing, 237 00:12:04,800 --> 00:12:07,800 Speaker 1: trip pricing, you know, people run special and stuff. It's 238 00:12:07,840 --> 00:12:10,319 Speaker 1: all elevated and and that will come through. So I 239 00:12:10,320 --> 00:12:11,840 Speaker 1: think you have to start with the consumer being in 240 00:12:11,840 --> 00:12:16,560 Speaker 1: great shape, having money employed in wages rising and frankly 241 00:12:17,200 --> 00:12:20,440 Speaker 1: freed up to do more. And that's then you back 242 00:12:20,480 --> 00:12:22,120 Speaker 1: into that. Think about all the cars that didn't get 243 00:12:22,120 --> 00:12:23,960 Speaker 1: sold because the chip short At some point, the chips 244 00:12:23,960 --> 00:12:25,960 Speaker 1: are there, and those you know that sixteen million down 245 00:12:26,000 --> 00:12:28,800 Speaker 1: to twelve or thirteen million rate moves back up, and 246 00:12:28,840 --> 00:12:31,640 Speaker 1: so I think there's that's just that housing. You know, 247 00:12:31,640 --> 00:12:33,720 Speaker 1: people are still buying homes. There's a shortage of homes, 248 00:12:33,720 --> 00:12:36,000 Speaker 1: therefore wible demand. They're you've got to get prices back 249 00:12:36,040 --> 00:12:38,400 Speaker 1: in control. Frankly there, But so I think, yeah, I 250 00:12:38,400 --> 00:12:40,640 Speaker 1: think I'd be more afraid of the margin question for 251 00:12:40,679 --> 00:12:42,199 Speaker 1: companies if you didn't have these you know, in the 252 00:12:42,280 --> 00:12:44,440 Speaker 1: end of the day, it's a consumer drives the economy 253 00:12:44,520 --> 00:12:46,800 Speaker 1: two thirds of the activity or whatever the right words are, 254 00:12:47,280 --> 00:12:48,800 Speaker 1: if they didn't have the money spent and they do. 255 00:12:49,400 --> 00:12:52,560 Speaker 1: It looks right now for what the FED share has 256 00:12:52,600 --> 00:12:55,120 Speaker 1: said that we're looking at two is being a pivot 257 00:12:55,160 --> 00:12:59,400 Speaker 1: year with respect to monetary support for the economy. How 258 00:12:59,440 --> 00:13:02,520 Speaker 1: concerned are you about the rapidity with which they tighten 259 00:13:02,559 --> 00:13:06,400 Speaker 1: them might supply because theoretically we could do some damage. Yeah, 260 00:13:06,720 --> 00:13:09,360 Speaker 1: well they have to they have to slow down. You 261 00:13:09,360 --> 00:13:11,640 Speaker 1: don't raise rates and expect the economy not to change 262 00:13:13,440 --> 00:13:16,520 Speaker 1: outcome when you have inflation. And so that's the economics 263 00:13:16,520 --> 00:13:18,520 Speaker 1: one I want about the thing. But let's let's back 264 00:13:18,600 --> 00:13:22,319 Speaker 1: up to this this FED you have saying general people 265 00:13:22,559 --> 00:13:27,000 Speaker 1: two thousand nineteen economy, economy, excize today excise it could 266 00:13:27,000 --> 00:13:30,040 Speaker 1: be bigger probably this quarter. Unemployment three point six or 267 00:13:30,120 --> 00:13:32,360 Speaker 1: four point two already. At the year end, we'll see 268 00:13:32,360 --> 00:13:34,559 Speaker 1: where we are. But my guess is closer to that number. 269 00:13:35,040 --> 00:13:38,439 Speaker 1: The consumer, all that fiscal stimulus went on, and so 270 00:13:38,800 --> 00:13:41,280 Speaker 1: you think about all that, and you're saying, wait a second. 271 00:13:41,440 --> 00:13:43,880 Speaker 1: You know the voages have grown dramatically since then, and 272 00:13:43,920 --> 00:13:46,000 Speaker 1: I expect to grow faster rate. I think they have 273 00:13:46,040 --> 00:13:47,680 Speaker 1: to bring the rates up. The pace will always be 274 00:13:47,720 --> 00:13:50,199 Speaker 1: based on their view, but I think what's more, it's 275 00:13:50,200 --> 00:13:51,840 Speaker 1: going to be more on people's minds. Goes back to 276 00:13:51,880 --> 00:13:54,160 Speaker 1: the question the pathway of the virus. We have we 277 00:13:54,200 --> 00:13:55,839 Speaker 1: won the war, or if we won most of the 278 00:13:55,840 --> 00:13:57,400 Speaker 1: war and the war still out in front of us. 279 00:13:57,440 --> 00:13:59,640 Speaker 1: And I hope and pray that the first is true. 280 00:13:59,679 --> 00:14:01,680 Speaker 1: But I think that will affect their pace more than 281 00:14:01,760 --> 00:14:03,840 Speaker 1: anything else, because they're always trying to make the judgment, 282 00:14:04,000 --> 00:14:05,839 Speaker 1: because they're making the judgment based on the facts, and 283 00:14:06,120 --> 00:14:08,000 Speaker 1: it actually has impact in the future. But I think 284 00:14:08,040 --> 00:14:12,760 Speaker 1: from a maths you know, the employment, full employment, stable pricing, 285 00:14:12,920 --> 00:14:16,440 Speaker 1: you could move rates up and relatively quickly. I think 286 00:14:16,400 --> 00:14:18,160 Speaker 1: the US be slow because I think no matter what 287 00:14:18,200 --> 00:14:20,200 Speaker 1: we think we know, we'll know other things about this 288 00:14:20,280 --> 00:14:22,200 Speaker 1: virus every day, week, month, and I think that will 289 00:14:22,280 --> 00:14:24,200 Speaker 1: keep changing their ebbs and flows, but they're gonna be 290 00:14:24,240 --> 00:14:26,360 Speaker 1: careful not to get ahead of it. But on the 291 00:14:26,360 --> 00:14:28,600 Speaker 1: other hand, they have to resolute to get it, get 292 00:14:28,600 --> 00:14:30,720 Speaker 1: the rate structure back. In the rate structure almost two 293 00:14:30,720 --> 00:14:34,080 Speaker 1: percent fed funds and two percent tenure to you're saying, so, 294 00:14:34,160 --> 00:14:37,760 Speaker 1: what's different, Same size economy, same unemployment, more money in 295 00:14:37,760 --> 00:14:40,840 Speaker 1: people's accounts, more spending, more final demand. At some point, 296 00:14:41,160 --> 00:14:45,320 Speaker 1: you've got to bring the structure back. Thanks to Brian moynihan, 297 00:14:45,440 --> 00:14:48,520 Speaker 1: Chairman and CEO of Bank of America. Coming up, we 298 00:14:48,560 --> 00:14:52,520 Speaker 1: convene our roundtable together in the studio with contributors Larry 299 00:14:52,520 --> 00:14:55,400 Speaker 1: Summers of Harvard and Steve Rattner of Will of Advisers. 300 00:14:55,760 --> 00:15:02,840 Speaker 1: That's next on Wall Street Week on Bloomberg. This is 301 00:15:02,880 --> 00:15:07,240 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 302 00:15:11,680 --> 00:15:14,200 Speaker 1: This is Walton. I'm David Weston. I am delighted to 303 00:15:14,240 --> 00:15:16,480 Speaker 1: say that for the first time in nearly two years, 304 00:15:16,480 --> 00:15:19,600 Speaker 1: we are back around our real roundtable in New York 305 00:15:19,640 --> 00:15:22,280 Speaker 1: with our contributor Larry Summers of Harvard and also our 306 00:15:22,280 --> 00:15:25,320 Speaker 1: contrautor Steve Radner of Will Advisers and they're responsible for 307 00:15:25,400 --> 00:15:28,720 Speaker 1: investing the personal and philanthropic assets of Michael R. Bloomberg, 308 00:15:28,880 --> 00:15:31,880 Speaker 1: our founder and majority shareholders. So Larry, let's start with you. 309 00:15:32,040 --> 00:15:35,160 Speaker 1: On Friday, we got CPI numbers. As predicted, they came 310 00:15:35,200 --> 00:15:38,280 Speaker 1: in hot headline number six. You've been talking about this 311 00:15:38,320 --> 00:15:40,240 Speaker 1: for some time. What are we learning about inflation that 312 00:15:40,280 --> 00:15:43,480 Speaker 1: we didn't know before? We're having it confirmed that it's 313 00:15:43,480 --> 00:15:47,840 Speaker 1: not transitory. And I think everybody recognizes now with the 314 00:15:47,880 --> 00:15:51,680 Speaker 1: statements from Chairman Powell, with the statements from Secretary Yellen, 315 00:15:52,200 --> 00:15:54,920 Speaker 1: that this isn't going to just go away of its 316 00:15:55,000 --> 00:15:58,280 Speaker 1: own accord, that the Fed is going to have to 317 00:15:58,320 --> 00:16:04,560 Speaker 1: take substantial action to control inflation unless there's some kind 318 00:16:04,600 --> 00:16:08,880 Speaker 1: of other adverse development of crack and markets or something 319 00:16:08,920 --> 00:16:13,240 Speaker 1: of that kind. But we put in motion for the 320 00:16:13,280 --> 00:16:18,320 Speaker 1: first time in forty years, excessive inflation caused by overheating 321 00:16:18,320 --> 00:16:20,880 Speaker 1: of the economy, and that's going to have to be 322 00:16:21,320 --> 00:16:24,120 Speaker 1: worked out of the system. And that's probably not going 323 00:16:24,160 --> 00:16:26,120 Speaker 1: to be such an easy thing. Well, I'll tell about 324 00:16:26,160 --> 00:16:28,040 Speaker 1: that how easy it is, Steve, do you agree with 325 00:16:28,080 --> 00:16:30,600 Speaker 1: that analysis, and if so, what are the prospects that 326 00:16:30,640 --> 00:16:32,960 Speaker 1: in fact the FED can slow this thing out down 327 00:16:33,000 --> 00:16:36,520 Speaker 1: without really causing some damage the economy. Well, I completely 328 00:16:36,560 --> 00:16:38,960 Speaker 1: grew with Larry, and I think you have to recognize 329 00:16:39,000 --> 00:16:41,520 Speaker 1: it's a problem that was not created in two months, 330 00:16:41,560 --> 00:16:44,520 Speaker 1: as a problem creator over the last two years, and 331 00:16:44,560 --> 00:16:46,920 Speaker 1: so it's going to take multiple years, certainly to work 332 00:16:46,960 --> 00:16:49,920 Speaker 1: it out. I know, I want to predict that we're 333 00:16:49,920 --> 00:16:51,880 Speaker 1: going back to where we were in the late seventies. 334 00:16:51,920 --> 00:16:53,920 Speaker 1: But I was sitting in the washingbur the New York 335 00:16:53,960 --> 00:16:56,680 Speaker 1: Times when Paul Vulkan announced his new inflation policy, and 336 00:16:56,720 --> 00:16:59,240 Speaker 1: I watched all that happen, and it took multiple, multiple 337 00:16:59,320 --> 00:17:01,520 Speaker 1: years and a terrible a recession to get it out 338 00:17:01,520 --> 00:17:03,960 Speaker 1: of the system. So it is gonna be painful, and 339 00:17:04,000 --> 00:17:05,919 Speaker 1: it's going to be painful for growth. It's gonna be 340 00:17:05,920 --> 00:17:08,560 Speaker 1: painful for jobs. And we do have an election coming 341 00:17:08,600 --> 00:17:12,760 Speaker 1: next year, which is going to be complicated. Hilarious. Listen 342 00:17:12,800 --> 00:17:15,360 Speaker 1: to the White House. They admit there's inflation, Uh, they 343 00:17:15,400 --> 00:17:17,840 Speaker 1: still say maybe transitory. And one of thing they point 344 00:17:17,840 --> 00:17:20,879 Speaker 1: to is gas prices. They said, that's really artificially spiked 345 00:17:20,880 --> 00:17:22,719 Speaker 1: it up, that's leveling off. Maybe we don't have as 346 00:17:22,720 --> 00:17:25,480 Speaker 1: bigger problem. What about the difference between headline and so 347 00:17:25,600 --> 00:17:30,040 Speaker 1: called core Look there's surely our transitory elements and inflation, 348 00:17:30,400 --> 00:17:33,880 Speaker 1: no question about it. But here's the thing, David. If 349 00:17:33,920 --> 00:17:36,679 Speaker 1: you look at annual rates, if you take this month's 350 00:17:36,760 --> 00:17:40,240 Speaker 1: number and you annualize it, it's ten. So a lot 351 00:17:40,240 --> 00:17:43,439 Speaker 1: of that is, no doubt transitory. But to say that 352 00:17:43,480 --> 00:17:46,399 Speaker 1: a lot of it is transitory is not to say 353 00:17:46,520 --> 00:17:49,399 Speaker 1: that it's going to get anywhere near price stability on 354 00:17:49,480 --> 00:17:52,879 Speaker 1: its own. And there's another point, which is we always 355 00:17:52,880 --> 00:17:58,080 Speaker 1: talk about the things that are high and might be transitory. 356 00:17:58,200 --> 00:18:03,000 Speaker 1: House prices on every index, rental prices on every index 357 00:18:03,040 --> 00:18:06,720 Speaker 1: except the CPI or up over the last year. The 358 00:18:06,800 --> 00:18:09,639 Speaker 1: vast majority of that is not yet in the c 359 00:18:09,840 --> 00:18:13,879 Speaker 1: p I, so it's probably coming. Every business person I 360 00:18:14,000 --> 00:18:17,280 Speaker 1: talked to says the same thing. They say, we're gonna 361 00:18:17,280 --> 00:18:20,480 Speaker 1: have much higher labor costs going forward to retain our people. 362 00:18:21,040 --> 00:18:25,239 Speaker 1: We're gonna have higher input costs, and it's kind of 363 00:18:25,240 --> 00:18:28,720 Speaker 1: okay because we're gonna be able to pass it on. Well, 364 00:18:28,720 --> 00:18:31,760 Speaker 1: that's an environment where there are pressures in many places 365 00:18:31,800 --> 00:18:36,359 Speaker 1: for rising prices, not for uh, falling prices. You know, 366 00:18:36,440 --> 00:18:38,760 Speaker 1: one of the sectors that's been very benign over the 367 00:18:38,840 --> 00:18:42,879 Speaker 1: last time last while is medical services. But as you 368 00:18:42,960 --> 00:18:46,760 Speaker 1: see all the nurses who are quitting, there's gonna be 369 00:18:46,800 --> 00:18:49,639 Speaker 1: pressure there. As you see all the backlogs of elective 370 00:18:49,640 --> 00:18:52,960 Speaker 1: procedures from the last year or two, they're gonna be 371 00:18:53,000 --> 00:18:58,359 Speaker 1: back lugs. Uh there. So I think we're going to 372 00:18:59,160 --> 00:19:04,199 Speaker 1: in trend um inflation way above two, perhaps in the 373 00:19:04,200 --> 00:19:09,760 Speaker 1: four percent or even higher range, unless something happens to 374 00:19:10,000 --> 00:19:15,040 Speaker 1: break the current mood, to break uh the current trend, 375 00:19:15,600 --> 00:19:19,840 Speaker 1: And I don't think it's gonna be three rate increases 376 00:19:20,320 --> 00:19:26,280 Speaker 1: or two rate increases uh next year. I mean, remember this, crucially, 377 00:19:27,280 --> 00:19:32,359 Speaker 1: monetary policy today is far looser than it was a 378 00:19:32,440 --> 00:19:36,960 Speaker 1: year ago. Looser is measured by real interest rates. Looser 379 00:19:37,040 --> 00:19:41,239 Speaker 1: is measured by financial conditions. Looser is measured by the 380 00:19:41,320 --> 00:19:46,400 Speaker 1: size of the Federal Reserves balance sheet. So we've got 381 00:19:46,760 --> 00:19:52,040 Speaker 1: looser monetary policy even as job vacancies are way up, 382 00:19:52,800 --> 00:19:57,240 Speaker 1: and even as inflation is way up as well. So 383 00:19:57,280 --> 00:20:00,520 Speaker 1: Steve Larry says we should be having hykes. He's been 384 00:20:00,520 --> 00:20:02,200 Speaker 1: talking about this for the better part of a year now. 385 00:20:02,760 --> 00:20:04,720 Speaker 1: Uh do you think we should have more than three 386 00:20:04,760 --> 00:20:07,280 Speaker 1: rate hikes next week, next month, next year? Well, I 387 00:20:07,280 --> 00:20:09,959 Speaker 1: don't know yet. We have you know, obviously, as Janet 388 00:20:09,960 --> 00:20:11,920 Speaker 1: Young used to say, you know, the FETE is data 389 00:20:12,000 --> 00:20:13,959 Speaker 1: driven and you take each each month or quarter at 390 00:20:13,960 --> 00:20:16,520 Speaker 1: a time. But I agree with I agree with pretty 391 00:20:16,600 --> 00:20:18,520 Speaker 1: much everything everything Larry said, But I would just make 392 00:20:18,560 --> 00:20:20,960 Speaker 1: this point, Like we talked about oil having leveled off, 393 00:20:21,400 --> 00:20:23,440 Speaker 1: there's no guarantee that oil is going to stay where 394 00:20:23,440 --> 00:20:27,080 Speaker 1: it is. You know, it's not a function of some 395 00:20:27,160 --> 00:20:29,960 Speaker 1: specific supply disruption of something that's can be easily corrected. 396 00:20:30,280 --> 00:20:33,000 Speaker 1: It's largely a function of global demand. And global demand 397 00:20:33,040 --> 00:20:35,600 Speaker 1: isn't going down at the moment. And so I think 398 00:20:35,600 --> 00:20:37,600 Speaker 1: there is a lot of not just in Core, I 399 00:20:37,640 --> 00:20:39,639 Speaker 1: think there's a lot of inflation that is really stuck 400 00:20:39,640 --> 00:20:42,399 Speaker 1: in the economy. And yeah, I think I think Larry's right. 401 00:20:42,400 --> 00:20:44,480 Speaker 1: If the FETE is really serious about getting back to 402 00:20:44,560 --> 00:20:46,919 Speaker 1: an average of two, it is going to take a 403 00:20:46,920 --> 00:20:49,760 Speaker 1: lot more than three rate hikes over some period of time. Okay, 404 00:20:49,760 --> 00:20:51,879 Speaker 1: so that was terrific, great start here. We're gonna come 405 00:20:51,880 --> 00:20:54,800 Speaker 1: back with Larry Summers and Steve Redder just short time 406 00:20:54,840 --> 00:20:57,600 Speaker 1: from now to address the really pressing problem of COVID 407 00:20:57,680 --> 00:21:01,280 Speaker 1: nineteen and now homocron. And this is Wall Street Week 408 00:21:01,520 --> 00:21:08,960 Speaker 1: on Bloomberg. This is Bloomberg Wall Street Week with David 409 00:21:08,960 --> 00:21:15,879 Speaker 1: Weston from Bloomberg Radio. This is Wall Street Week. I'm 410 00:21:15,920 --> 00:21:18,439 Speaker 1: David western We were back with our Real roundtable in 411 00:21:18,480 --> 00:21:21,280 Speaker 1: New York with Larry Summers of Harvard and Steve Runner 412 00:21:21,400 --> 00:21:23,800 Speaker 1: of Willard Advisers. So Steve, let me turn to you 413 00:21:24,240 --> 00:21:27,439 Speaker 1: as an investor on behalf of Mike Bloomberg. One of 414 00:21:27,440 --> 00:21:29,520 Speaker 1: the big stories, not just the week this week, but 415 00:21:29,600 --> 00:21:32,000 Speaker 1: this year is the COVID villars. Now we have the 416 00:21:32,000 --> 00:21:35,760 Speaker 1: omo cron variant. None of us, I dare say, are epidemiologists. 417 00:21:36,040 --> 00:21:37,680 Speaker 1: We can't know what's going on. And by the way, 418 00:21:37,680 --> 00:21:39,160 Speaker 1: even if we were, I don't know that we could 419 00:21:39,160 --> 00:21:41,520 Speaker 1: predict what's happening with virus. But as an investor, what 420 00:21:41,560 --> 00:21:43,560 Speaker 1: do you do about that? Because it could well affect 421 00:21:43,560 --> 00:21:46,960 Speaker 1: your investments? Of course it has has affected our investments, 422 00:21:46,960 --> 00:21:49,840 Speaker 1: and I would say in several decades of investing, I've 423 00:21:49,840 --> 00:21:51,960 Speaker 1: never been in a position where I had to analyze 424 00:21:52,000 --> 00:21:55,200 Speaker 1: things like this that went way beyond the normal parameters 425 00:21:55,280 --> 00:21:57,159 Speaker 1: you look at as an investor. And so it has 426 00:21:57,200 --> 00:22:00,240 Speaker 1: introduced the level of altility into the markets is level. 427 00:22:00,320 --> 00:22:02,880 Speaker 1: It's introduced level of inefficiency in the markets. You see 428 00:22:02,880 --> 00:22:06,159 Speaker 1: stocks reacting in strange ways and uh and and not 429 00:22:06,280 --> 00:22:08,800 Speaker 1: anticipating events the way the market is usually good at. 430 00:22:09,400 --> 00:22:13,239 Speaker 1: And so it has made life very very complicated an economistillary. 431 00:22:13,320 --> 00:22:15,040 Speaker 1: One of the things that may well affect is the 432 00:22:15,040 --> 00:22:17,240 Speaker 1: supply chain problem that you just mentioned in the the last segment. 433 00:22:18,280 --> 00:22:21,760 Speaker 1: I think one of the big questions about any time 434 00:22:21,800 --> 00:22:24,240 Speaker 1: we're talking pandemic is the way I like to say 435 00:22:24,280 --> 00:22:27,240 Speaker 1: it is, how does it affect the number of bartenders 436 00:22:27,720 --> 00:22:30,840 Speaker 1: relative to the number of our customers? Because the thing 437 00:22:30,880 --> 00:22:34,160 Speaker 1: about the pandemic is that it affects both demand and supply, 438 00:22:34,760 --> 00:22:36,639 Speaker 1: and so you know it's gonna be bad for the 439 00:22:36,720 --> 00:22:39,080 Speaker 1: level of output because there's gonna be less demand and 440 00:22:39,160 --> 00:22:42,199 Speaker 1: less supply. But with less demand and less supply, you 441 00:22:42,240 --> 00:22:45,080 Speaker 1: don't know what it's going to mean for prices. And 442 00:22:45,119 --> 00:22:47,440 Speaker 1: that's one of the puzzles in a lot of the discussion. 443 00:22:47,880 --> 00:22:52,080 Speaker 1: Everybody said a year ago, that a year and a 444 00:22:52,119 --> 00:22:56,399 Speaker 1: half ago, that we needed all kinds of stimulus because 445 00:22:57,000 --> 00:23:01,760 Speaker 1: um of the pandemic coming. Now there are many people 446 00:23:01,800 --> 00:23:05,320 Speaker 1: who say the FED doesn't need to tighten because the 447 00:23:05,359 --> 00:23:08,920 Speaker 1: pandemic is gonna end and people are gonna come back 448 00:23:08,960 --> 00:23:13,040 Speaker 1: to work. Those can't both be are unlikely to both 449 00:23:13,400 --> 00:23:18,120 Speaker 1: UH be proper logical UH propositions. I think O Macron 450 00:23:18,240 --> 00:23:24,439 Speaker 1: does introduce substantial uncertainty UH into the future, and probably 451 00:23:24,440 --> 00:23:28,920 Speaker 1: even more for emerging markets than for the United States 452 00:23:29,280 --> 00:23:35,040 Speaker 1: and UH and Europe. It does certainly put an extra 453 00:23:35,240 --> 00:23:40,200 Speaker 1: range of uncertainty. And I also think that we shouldn't 454 00:23:40,200 --> 00:23:44,000 Speaker 1: be so callous as to analyze it entirely through the 455 00:23:44,080 --> 00:23:48,160 Speaker 1: prism of markets or the prism of GDP statistics. Even 456 00:23:48,200 --> 00:23:50,600 Speaker 1: if we don't. Even if it doesn't have any effect 457 00:23:50,640 --> 00:23:53,640 Speaker 1: on mobility and lock up policies and people are still 458 00:23:53,680 --> 00:24:00,280 Speaker 1: flying UH planes, a much more pervasive virus is going 459 00:24:00,320 --> 00:24:03,360 Speaker 1: to have a set of human consequences well. As fair point. 460 00:24:03,400 --> 00:24:05,160 Speaker 1: I know you'd agree with that, Steve first and Foremo 461 00:24:05,200 --> 00:24:07,679 Speaker 1: it's a matter of personal health and safety. But it 462 00:24:07,720 --> 00:24:10,880 Speaker 1: does affect investments and does affect money as a practic matter. 463 00:24:10,960 --> 00:24:13,080 Speaker 1: You have investments around the world, not just in the 464 00:24:13,119 --> 00:24:16,320 Speaker 1: United States. Are you seeing a divergence among the markets 465 00:24:16,359 --> 00:24:18,800 Speaker 1: according to actually the COVID, I mean right now we 466 00:24:18,840 --> 00:24:21,560 Speaker 1: see very different approaches. I mean China really locks down 467 00:24:21,560 --> 00:24:24,399 Speaker 1: pretty quickly to try to protect themselves. You're parts of 468 00:24:24,400 --> 00:24:26,119 Speaker 1: it now. Are starting to really shut things down. Do 469 00:24:26,119 --> 00:24:30,240 Speaker 1: you see divergence an investment based on that? Not? Not really. 470 00:24:30,240 --> 00:24:32,639 Speaker 1: You know, they are pursuing different strategies, but I'm not 471 00:24:32,680 --> 00:24:37,280 Speaker 1: sure whether the COVID strategies are uh the biggest driver 472 00:24:37,560 --> 00:24:40,359 Speaker 1: of economic differences. I mean, for example, China, there's an 473 00:24:40,480 --> 00:24:43,080 Speaker 1: enormous amount going on in China President Gy. I mean, 474 00:24:43,119 --> 00:24:44,960 Speaker 1: we don't have time to talk about it today, but 475 00:24:45,040 --> 00:24:48,280 Speaker 1: he's fundamentally changing the nature of China's approach to the 476 00:24:48,280 --> 00:24:50,880 Speaker 1: market economy. That is far more important than the fact 477 00:24:50,920 --> 00:24:53,119 Speaker 1: that China has its own approach to COVID versus how 478 00:24:53,119 --> 00:24:55,960 Speaker 1: England approaches it, or how Austrian approaches or this or that. 479 00:24:56,880 --> 00:24:59,719 Speaker 1: So so, Larry, what about that the approach of shutting 480 00:24:59,760 --> 00:25:03,399 Speaker 1: down as opposed to vaccinating, two very different courses, have 481 00:25:03,560 --> 00:25:08,080 Speaker 1: different economic effects. Yeah, they do, certainly while you're locking down. 482 00:25:08,600 --> 00:25:11,560 Speaker 1: I think what I have been struck by in general 483 00:25:12,520 --> 00:25:16,000 Speaker 1: is that the policies seem to have more effect on 484 00:25:16,080 --> 00:25:18,919 Speaker 1: the timing of the disease then they do on the 485 00:25:19,000 --> 00:25:21,600 Speaker 1: overall level of the disease. That if you lock up, 486 00:25:22,160 --> 00:25:27,320 Speaker 1: then you reduce the disease substantially for a while, but 487 00:25:27,560 --> 00:25:29,800 Speaker 1: you have to unlock at some point and then you 488 00:25:29,880 --> 00:25:32,479 Speaker 1: get most of the cases that you avoid it. If 489 00:25:32,520 --> 00:25:35,320 Speaker 1: you look at the different countries within Europe, there are 490 00:25:35,320 --> 00:25:39,080 Speaker 1: a lot of different strategies, but less difference in result. 491 00:25:39,600 --> 00:25:42,040 Speaker 1: Part of what I think has to be a concern. 492 00:25:42,080 --> 00:25:44,080 Speaker 1: You know, when people talk about China, they always talk 493 00:25:44,119 --> 00:25:48,480 Speaker 1: about every grand and that is certainly a very big concern. 494 00:25:49,080 --> 00:25:54,960 Speaker 1: But China, which has had nothing much happened that has 495 00:25:55,080 --> 00:25:59,760 Speaker 1: increased its immunity levels, uh virtually none of the disease 496 00:26:00,480 --> 00:26:03,719 Speaker 1: vaccines that appear to not be nearly as strong as 497 00:26:03,760 --> 00:26:07,320 Speaker 1: the ones we've used. How they're gonna work their way 498 00:26:07,400 --> 00:26:12,240 Speaker 1: out of they're totally locked up situation, I think is 499 00:26:12,280 --> 00:26:16,800 Speaker 1: a very big challenge. And the longer they stay locked up, 500 00:26:17,359 --> 00:26:20,280 Speaker 1: the bigger that challenge is going to be. They're gonna 501 00:26:20,280 --> 00:26:22,560 Speaker 1: have Olympics which are opening up, and Steve Well, they're 502 00:26:22,560 --> 00:26:24,080 Speaker 1: not gonna open up for the Olympics. They're gonna do 503 00:26:24,119 --> 00:26:26,720 Speaker 1: the Olympics in a bubble. And look what I've heard 504 00:26:26,720 --> 00:26:29,920 Speaker 1: about China and their vaccination strategy. Nobody knows, of course, 505 00:26:30,200 --> 00:26:34,080 Speaker 1: the speculation among people who know something is that between 506 00:26:34,119 --> 00:26:35,680 Speaker 1: now and a year from now and the next Party 507 00:26:35,720 --> 00:26:38,120 Speaker 1: Congress occurs, they will figure out how to vaccinate people 508 00:26:38,160 --> 00:26:40,680 Speaker 1: with vaccines that actually work, and they will then start 509 00:26:40,720 --> 00:26:43,240 Speaker 1: to open up. Is that right I have? I have 510 00:26:43,320 --> 00:26:45,280 Speaker 1: no idea, but let me just say two other quick things. One, 511 00:26:45,760 --> 00:26:48,520 Speaker 1: I do think we're learning to live economically with the virus. 512 00:26:48,680 --> 00:26:51,400 Speaker 1: I send some of my colleagues among people I deal with, 513 00:26:51,760 --> 00:26:53,919 Speaker 1: so far, no one is flustered that much by Oh 514 00:26:53,960 --> 00:26:55,800 Speaker 1: my cron. We're still in the office, people are still 515 00:26:55,840 --> 00:26:57,720 Speaker 1: having meetings and so on, and it's something we're gonna 516 00:26:57,720 --> 00:27:00,119 Speaker 1: have to live with, like hijackings on airplanes, and us 517 00:27:00,160 --> 00:27:02,320 Speaker 1: have another way to approach it. The second quick thing 518 00:27:02,320 --> 00:27:04,720 Speaker 1: I'd say is, I don't believe that the reason people 519 00:27:04,720 --> 00:27:07,280 Speaker 1: are not working now is because of the virus generally 520 00:27:07,320 --> 00:27:10,240 Speaker 1: obvious exceptions. I think the reason they're working right now, frankly, 521 00:27:10,280 --> 00:27:12,040 Speaker 1: as many of the don't have to. They have strong 522 00:27:12,080 --> 00:27:13,560 Speaker 1: balance sheets, they don't want to go back to an 523 00:27:13,560 --> 00:27:15,920 Speaker 1: Amazon warehouse. I don't want to go to an Amazon warehouse, 524 00:27:16,240 --> 00:27:18,280 Speaker 1: and so they're taking their time and figuring out what 525 00:27:18,320 --> 00:27:20,040 Speaker 1: they want to do. And there are eleven million jobs 526 00:27:20,040 --> 00:27:21,879 Speaker 1: open out there, and they know they can get one 527 00:27:21,920 --> 00:27:23,840 Speaker 1: whenever they want. On a really important point, let's wrap 528 00:27:23,880 --> 00:27:25,960 Speaker 1: this up now looking forward in two if we could, 529 00:27:26,000 --> 00:27:27,879 Speaker 1: let me start with you, as you look forward to 530 00:27:27,920 --> 00:27:30,320 Speaker 1: the new year, what do you think the biggest downside 531 00:27:30,400 --> 00:27:33,800 Speaker 1: risk is that we face. I think the three risks 532 00:27:35,560 --> 00:27:42,720 Speaker 1: inflation and over extended markets are the three biggest risks 533 00:27:42,760 --> 00:27:45,359 Speaker 1: we face, and I'm not sure in what I'm not 534 00:27:45,400 --> 00:27:48,000 Speaker 1: sure in what order. And I would also say the 535 00:27:48,000 --> 00:27:52,920 Speaker 1: geopolitics of China, Russia and Iran, all of which your 536 00:27:52,960 --> 00:27:56,800 Speaker 1: potential sources of crisis in the next year, is an 537 00:27:56,840 --> 00:28:00,960 Speaker 1: additional concern. Give us one minute on sing and you 538 00:28:01,080 --> 00:28:03,959 Speaker 1: identified omicron is a big risk. Are we testing enough 539 00:28:04,000 --> 00:28:08,200 Speaker 1: in this country? No? We we we're fixing it now, 540 00:28:08,760 --> 00:28:14,439 Speaker 1: but we're a year late too pervasive cheap tests that 541 00:28:14,520 --> 00:28:16,680 Speaker 1: you can give to guests to your home and get 542 00:28:16,680 --> 00:28:19,960 Speaker 1: a result in fifteen minutes. And the faster we move 543 00:28:20,040 --> 00:28:22,159 Speaker 1: on that, and the stronger we move on that, and 544 00:28:22,160 --> 00:28:24,919 Speaker 1: the more universally we move on that, the better it 545 00:28:24,920 --> 00:28:28,120 Speaker 1: will be. So, Steve, same question, you looking at two 546 00:28:28,160 --> 00:28:30,919 Speaker 1: biggest risk. I agree with Larry's through three risks, but 547 00:28:31,000 --> 00:28:33,119 Speaker 1: I think the first one and the third one are linked. 548 00:28:33,240 --> 00:28:34,920 Speaker 1: And I think when you get to the question why 549 00:28:35,040 --> 00:28:39,000 Speaker 1: the markets so so frothy. I think my own personal 550 00:28:39,080 --> 00:28:41,400 Speaker 1: view is that the vast majority majority of the reason 551 00:28:41,520 --> 00:28:45,000 Speaker 1: is the FED. That when you take interest rates to zero, 552 00:28:45,080 --> 00:28:46,760 Speaker 1: you know, it's tina, what we call tina, there is 553 00:28:46,760 --> 00:28:49,240 Speaker 1: no alternative, and people come into the markets. And what 554 00:28:49,320 --> 00:28:51,320 Speaker 1: you see happening right now is that every time this 555 00:28:51,480 --> 00:28:53,960 Speaker 1: talk of interest rates going up, the stocks that get 556 00:28:54,160 --> 00:28:57,040 Speaker 1: hardest are the growth stocks because their cash flows are 557 00:28:57,040 --> 00:28:58,560 Speaker 1: so far out in the future that when you put 558 00:28:58,560 --> 00:29:01,640 Speaker 1: a discount rate on it, values go down as interest 559 00:29:01,760 --> 00:29:04,240 Speaker 1: rates go up. And so I think the market is 560 00:29:04,280 --> 00:29:07,840 Speaker 1: not really responding to uh international strategic issues it might 561 00:29:07,840 --> 00:29:11,120 Speaker 1: if they became more severe. I think the markets responding 562 00:29:11,240 --> 00:29:13,560 Speaker 1: almost entirely the interest rates. And if the FED starts 563 00:29:13,600 --> 00:29:15,800 Speaker 1: down this path, I think it is going to be 564 00:29:16,040 --> 00:29:18,000 Speaker 1: a tough ride for the market. Well that's my question, 565 00:29:18,040 --> 00:29:20,040 Speaker 1: because it started on the path. We've had it pretty 566 00:29:20,080 --> 00:29:22,120 Speaker 1: clearly from J. Powell. They're going to start down the path. 567 00:29:22,200 --> 00:29:24,520 Speaker 1: Question of how fast and how far so? Do you 568 00:29:24,560 --> 00:29:26,320 Speaker 1: think would you feel better if there was a bit 569 00:29:26,360 --> 00:29:29,800 Speaker 1: more of a taper tantrum. I'm not asking for a 570 00:29:29,800 --> 00:29:31,880 Speaker 1: taper tantrum. And obviously part of why I think the 571 00:29:31,920 --> 00:29:33,840 Speaker 1: FED has moved so slowly is to avoid a taper 572 00:29:33,840 --> 00:29:37,960 Speaker 1: taper tantrum. I think they've successfully mitigated the effects of 573 00:29:37,960 --> 00:29:40,760 Speaker 1: stopping the asset purchases the twenty billion a month. I 574 00:29:40,760 --> 00:29:43,360 Speaker 1: think the markets accepted that. I'm not sure the markets 575 00:29:43,360 --> 00:29:45,720 Speaker 1: ready for three interest rate increases next year, and I 576 00:29:45,720 --> 00:29:47,520 Speaker 1: think that may come as a shock to the inventially 577 00:29:47,520 --> 00:29:49,560 Speaker 1: the precedent. This has been a great round table back 578 00:29:49,600 --> 00:29:52,080 Speaker 1: again after almost two years, I think many thanks to 579 00:29:52,160 --> 00:29:57,320 Speaker 1: Larry Summers of Harvard and Steve Rattner of will It Advisors. Finally, 580 00:29:57,440 --> 00:30:01,640 Speaker 1: one more thought the geo politics parts. Yet once again 581 00:30:02,240 --> 00:30:04,560 Speaker 1: this week, the United States made it official it would 582 00:30:04,560 --> 00:30:07,880 Speaker 1: not be sending any delegation to the Beijing Winter Olympics 583 00:30:07,920 --> 00:30:11,600 Speaker 1: next year. The Biden administration will not send any diplomatic 584 00:30:11,720 --> 00:30:15,960 Speaker 1: or official representation to the Beijing two Winter Olympics and 585 00:30:16,000 --> 00:30:20,520 Speaker 1: Paralympic Games, given the Pierre scenes, ongoing genocide and crimes 586 00:30:20,560 --> 00:30:25,200 Speaker 1: against a humanity in Jin John and other human rights abuses. 587 00:30:25,400 --> 00:30:27,800 Speaker 1: The White House Press Secretary Jen Saki said that the 588 00:30:27,840 --> 00:30:32,360 Speaker 1: administration would be backing Team USA, albeit from a pretty 589 00:30:32,360 --> 00:30:34,680 Speaker 1: big distance. This is hardly the first time that we've 590 00:30:34,680 --> 00:30:37,840 Speaker 1: seen the Olympics used as a lever in geopolitics, going 591 00:30:37,880 --> 00:30:40,640 Speaker 1: all the way back to the nine Olympics in Moscow, 592 00:30:40,720 --> 00:30:44,000 Speaker 1: when President Jimmy Carter didn't just keep American officials away, 593 00:30:44,200 --> 00:30:48,400 Speaker 1: he kept US athletes from competing after Russia invaded Afghanistan. 594 00:30:48,680 --> 00:30:51,960 Speaker 1: I can't say at this moment, but other nations will 595 00:30:52,000 --> 00:30:58,800 Speaker 1: not go to the Summer Olympics in Moscow, hours will 596 00:30:58,880 --> 00:31:02,000 Speaker 1: not go, and the effect well, Russian troops stayed in 597 00:31:02,040 --> 00:31:05,800 Speaker 1: Afghanistan for another nine years. But what might hurt more 598 00:31:05,840 --> 00:31:07,840 Speaker 1: than the loss of a few officials up in the 599 00:31:07,920 --> 00:31:11,280 Speaker 1: stands at the games might be if corporate sponsors pulled 600 00:31:11,360 --> 00:31:14,160 Speaker 1: out their support, something that Richard has of the Council 601 00:31:14,200 --> 00:31:16,560 Speaker 1: and Form Relations has warned about right now in a 602 00:31:16,840 --> 00:31:20,560 Speaker 1: world in which corporations are far more vulnerable uh to 603 00:31:20,720 --> 00:31:24,320 Speaker 1: political pressures from investors and others, I wouldn't be surprised 604 00:31:24,360 --> 00:31:27,880 Speaker 1: if both governments and corporations essentially decided to hold back 605 00:31:28,240 --> 00:31:30,720 Speaker 1: from China, and then there's a threat that China just 606 00:31:31,000 --> 00:31:33,640 Speaker 1: might not get to see some sports at all, as 607 00:31:33,680 --> 00:31:35,840 Speaker 1: in the case of the World Tennis Association, which has 608 00:31:35,840 --> 00:31:38,280 Speaker 1: pulled all of its matches from China out of concern 609 00:31:38,360 --> 00:31:41,360 Speaker 1: over the fate of China's only number one tennis player 610 00:31:41,360 --> 00:31:44,760 Speaker 1: in history, Ms Pung Shwi, after she accused of former 611 00:31:44,880 --> 00:31:48,760 Speaker 1: senior government official of sexual assault and then she disappeared. 612 00:31:48,920 --> 00:31:53,640 Speaker 1: Longtime Olympics official Dick Pound explains all kinds of people 613 00:31:53,640 --> 00:31:55,520 Speaker 1: who are trying to get in touch with her to 614 00:31:55,560 --> 00:31:58,040 Speaker 1: make sure that she was alive and healthy and not 615 00:31:58,160 --> 00:32:00,600 Speaker 1: in captivity and all of those starts of things. But 616 00:32:00,680 --> 00:32:03,520 Speaker 1: if we really want to get China's attention, maybe we're 617 00:32:03,560 --> 00:32:06,520 Speaker 1: better off using sports as a carrot instead of a stick. 618 00:32:06,920 --> 00:32:09,719 Speaker 1: Just remember all the way back in one what happened 619 00:32:09,800 --> 00:32:12,760 Speaker 1: when a simple table tennis match paved the way for 620 00:32:12,800 --> 00:32:16,040 Speaker 1: President Nixon to go to China. And the rest, as 621 00:32:16,080 --> 00:32:19,240 Speaker 1: they say, is history. That does it. For this episode 622 00:32:19,240 --> 00:32:21,840 Speaker 1: of Wall Street Week, I'm David Weston. This is Bloomberg. 623 00:32:22,000 --> 00:32:23,840 Speaker 1: See you next week.