WEBVTT - Bloomberg Wall Street Week: Moynihan, Rattner, Summers 0:00:00.240 --> 0:00:05.000 This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes, 0:00:05.040 --> 0:00:07.400 The economy is in the process of rebounding. Will the 0:00:07.400 --> 0:00:10.479 Federal Reserve have its own digital currency? The financial stories 0:00:10.520 --> 0:00:12.879 that cheap hard work. Many people think the eels are 0:00:12.880 --> 0:00:15.080 just going to keep marching up. We have more spending 0:00:15.120 --> 0:00:17.160 coming out of Congress. One of the big questions I 0:00:17.200 --> 0:00:19.880 think on investor's minds inflation through the eyes of the 0:00:19.880 --> 0:00:23.560 most influential voices. Larry Summer is the former Treasury Secretary 0:00:23.640 --> 0:00:27.240 Bryan Wenthan a backup America, Will Smart CEO Charlie Sharp, 0:00:27.360 --> 0:00:31.560 Bloomberg wool Street Week with David Weston from Bloomberg Radio 0:00:31.800 --> 0:00:35.080 coming to terms with the pandemic that just won't quit, 0:00:35.479 --> 0:00:38.839 and with a Russian threat to Ukraine. This is Bloomberg 0:00:38.880 --> 0:00:42.519 Wall Street Week. I'm David Weston. The week began with 0:00:42.600 --> 0:00:46.560 President Biden confronting Russian President Putin over Russia's military build 0:00:46.600 --> 0:00:50.360 up along Ukraine's borders, with National Security Advisor Jake Sullivan 0:00:50.560 --> 0:00:53.280 reporting the US made it clear that it would take 0:00:53.320 --> 0:00:57.880 action in response to any invasion. Told President Putin directly 0:00:57.880 --> 0:01:00.640 that if Russia further invade Ukraine, the United States and 0:01:00.680 --> 0:01:04.720 our European allies would respond to strong economic measures, but 0:01:04.840 --> 0:01:09.000 as important as geopolitics are, the continued fight over COVID 0:01:09.120 --> 0:01:13.160 remains the number one thing we all confront with Spikes 0:01:13.160 --> 0:01:16.400 and cases and fears of O Macron leading to shutdowns, 0:01:16.600 --> 0:01:19.720 as British Prime Minister Boris Johnson said his country was 0:01:19.800 --> 0:01:23.839 urging people to stay home from Monday. You should work 0:01:23.840 --> 0:01:27.160 from him if you can, But there was also hope, 0:01:27.560 --> 0:01:31.280 hope that vaccinations and boosters would offer us a better 0:01:31.319 --> 0:01:34.920 alternative to shutting down and staying home, and Johnson and 0:01:35.000 --> 0:01:38.600 Johnson CEO Alex Gorski expressed confidence that science will help 0:01:38.720 --> 0:01:42.360 us get past the crisis in the new year. Obviously 0:01:42.360 --> 0:01:45.479 we're navigating our way through the pandemic uh and there's 0:01:45.520 --> 0:01:47.640 likely to be twists and turns and ups and downs. 0:01:48.080 --> 0:01:53.000 That being said, I'm optimistic and in the end, despite 0:01:53.040 --> 0:01:56.320 some high inflation numbers, the markets decided to choose hope 0:01:56.360 --> 0:01:59.160 over anxiety this week, giving equities their best rally in 0:01:59.240 --> 0:02:02.600 ten months and take the sp all time high, getting 0:02:02.600 --> 0:02:05.160 over three point eight percent on the week, with an 0:02:05.160 --> 0:02:08.440 etact just behind posting three point six percent gains, while 0:02:08.480 --> 0:02:10.880 the yield curves steepen just a little bit, leaving the 0:02:10.919 --> 0:02:14.320 ten year yields still below one. To explain what she 0:02:14.440 --> 0:02:17.680 makes all this, we welcome now our contributor Asani Beschelas. 0:02:17.720 --> 0:02:20.440 She's the founder and CEO of Rock Creek, So Asani, 0:02:20.639 --> 0:02:23.000 we really need your advice here. What's going on the 0:02:23.000 --> 0:02:25.040 market is really on the tear this week by and 0:02:25.120 --> 0:02:27.040 large after last week, sort of selling up a bit, 0:02:27.280 --> 0:02:32.840 despite the inflation, despite the despite the virus. Why David, 0:02:32.960 --> 0:02:35.840 great to be on with you today, and it's again 0:02:35.880 --> 0:02:39.000 about COVID. Right, COVID news were really bad when we 0:02:39.080 --> 0:02:43.200 heard about omicron and COVID news this week as people 0:02:43.320 --> 0:02:46.240 got more data on omicron and not that it's not 0:02:46.280 --> 0:02:50.040 a problem, but seems to be milder, seems to be spreading, 0:02:50.120 --> 0:02:53.680 but not uh, you know, not as scary as some 0:02:53.840 --> 0:02:57.320 variants could have been. I think has calmed the market 0:02:57.639 --> 0:02:59.920 so as people are sort of moving on where there's 0:03:00.000 --> 0:03:04.360 more clarity on the FED position on both taper and 0:03:04.400 --> 0:03:08.160 probably interest rate increases. But of course we have the 0:03:08.200 --> 0:03:11.880 inflation scared at the same time coming up well, and 0:03:11.919 --> 0:03:14.040 there was the question how sure are we about the Fed? 0:03:14.160 --> 0:03:16.440 I mean, j Pow has made it clear they're going 0:03:16.480 --> 0:03:18.799 to advance. It appears in the next meeting coming up, 0:03:19.360 --> 0:03:21.800 the tapering of the bond buying. But some people are 0:03:21.800 --> 0:03:23.799 saying he's going to go faster than even he thinks, 0:03:23.880 --> 0:03:26.080 and they may end up at a higher point. What 0:03:26.120 --> 0:03:28.480 do you think? And can he do that without really 0:03:28.560 --> 0:03:31.000 rocking the boat so much that it hurts the economy. 0:03:31.560 --> 0:03:35.640 I agree that tapering will start sooner and go faster 0:03:35.960 --> 0:03:40.080 than was his original plan, and um and I think 0:03:40.440 --> 0:03:45.800 that it is overdue. But the important thing is that 0:03:45.840 --> 0:03:48.800 the Fed has really had got two jobs right. It's 0:03:48.840 --> 0:03:53.080 inflation and employment. And on the employment side there is 0:03:53.120 --> 0:03:56.720 sort of a new twist that both you may remember 0:03:56.880 --> 0:04:00.720 Treasury Secretary Janet Yellen has been emphasizing it, so has 0:04:01.080 --> 0:04:05.840 um FED chair power, which is equitable employment and more 0:04:05.880 --> 0:04:10.560 equity in growth. And I think that is where, you know, 0:04:10.680 --> 0:04:14.400 it may lead to slightly different actions, which might mean 0:04:14.640 --> 0:04:18.160 that while inflation you know, is what about six point 0:04:18.240 --> 0:04:21.200 eight percent, it might go up too close to seven 0:04:21.279 --> 0:04:24.640 percent and peak around seven percent. But my view is 0:04:24.680 --> 0:04:27.000 that it will come down to about half of that 0:04:27.680 --> 0:04:29.840 um you know, towards the end of next year, as 0:04:29.839 --> 0:04:33.720 the supply chains go away, but also as some hopefully 0:04:33.760 --> 0:04:37.400 some of the build back better UM actual actions get 0:04:37.440 --> 0:04:40.480 implemented and we start having some of the supply chain 0:04:40.839 --> 0:04:44.920 issues get resolved a little faster. I've signed you at 0:04:45.000 --> 0:04:47.320 Rock Creek are an investor rather than a trader, so 0:04:47.360 --> 0:04:50.040 you look over the longer term. You're not in another market, 0:04:50.080 --> 0:04:52.240 as I understand it. Constantly. At the same time, some 0:04:52.279 --> 0:04:55.240 people are saying that we should get used to higher inflation, 0:04:55.360 --> 0:04:58.120 not six point eight percent, but signalically higher than we 0:04:58.160 --> 0:05:00.600 have on trend. If it's true, if we're set for 0:05:00.760 --> 0:05:04.320 three percent or even four percent, lurry summers, and what 0:05:04.400 --> 0:05:07.120 does that do to investor? How has that changed your portfolio? 0:05:08.360 --> 0:05:12.240 So two things. One is depends on how this inflation 0:05:12.279 --> 0:05:14.960 gets translated. For example, a lot of people say, you know, 0:05:15.000 --> 0:05:17.359 wages are going up and that's a bad thing, but 0:05:17.520 --> 0:05:20.560 really in economics one on one depends on exactly where 0:05:20.560 --> 0:05:22.800 the wage growth is happening. If the wage growth is 0:05:22.800 --> 0:05:27.279 happening at the lowest income levels, and that is actually 0:05:27.520 --> 0:05:31.640 the case, um, but don't forget those income Those wages 0:05:31.680 --> 0:05:36.440 are so very low that you know, increase is very 0:05:36.480 --> 0:05:39.120 little on a on a very small base, right, So 0:05:39.240 --> 0:05:42.040 if you have higher growth on wages. What you're going 0:05:42.040 --> 0:05:46.479 to have is potentially more ability to buy goods by 0:05:46.520 --> 0:05:49.480 that group, which has a higher consumption rate than higher 0:05:49.560 --> 0:05:54.080 income goods and UH and higher growth in the longer run. Now, 0:05:54.440 --> 0:05:57.359 the other side of this is as I think some 0:05:57.480 --> 0:06:00.440 of these very short short I would call it short term, 0:06:00.520 --> 0:06:03.080 not just supply chain, you know, but the fact that 0:06:03.160 --> 0:06:06.440 people were reading about inflation got them to buying more. 0:06:06.880 --> 0:06:10.360 The fact that we have some issues with specific issues 0:06:10.440 --> 0:06:14.200 because of COVID that happened with for example, not you know, 0:06:14.240 --> 0:06:18.960 car companies selling their fleets or not investing last year. 0:06:19.200 --> 0:06:22.599 We're seeing that impact this year as they invest next year, 0:06:22.880 --> 0:06:25.560 we're not going to have those same pictures. So you know, 0:06:25.720 --> 0:06:30.039 we might be closer to my my assumption is closer 0:06:30.120 --> 0:06:32.719 to three or three and a half percent, but that 0:06:32.800 --> 0:06:35.800 will go down over time, so not so concerned about that. 0:06:36.120 --> 0:06:37.719 Thank you. So it's always a pleasure to have you 0:06:37.800 --> 0:06:40.400 with us. As Sonny Bachelors, she is the founder and 0:06:40.480 --> 0:06:44.120 the CEO of Rock Creek. Coming up, we get a 0:06:44.120 --> 0:06:46.480 preview of what to expect in the new year from 0:06:46.520 --> 0:06:50.479 the Chairman and CEO of Bank America, Bryan moynihan. That's 0:06:50.520 --> 0:07:01.880 next on Water with on Bloomberg. This is Bloomberg Wall 0:07:01.920 --> 0:07:05.880 Street Week with David Weston from Bloomberg Radio. This is 0:07:05.880 --> 0:07:09.560 Wall Stree Week. I'm David Weston. Two twenty one has 0:07:09.560 --> 0:07:13.440 been another wild year with a continued fight against the pandemic, 0:07:13.760 --> 0:07:19.000 continued fiscal and monetary stimulus, and growing inflation concerns buffeting investors. 0:07:19.360 --> 0:07:21.160 But as we come to the end of the year, 0:07:21.400 --> 0:07:24.040 we asked Brian moynihan at Back of America to take 0:07:24.080 --> 0:07:28.679 a look at what he sees ahead in twenty two. So, Brian, 0:07:28.720 --> 0:07:30.200 it's coming to the end of the year, let's look 0:07:30.240 --> 0:07:32.960 forward to two thousand twenty two and what you could anticipate. 0:07:33.080 --> 0:07:35.400 First of all, let me ask you how uncertain is it? 0:07:35.480 --> 0:07:37.640 Because right now we're looking at the various banks and 0:07:37.640 --> 0:07:40.160 the projections, for example on SMP five where it ends up, 0:07:40.280 --> 0:07:42.040 it's a wider range we've seen a long time. It 0:07:43.040 --> 0:07:45.560 does that indicate there's less certainty about where we're headed 0:07:45.560 --> 0:07:49.000 in two. I think if you look at the economic projections, 0:07:49.000 --> 0:07:52.200 they're close or bunched. Those have to do with multiple 0:07:52.680 --> 0:07:55.240 evaluations coming in some of the you know, you've seen 0:07:55.240 --> 0:07:56.760 the I p O S trade down, and I think 0:07:56.800 --> 0:07:58.760 people are starting to say, Okay, this just can't keep 0:07:58.760 --> 0:08:01.000 going in one direction. So you're seeing start to people 0:08:01.000 --> 0:08:03.640 start to disperse. I think around this question of where 0:08:03.680 --> 0:08:06.440 they think the market evaluation is and whether the earnings 0:08:06.480 --> 0:08:08.720 growth can sustain. And if you earning growth slows down, 0:08:08.800 --> 0:08:11.520 theoretically market evaluation how to slow down, first by just 0:08:11.720 --> 0:08:14.480 math and then by multiple contractions. So I think I 0:08:14.480 --> 0:08:16.440 think that's more of the thing. But if you look 0:08:16.440 --> 0:08:19.640 at the economy side, you know, we're at four two 0:08:19.680 --> 0:08:21.560 percent for next year and two point two for the 0:08:21.800 --> 0:08:25.120 year after, and I think you know that's you know, 0:08:25.160 --> 0:08:28.040 that's a slowdown from this year. But the roalities sort 0:08:28.040 --> 0:08:29.840 of has to slow down. I mean, in in in 0:08:29.880 --> 0:08:32.400 the federal raised rates to make sure it does because 0:08:32.440 --> 0:08:35.000 inflation and other things. So I think we we feel 0:08:35.040 --> 0:08:37.800 very strongly what we see in our customer base is 0:08:37.800 --> 0:08:41.240 is consistent with four plus growth. What we see on 0:08:41.280 --> 0:08:43.320 the commercial side and consumer side. Now, the risk of 0:08:43.320 --> 0:08:45.200 that is still this pandemic. And so the other thing 0:08:45.240 --> 0:08:47.240 you see this dispersion when you have a you know, 0:08:47.280 --> 0:08:50.400 this new variant surface and people you see people taking 0:08:50.400 --> 0:08:52.440 different actions around the world, and we'll shut down and 0:08:52.440 --> 0:08:54.960 will not people start to make decisions based on that 0:08:55.160 --> 0:08:58.040 and in terms of their valuations and points. And the 0:08:58.040 --> 0:09:02.520 good news is between because the great health care systems 0:09:02.520 --> 0:09:05.360 we have and great science we have. You know, the 0:09:05.440 --> 0:09:08.080 vaccines out there, it's effective. It may have to be 0:09:08.320 --> 0:09:10.600 changed and play with, but you're seeing the impact less 0:09:10.600 --> 0:09:12.880 so far. Alcome what and we'll see what happens. But 0:09:12.880 --> 0:09:15.560 that's a big uncertainty that that Trump's every other thing 0:09:15.600 --> 0:09:18.640 you're talking about. You're not an epidemiologist, as far as 0:09:18.640 --> 0:09:21.000 I know, I'm not, Goodness knows. But you talk to 0:09:21.040 --> 0:09:22.880 a lot of experts. You have people you touch to 0:09:22.920 --> 0:09:25.200 all the time. Your best guest, do you think by 0:09:25.240 --> 0:09:28.080 the end of two we will have this largely behind 0:09:28.200 --> 0:09:30.240 its the pandemic, Not to say it's all gone, but 0:09:30.280 --> 0:09:31.559 we won't have to deal with the day in and 0:09:31.640 --> 0:09:33.319 day out, you know. I think the risk is the 0:09:33.600 --> 0:09:36.320 variant that the vaccines really don't work against. And and 0:09:36.440 --> 0:09:40.800 so if you unwind the decision path by the people 0:09:40.840 --> 0:09:43.280 in charge of government and making rules, it's gonna be 0:09:43.679 --> 0:09:45.600 if my I c U s are overwhelmed, if my 0:09:45.640 --> 0:09:49.079 hospitals are overwhelmed, I have to slow down activity to 0:09:49.160 --> 0:09:51.520 keep people away from each other, you know, to avoid 0:09:51.559 --> 0:09:53.360 that outcome because you can't have people dying in the hall. 0:09:53.400 --> 0:09:55.720 That's just not fair. And so remember back in the 0:09:55.760 --> 0:09:58.360 early pandemic, the field hospitals were being built. We need 0:09:58.360 --> 0:10:00.320 thirty thousand ventilators. We didn't use them, all of it. 0:10:00.600 --> 0:10:02.320 And but the good news as the treatments in the 0:10:02.360 --> 0:10:05.120 monoclona and advising pills and all those things. So I'm 0:10:05.120 --> 0:10:08.520 not I can't make the uh, the medical prediction, but 0:10:08.559 --> 0:10:11.640 our experts say this, we are. We've come from that 0:10:11.640 --> 0:10:13.400 where it was just immediately had to get people away 0:10:13.480 --> 0:10:18.360 with all these tools, the treatment, vaccines, understanding disease better, 0:10:18.360 --> 0:10:20.240 the speed at which it can be adapted to to 0:10:20.360 --> 0:10:22.800 where you know, so the waggle around and outcomes faster. Right, 0:10:22.880 --> 0:10:25.360 So if you look the market, there's a chart the 0:10:25.440 --> 0:10:26.920 other day you saw, you know, it took this long 0:10:27.000 --> 0:10:28.880 for the market to recover the first time, and it's 0:10:28.920 --> 0:10:30.559 gone any edge time and new variants come up, and 0:10:30.559 --> 0:10:32.240 that's because of confidence that you can get behind it. 0:10:32.480 --> 0:10:34.520 I think that means you're in an you know, the 0:10:34.600 --> 0:10:38.120 endemic type of situation as opposed to the pandemic, which 0:10:38.120 --> 0:10:40.040 means we're gonna be living with this and there's gonna 0:10:40.040 --> 0:10:41.880 be ebbs and flows, and I think that's what people 0:10:41.880 --> 0:10:43.640 are for seeing. Twenty two is about now take a 0:10:43.679 --> 0:10:45.720 wool a wat to get used to that fact, you know, 0:10:45.840 --> 0:10:47.720 and and and and that will be interesting to see 0:10:47.760 --> 0:10:50.320 how society adopts. But you know, with with what's going 0:10:50.320 --> 0:10:51.959 on in other countries, you see in them start to 0:10:52.000 --> 0:10:55.679 adjust because there's one fundamental differences. The vaccine levels are 0:10:55.720 --> 0:10:57.360 just not there they are in the United States. So 0:10:57.440 --> 0:11:00.400 the judgment by a person here given this aime set 0:11:00.440 --> 0:11:02.800 of facts could be different based on that fact alone. 0:11:03.280 --> 0:11:05.480 Putting aside the pandemic, and recognize that's a big thing 0:11:05.520 --> 0:11:07.040 to put aside, but put takeing that out of the 0:11:07.080 --> 0:11:09.400 careation for a second. When you take a look at 0:11:09.400 --> 0:11:14.040 the markets, typically valuations were based on corporate earnings and 0:11:14.080 --> 0:11:16.240 that should be a function of growth. You say, growth 0:11:16.240 --> 0:11:18.000 looks pretty solid. Maybe it won't be as high as 0:11:18.040 --> 0:11:20.240 it was this year, but pretty solid. But there's another 0:11:20.240 --> 0:11:23.480 factor which is also margins and profitability. How concerned are 0:11:23.480 --> 0:11:28.320 you going about inflation and their ability to erode corporate margins. 0:11:28.360 --> 0:11:30.199 So at the end of the consumer they have more 0:11:30.200 --> 0:11:32.640 money to spend their all their employed and wages are 0:11:32.640 --> 0:11:35.920 growing fast. They ability to absorb price increases, you know, 0:11:36.120 --> 0:11:38.400 is there now people don't like to give them price increases, 0:11:38.440 --> 0:11:42.160 and that's white companies have different strategies and different pricing schemes. 0:11:42.160 --> 0:11:44.600 But the reality is is you'd be more afraid if 0:11:44.720 --> 0:11:47.760 if the I'm not sure if the pressure came through 0:11:47.760 --> 0:11:50.520 on the supply side without the consumers and the condition 0:11:50.559 --> 0:11:53.200 they're in, I'd be more afraid of that question. And 0:11:53.280 --> 0:11:55.520 right now, if companies tell us they're able to pass 0:11:55.559 --> 0:11:57.680 through price, either be two B or B two. See 0:11:57.679 --> 0:12:00.319 in other words, that um and and shortages. I mean 0:12:00.360 --> 0:12:04.079 people buy no matter what. So restaurant pricing, hotel pricing, 0:12:04.800 --> 0:12:07.800 trip pricing, you know, people run special and stuff. It's 0:12:07.840 --> 0:12:10.319 all elevated and and that will come through. So I 0:12:10.320 --> 0:12:11.840 think you have to start with the consumer being in 0:12:11.840 --> 0:12:16.560 great shape, having money employed in wages rising and frankly 0:12:17.200 --> 0:12:20.440 freed up to do more. And that's then you back 0:12:20.480 --> 0:12:22.120 into that. Think about all the cars that didn't get 0:12:22.120 --> 0:12:23.960 sold because the chip short At some point, the chips 0:12:23.960 --> 0:12:25.960 are there, and those you know that sixteen million down 0:12:26.000 --> 0:12:28.800 to twelve or thirteen million rate moves back up, and 0:12:28.840 --> 0:12:31.640 so I think there's that's just that housing. You know, 0:12:31.640 --> 0:12:33.720 people are still buying homes. There's a shortage of homes, 0:12:33.720 --> 0:12:36.000 therefore wible demand. They're you've got to get prices back 0:12:36.040 --> 0:12:38.400 in control. Frankly there, But so I think, yeah, I 0:12:38.400 --> 0:12:40.640 think I'd be more afraid of the margin question for 0:12:40.679 --> 0:12:42.199 companies if you didn't have these you know, in the 0:12:42.280 --> 0:12:44.440 end of the day, it's a consumer drives the economy 0:12:44.520 --> 0:12:46.800 two thirds of the activity or whatever the right words are, 0:12:47.280 --> 0:12:48.800 if they didn't have the money spent and they do. 0:12:49.400 --> 0:12:52.560 It looks right now for what the FED share has 0:12:52.600 --> 0:12:55.120 said that we're looking at two is being a pivot 0:12:55.160 --> 0:12:59.400 year with respect to monetary support for the economy. How 0:12:59.440 --> 0:13:02.520 concerned are you about the rapidity with which they tighten 0:13:02.559 --> 0:13:06.400 them might supply because theoretically we could do some damage. Yeah, 0:13:06.720 --> 0:13:09.360 well they have to they have to slow down. You 0:13:09.360 --> 0:13:11.640 don't raise rates and expect the economy not to change 0:13:13.440 --> 0:13:16.520 outcome when you have inflation. And so that's the economics 0:13:16.520 --> 0:13:18.520 one I want about the thing. But let's let's back 0:13:18.600 --> 0:13:22.319 up to this this FED you have saying general people 0:13:22.559 --> 0:13:27.000 two thousand nineteen economy, economy, excize today excise it could 0:13:27.000 --> 0:13:30.040 be bigger probably this quarter. Unemployment three point six or 0:13:30.120 --> 0:13:32.360 four point two already. At the year end, we'll see 0:13:32.360 --> 0:13:34.559 where we are. But my guess is closer to that number. 0:13:35.040 --> 0:13:38.439 The consumer, all that fiscal stimulus went on, and so 0:13:38.800 --> 0:13:41.280 you think about all that, and you're saying, wait a second. 0:13:41.440 --> 0:13:43.880 You know the voages have grown dramatically since then, and 0:13:43.920 --> 0:13:46.000 I expect to grow faster rate. I think they have 0:13:46.040 --> 0:13:47.680 to bring the rates up. The pace will always be 0:13:47.720 --> 0:13:50.199 based on their view, but I think what's more, it's 0:13:50.200 --> 0:13:51.840 going to be more on people's minds. Goes back to 0:13:51.880 --> 0:13:54.160 the question the pathway of the virus. We have we 0:13:54.200 --> 0:13:55.839 won the war, or if we won most of the 0:13:55.840 --> 0:13:57.400 war and the war still out in front of us. 0:13:57.440 --> 0:13:59.640 And I hope and pray that the first is true. 0:13:59.679 --> 0:14:01.680 But I think that will affect their pace more than 0:14:01.760 --> 0:14:03.840 anything else, because they're always trying to make the judgment, 0:14:04.000 --> 0:14:05.839 because they're making the judgment based on the facts, and 0:14:06.120 --> 0:14:08.000 it actually has impact in the future. But I think 0:14:08.040 --> 0:14:12.760 from a maths you know, the employment, full employment, stable pricing, 0:14:12.920 --> 0:14:16.440 you could move rates up and relatively quickly. I think 0:14:16.400 --> 0:14:18.160 the US be slow because I think no matter what 0:14:18.200 --> 0:14:20.200 we think we know, we'll know other things about this 0:14:20.280 --> 0:14:22.200 virus every day, week, month, and I think that will 0:14:22.280 --> 0:14:24.200 keep changing their ebbs and flows, but they're gonna be 0:14:24.240 --> 0:14:26.360 careful not to get ahead of it. But on the 0:14:26.360 --> 0:14:28.600 other hand, they have to resolute to get it, get 0:14:28.600 --> 0:14:30.720 the rate structure back. In the rate structure almost two 0:14:30.720 --> 0:14:34.080 percent fed funds and two percent tenure to you're saying, so, 0:14:34.160 --> 0:14:37.760 what's different, Same size economy, same unemployment, more money in 0:14:37.760 --> 0:14:40.840 people's accounts, more spending, more final demand. At some point, 0:14:41.160 --> 0:14:45.320 you've got to bring the structure back. Thanks to Brian moynihan, 0:14:45.440 --> 0:14:48.520 Chairman and CEO of Bank of America. Coming up, we 0:14:48.560 --> 0:14:52.520 convene our roundtable together in the studio with contributors Larry 0:14:52.520 --> 0:14:55.400 Summers of Harvard and Steve Rattner of Will of Advisers. 0:14:55.760 --> 0:15:02.840 That's next on Wall Street Week on Bloomberg. This is 0:15:02.880 --> 0:15:07.240 Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 0:15:11.680 --> 0:15:14.200 This is Walton. I'm David Weston. I am delighted to 0:15:14.240 --> 0:15:16.480 say that for the first time in nearly two years, 0:15:16.480 --> 0:15:19.600 we are back around our real roundtable in New York 0:15:19.640 --> 0:15:22.280 with our contributor Larry Summers of Harvard and also our 0:15:22.280 --> 0:15:25.320 contrautor Steve Radner of Will Advisers and they're responsible for 0:15:25.400 --> 0:15:28.720 investing the personal and philanthropic assets of Michael R. Bloomberg, 0:15:28.880 --> 0:15:31.880 our founder and majority shareholders. So Larry, let's start with you. 0:15:32.040 --> 0:15:35.160 On Friday, we got CPI numbers. As predicted, they came 0:15:35.200 --> 0:15:38.280 in hot headline number six. You've been talking about this 0:15:38.320 --> 0:15:40.240 for some time. What are we learning about inflation that 0:15:40.280 --> 0:15:43.480 we didn't know before? We're having it confirmed that it's 0:15:43.480 --> 0:15:47.840 not transitory. And I think everybody recognizes now with the 0:15:47.880 --> 0:15:51.680 statements from Chairman Powell, with the statements from Secretary Yellen, 0:15:52.200 --> 0:15:54.920 that this isn't going to just go away of its 0:15:55.000 --> 0:15:58.280 own accord, that the Fed is going to have to 0:15:58.320 --> 0:16:04.560 take substantial action to control inflation unless there's some kind 0:16:04.600 --> 0:16:08.880 of other adverse development of crack and markets or something 0:16:08.920 --> 0:16:13.240 of that kind. But we put in motion for the 0:16:13.280 --> 0:16:18.320 first time in forty years, excessive inflation caused by overheating 0:16:18.320 --> 0:16:20.880 of the economy, and that's going to have to be 0:16:21.320 --> 0:16:24.120 worked out of the system. And that's probably not going 0:16:24.160 --> 0:16:26.120 to be such an easy thing. Well, I'll tell about 0:16:26.160 --> 0:16:28.040 that how easy it is, Steve, do you agree with 0:16:28.080 --> 0:16:30.600 that analysis, and if so, what are the prospects that 0:16:30.640 --> 0:16:32.960 in fact the FED can slow this thing out down 0:16:33.000 --> 0:16:36.520 without really causing some damage the economy. Well, I completely 0:16:36.560 --> 0:16:38.960 grew with Larry, and I think you have to recognize 0:16:39.000 --> 0:16:41.520 it's a problem that was not created in two months, 0:16:41.560 --> 0:16:44.520 as a problem creator over the last two years, and 0:16:44.560 --> 0:16:46.920 so it's going to take multiple years, certainly to work 0:16:46.960 --> 0:16:49.920 it out. I know, I want to predict that we're 0:16:49.920 --> 0:16:51.880 going back to where we were in the late seventies. 0:16:51.920 --> 0:16:53.920 But I was sitting in the washingbur the New York 0:16:53.960 --> 0:16:56.680 Times when Paul Vulkan announced his new inflation policy, and 0:16:56.720 --> 0:16:59.240 I watched all that happen, and it took multiple, multiple 0:16:59.320 --> 0:17:01.520 years and a terrible a recession to get it out 0:17:01.520 --> 0:17:03.960 of the system. So it is gonna be painful, and 0:17:04.000 --> 0:17:05.919 it's going to be painful for growth. It's gonna be 0:17:05.920 --> 0:17:08.560 painful for jobs. And we do have an election coming 0:17:08.600 --> 0:17:12.760 next year, which is going to be complicated. Hilarious. Listen 0:17:12.800 --> 0:17:15.360 to the White House. They admit there's inflation, Uh, they 0:17:15.400 --> 0:17:17.840 still say maybe transitory. And one of thing they point 0:17:17.840 --> 0:17:20.879 to is gas prices. They said, that's really artificially spiked 0:17:20.880 --> 0:17:22.719 it up, that's leveling off. Maybe we don't have as 0:17:22.720 --> 0:17:25.480 bigger problem. What about the difference between headline and so 0:17:25.600 --> 0:17:30.040 called core Look there's surely our transitory elements and inflation, 0:17:30.400 --> 0:17:33.880 no question about it. But here's the thing, David. If 0:17:33.920 --> 0:17:36.679 you look at annual rates, if you take this month's 0:17:36.760 --> 0:17:40.240 number and you annualize it, it's ten. So a lot 0:17:40.240 --> 0:17:43.439 of that is, no doubt transitory. But to say that 0:17:43.480 --> 0:17:46.399 a lot of it is transitory is not to say 0:17:46.520 --> 0:17:49.399 that it's going to get anywhere near price stability on 0:17:49.480 --> 0:17:52.879 its own. And there's another point, which is we always 0:17:52.880 --> 0:17:58.080 talk about the things that are high and might be transitory. 0:17:58.200 --> 0:18:03.000 House prices on every index, rental prices on every index 0:18:03.040 --> 0:18:06.720 except the CPI or up over the last year. The 0:18:06.800 --> 0:18:09.639 vast majority of that is not yet in the c 0:18:09.840 --> 0:18:13.879 p I, so it's probably coming. Every business person I 0:18:14.000 --> 0:18:17.280 talked to says the same thing. They say, we're gonna 0:18:17.280 --> 0:18:20.480 have much higher labor costs going forward to retain our people. 0:18:21.040 --> 0:18:25.239 We're gonna have higher input costs, and it's kind of 0:18:25.240 --> 0:18:28.720 okay because we're gonna be able to pass it on. Well, 0:18:28.720 --> 0:18:31.760 that's an environment where there are pressures in many places 0:18:31.800 --> 0:18:36.359 for rising prices, not for uh, falling prices. You know, 0:18:36.440 --> 0:18:38.760 one of the sectors that's been very benign over the 0:18:38.840 --> 0:18:42.879 last time last while is medical services. But as you 0:18:42.960 --> 0:18:46.760 see all the nurses who are quitting, there's gonna be 0:18:46.800 --> 0:18:49.639 pressure there. As you see all the backlogs of elective 0:18:49.640 --> 0:18:52.960 procedures from the last year or two, they're gonna be 0:18:53.000 --> 0:18:58.359 back lugs. Uh there. So I think we're going to 0:18:59.160 --> 0:19:04.199 in trend um inflation way above two, perhaps in the 0:19:04.200 --> 0:19:09.760 four percent or even higher range, unless something happens to 0:19:10.000 --> 0:19:15.040 break the current mood, to break uh the current trend, 0:19:15.600 --> 0:19:19.840 And I don't think it's gonna be three rate increases 0:19:20.320 --> 0:19:26.280 or two rate increases uh next year. I mean, remember this, crucially, 0:19:27.280 --> 0:19:32.359 monetary policy today is far looser than it was a 0:19:32.440 --> 0:19:36.960 year ago. Looser is measured by real interest rates. Looser 0:19:37.040 --> 0:19:41.239 is measured by financial conditions. Looser is measured by the 0:19:41.320 --> 0:19:46.400 size of the Federal Reserves balance sheet. So we've got 0:19:46.760 --> 0:19:52.040 looser monetary policy even as job vacancies are way up, 0:19:52.800 --> 0:19:57.240 and even as inflation is way up as well. So 0:19:57.280 --> 0:20:00.520 Steve Larry says we should be having hykes. He's been 0:20:00.520 --> 0:20:02.200 talking about this for the better part of a year now. 0:20:02.760 --> 0:20:04.720 Uh do you think we should have more than three 0:20:04.760 --> 0:20:07.280 rate hikes next week, next month, next year? Well, I 0:20:07.280 --> 0:20:09.959 don't know yet. We have you know, obviously, as Janet 0:20:09.960 --> 0:20:11.920 Young used to say, you know, the FETE is data 0:20:12.000 --> 0:20:13.959 driven and you take each each month or quarter at 0:20:13.960 --> 0:20:16.520 a time. But I agree with I agree with pretty 0:20:16.600 --> 0:20:18.520 much everything everything Larry said, But I would just make 0:20:18.560 --> 0:20:20.960 this point, Like we talked about oil having leveled off, 0:20:21.400 --> 0:20:23.440 there's no guarantee that oil is going to stay where 0:20:23.440 --> 0:20:27.080 it is. You know, it's not a function of some 0:20:27.160 --> 0:20:29.960 specific supply disruption of something that's can be easily corrected. 0:20:30.280 --> 0:20:33.000 It's largely a function of global demand. And global demand 0:20:33.040 --> 0:20:35.600 isn't going down at the moment. And so I think 0:20:35.600 --> 0:20:37.600 there is a lot of not just in Core, I 0:20:37.640 --> 0:20:39.639 think there's a lot of inflation that is really stuck 0:20:39.640 --> 0:20:42.399 in the economy. And yeah, I think I think Larry's right. 0:20:42.400 --> 0:20:44.480