1 00:00:00,520 --> 00:00:03,760 Speaker 1: This is Bloomberg Wall Street Week. We turn our attention 2 00:00:03,880 --> 00:00:07,600 Speaker 1: to the markets this week. Us CPI never's reinforcing concerns 3 00:00:07,600 --> 00:00:10,800 Speaker 1: about inflation. The financial stories that sheep are worth a 4 00:00:10,840 --> 00:00:13,760 Speaker 1: really different reaction to Mark. It's more indications of just 5 00:00:13,960 --> 00:00:16,360 Speaker 1: how hot the U. S economy really is. Through the 6 00:00:16,400 --> 00:00:19,759 Speaker 1: eyes of the most influential voices Larry Summers, the former 7 00:00:19,800 --> 00:00:22,880 Speaker 1: Treachery Secretary, Katherine Keating, CEO of the n y Moms, 8 00:00:22,960 --> 00:00:26,160 Speaker 1: Sam's l Sharmon and founder of a creatic group. Investment 9 00:00:26,200 --> 00:00:30,280 Speaker 1: in Bloomberg Wall Street Week with David Weston from Bloomberg Radio, 10 00:00:31,160 --> 00:00:36,160 Speaker 1: Slowing growth, rising inflation, and Putin's war in Ukraine takes 11 00:00:36,159 --> 00:00:39,480 Speaker 1: a new dark turn. This is Bloomberg Wall Street Week. 12 00:00:39,680 --> 00:00:55,880 Speaker 1: I'm David Weston. Once again. We all spent a good 13 00:00:55,960 --> 00:00:58,600 Speaker 1: part of the week focused on the war in Ukraine, 14 00:00:59,040 --> 00:01:01,160 Speaker 1: with the beginning of what look to be a major 15 00:01:01,240 --> 00:01:04,360 Speaker 1: battle for the Dawn. Boss and people like former Secretary 16 00:01:04,400 --> 00:01:07,360 Speaker 1: of Defensive Leon Panetta is saying the Key is doubling 17 00:01:07,360 --> 00:01:10,880 Speaker 1: down on the economic sanctions. I think the most important 18 00:01:10,920 --> 00:01:12,960 Speaker 1: thing for the United States right now is to remain 19 00:01:13,080 --> 00:01:16,759 Speaker 1: united with our NATO allies to continue to put pressure 20 00:01:16,880 --> 00:01:20,040 Speaker 1: on the sanctions and try to squeeze them and enforce them. 21 00:01:20,080 --> 00:01:24,000 Speaker 1: Even as President Putin claimed that those economic sanctions weren't working, 22 00:01:24,640 --> 00:01:27,640 Speaker 1: we can now confidently say that such policy of sanctions 23 00:01:27,680 --> 00:01:32,600 Speaker 1: towards Russia has failed. The economic blitz Creek strategy didn't work. 24 00:01:33,000 --> 00:01:36,280 Speaker 1: And when we weren't watching video from Ukraine, some of 25 00:01:36,360 --> 00:01:38,720 Speaker 1: us may have been watching Netflix. But as it turns out, 26 00:01:38,959 --> 00:01:41,880 Speaker 1: not nearly enough of us. Let's take a look at this. 27 00:01:42,120 --> 00:01:46,000 Speaker 1: They are looking at first quarter streaming paid net change. Wow, 28 00:01:46,200 --> 00:01:49,800 Speaker 1: negative two hundred thousand. That was for estimates being up 29 00:01:49,880 --> 00:01:52,840 Speaker 1: two and a half million. That is a big decline here, 30 00:01:53,200 --> 00:01:57,080 Speaker 1: leading co CEO Read Hastings to throw out some alternatives like, 31 00:01:57,320 --> 00:02:01,000 Speaker 1: for example, putting some ads in our Netflix feed. I'm 32 00:02:01,000 --> 00:02:04,480 Speaker 1: a bigger fan of consumer choice and allowing consumers who 33 00:02:04,520 --> 00:02:07,520 Speaker 1: would like to have a lower price and are advertising 34 00:02:07,560 --> 00:02:10,480 Speaker 1: tolerant to get what they want makes a lot of sense. 35 00:02:10,960 --> 00:02:14,000 Speaker 1: Washington spent the week hosting economic officials for all around 36 00:02:14,000 --> 00:02:16,880 Speaker 1: the world for the World Bank IMF meetings with the 37 00:02:16,919 --> 00:02:20,680 Speaker 1: recurrent theme of less growth, as summarized by the IMF 38 00:02:20,880 --> 00:02:25,200 Speaker 1: Chief Economists. Compared to our January forecast, we have revised 39 00:02:25,200 --> 00:02:28,720 Speaker 1: our projection for global growth downwards to three point six 40 00:02:29,240 --> 00:02:34,760 Speaker 1: in both and even as fedeficial after FED officials said 41 00:02:34,800 --> 00:02:38,560 Speaker 1: that the priority had to be inflation, which means raising 42 00:02:38,600 --> 00:02:41,160 Speaker 1: the rates. We're really going to be raising rates and 43 00:02:41,200 --> 00:02:45,120 Speaker 1: getting expeditiously two levels that are more neutral and then 44 00:02:45,360 --> 00:02:48,600 Speaker 1: that are actually tight, tightening policy if that turns out 45 00:02:48,600 --> 00:02:52,440 Speaker 1: to be appropriate once we get there, and the markets, well, 46 00:02:52,480 --> 00:02:54,959 Speaker 1: the markets were listening to your polocks at least this time, 47 00:02:55,000 --> 00:02:58,200 Speaker 1: particularly the equity markets, with the NASDAC down a whopping 48 00:02:58,240 --> 00:03:01,120 Speaker 1: it's three point eight percent for the week, pointing toward 49 00:03:01,160 --> 00:03:03,360 Speaker 1: what could be the worst month for the tech heavy 50 00:03:03,400 --> 00:03:06,440 Speaker 1: index since Lehman collapsed back in two eight, while the 51 00:03:06,560 --> 00:03:10,120 Speaker 1: SPI was down two point seven and the yield in 52 00:03:10,160 --> 00:03:12,680 Speaker 1: the ten year treasury well, it just kept on climbing, 53 00:03:12,800 --> 00:03:15,799 Speaker 1: ending the week over two point nine. For their thoughts 54 00:03:15,800 --> 00:03:19,280 Speaker 1: on what the markets were reacting to, Welcome now, Barbara 55 00:03:19,320 --> 00:03:21,960 Speaker 1: and Bernard. She's founder and CEO of Windcrest Capital and 56 00:03:22,040 --> 00:03:24,920 Speaker 1: Rick Reader black Rock, CEO of Global Fixed Income and 57 00:03:25,040 --> 00:03:27,680 Speaker 1: head of its Global Allocation team. So we'll start with you. 58 00:03:27,840 --> 00:03:29,720 Speaker 1: I mean, I'm not the professional you are, but it 59 00:03:29,760 --> 00:03:31,640 Speaker 1: doesn't look like the markets very happy this week, if 60 00:03:31,680 --> 00:03:34,080 Speaker 1: I can put it that way, No, I mean it 61 00:03:34,160 --> 00:03:37,560 Speaker 1: was it got a dose of tightening financial conditions in 62 00:03:37,600 --> 00:03:41,400 Speaker 1: an aggressive way. When when Cheer Powell talks about Vulcar 63 00:03:41,840 --> 00:03:45,440 Speaker 1: and being aggressive on inflation and consequently the idea you're 64 00:03:45,440 --> 00:03:48,320 Speaker 1: gonna tighten financial conditions, that is an environment where the 65 00:03:48,320 --> 00:03:52,440 Speaker 1: bond market and the equity market don't don't do particularly well. 66 00:03:52,480 --> 00:03:54,880 Speaker 1: So you saw that play out in a pretty extraordinary way, 67 00:03:54,920 --> 00:03:58,160 Speaker 1: even not just where the markets soft. You know the thing, 68 00:03:58,200 --> 00:03:59,600 Speaker 1: there are a couple of things are interesting. One it 69 00:03:59,680 --> 00:04:02,320 Speaker 1: was the on market that was leading the equity market. 70 00:04:02,320 --> 00:04:05,120 Speaker 1: The equity mark was amazingly resilient until the last couple 71 00:04:05,200 --> 00:04:07,240 Speaker 1: of days and it was almost like the note the 72 00:04:07,280 --> 00:04:11,800 Speaker 1: memo got through that gosh, we're tightening financial conditions. Rates 73 00:04:11,800 --> 00:04:14,720 Speaker 1: of move significantly higher than the equity market turned down. 74 00:04:14,720 --> 00:04:18,320 Speaker 1: But you know it's a market right with uncertainty, lack 75 00:04:18,360 --> 00:04:21,440 Speaker 1: of conviction, and you're seeing that play through. So so, Barbara, 76 00:04:21,480 --> 00:04:23,279 Speaker 1: and is this a matter of the equity market just 77 00:04:23,320 --> 00:04:25,360 Speaker 1: finally catching up with the bond markets and saying, oh, 78 00:04:25,400 --> 00:04:28,040 Speaker 1: you know what, we are going to tighten. I think so, 79 00:04:28,120 --> 00:04:30,000 Speaker 1: you know, in our industry there's the whole manager result 80 00:04:30,080 --> 00:04:31,720 Speaker 1: quite the feed and I don't think you should hear. 81 00:04:31,760 --> 00:04:34,960 Speaker 1: They've been very clear that the narrative is no longer transitory, 82 00:04:35,000 --> 00:04:37,919 Speaker 1: that they're going to frontload hikes, and that's what the 83 00:04:37,920 --> 00:04:40,560 Speaker 1: market is finally pricing in. And you know, it's very 84 00:04:40,600 --> 00:04:44,039 Speaker 1: interesting because while Jerome Powell can crush the cyclical parts 85 00:04:44,040 --> 00:04:46,960 Speaker 1: of the economy that he can control, I worry about 86 00:04:47,040 --> 00:04:48,920 Speaker 1: what's he going to do about the sources of inflation 87 00:04:48,920 --> 00:04:51,880 Speaker 1: that he can't control. Well, that's a really good question. 88 00:04:52,200 --> 00:04:57,719 Speaker 1: For example, supply chain, right, Barbara correct, absolutely, And you know, 89 00:04:57,760 --> 00:05:01,520 Speaker 1: there is no interest rate that solved the inflationary effects 90 00:05:01,560 --> 00:05:05,400 Speaker 1: of deplobalization. And effectively, over the last three decades we've 91 00:05:05,400 --> 00:05:09,800 Speaker 1: had minimal geopolitical risk and that's encouraged managements to outsource 92 00:05:09,839 --> 00:05:13,200 Speaker 1: an offshore and that was great for margins and shareholder returns. 93 00:05:13,560 --> 00:05:16,359 Speaker 1: But just in time has it become just in case 94 00:05:16,600 --> 00:05:18,320 Speaker 1: in the now that we have a pandemic and a 95 00:05:18,320 --> 00:05:22,320 Speaker 1: war and those efficient supply chains are now coming across 96 00:05:22,360 --> 00:05:26,159 Speaker 1: as very vulnerable and fragile in the face of exogenous shocks. 97 00:05:26,560 --> 00:05:29,120 Speaker 1: And so what I fear that there is no rate 98 00:05:29,160 --> 00:05:31,919 Speaker 1: of interest rate that can fix that and there is 99 00:05:31,960 --> 00:05:34,599 Speaker 1: no quick fix to that, which is why I believe 100 00:05:34,640 --> 00:05:39,480 Speaker 1: inflation will be here for longer than the market is anticipating. So, Rick, 101 00:05:39,600 --> 00:05:41,960 Speaker 1: what should the realistic target for the FED be at 102 00:05:41,960 --> 00:05:44,159 Speaker 1: this point? I mean, you always talked about two percent. 103 00:05:44,200 --> 00:05:46,080 Speaker 1: We're way past two percent. I don't think we're going 104 00:05:46,240 --> 00:05:50,520 Speaker 1: back there anytime soon. What's a realistic target? So, you know, 105 00:05:50,560 --> 00:05:52,680 Speaker 1: it's a question of how much the FED feels like 106 00:05:52,800 --> 00:05:55,320 Speaker 1: they need to get they need to get into tightening, 107 00:05:55,360 --> 00:05:58,320 Speaker 1: as as Chair Powell would has described. The thing that 108 00:05:58,480 --> 00:06:01,960 Speaker 1: is ironic about this period of tightening as you're starting 109 00:06:01,960 --> 00:06:04,320 Speaker 1: to see cracks in the system in terms of the 110 00:06:04,360 --> 00:06:08,400 Speaker 1: economy starting to moderate in a in a pretty significant way. 111 00:06:08,680 --> 00:06:11,880 Speaker 1: In seeing that in some of the consumption data, You're 112 00:06:11,880 --> 00:06:14,800 Speaker 1: seeing that in some of the corporate data, and so 113 00:06:14,960 --> 00:06:17,320 Speaker 1: it's a tricky time. I mean, it's so listen, I 114 00:06:17,320 --> 00:06:20,000 Speaker 1: think the FED is going to overshoot and try and 115 00:06:20,400 --> 00:06:22,520 Speaker 1: try and bring down inflation. I think Barbara said is right. 116 00:06:22,640 --> 00:06:25,039 Speaker 1: You've got you know, when you when you talk about 117 00:06:25,080 --> 00:06:28,200 Speaker 1: the shocked effect on food from the Ukrainian dynamic, when 118 00:06:28,240 --> 00:06:30,440 Speaker 1: you talk about the shock effect that's also had on energy, 119 00:06:30,480 --> 00:06:33,640 Speaker 1: to talk about supplied to about China lockdown now and 120 00:06:33,720 --> 00:06:36,840 Speaker 1: creating an exacerbation of the supply chain issues. These are 121 00:06:36,880 --> 00:06:39,320 Speaker 1: tricky things for the FED to deal with, so Rick 122 00:06:39,360 --> 00:06:41,520 Speaker 1: Reader and Barbara and Bernard will be staying with us. 123 00:06:41,600 --> 00:06:43,640 Speaker 1: We're gonna focus on the consumer so much of our 124 00:06:43,680 --> 00:06:46,880 Speaker 1: economy and whether it can save us from the hard 125 00:06:46,960 --> 00:06:49,560 Speaker 1: landing that many are fearing right now. It's gonna have 126 00:06:49,680 --> 00:07:02,800 Speaker 1: next on Wall Street Week on Bloomberg. This is Bloomberg 127 00:07:02,839 --> 00:07:07,600 Speaker 1: Wall Street Week with David Weston from Bloomberg Radio and 128 00:07:07,680 --> 00:07:10,200 Speaker 1: the country's trade ballance, which has been delivering its own 129 00:07:10,240 --> 00:07:13,520 Speaker 1: brand of bad news for many a month. Somersaulted in 130 00:07:13,560 --> 00:07:17,920 Speaker 1: February and recorded the biggest one month surplus in American history. 131 00:07:18,720 --> 00:07:21,480 Speaker 1: Part of the reason was that importers had been stockpiling 132 00:07:21,560 --> 00:07:24,520 Speaker 1: oil the previous month in advance of the imposition of 133 00:07:24,560 --> 00:07:28,480 Speaker 1: President Ford's new tariff. Oil imports in February thus declined 134 00:07:28,600 --> 00:07:31,440 Speaker 1: to the lowest level since the nineteen seventy three embargo, 135 00:07:32,240 --> 00:07:34,600 Speaker 1: but still there was no arguing with a nine hundred 136 00:07:34,720 --> 00:07:38,560 Speaker 1: million dollar surplus, and a lot of European speculators decided 137 00:07:38,600 --> 00:07:42,040 Speaker 1: that it was time to start accumulating dollars instead of 138 00:07:42,040 --> 00:07:45,080 Speaker 1: other currencies. That was Lewis rehireser on Wall Street week 139 00:07:45,120 --> 00:07:48,000 Speaker 1: back in five and Ferris special Huser. Yes, someone's did 140 00:07:48,000 --> 00:07:50,840 Speaker 1: wear our hair that way back in five. It was 141 00:07:50,880 --> 00:07:53,280 Speaker 1: a very different era when the United States actually ran 142 00:07:53,360 --> 00:07:56,559 Speaker 1: a trade surplus for that month instead of the ninety 143 00:07:56,600 --> 00:07:59,200 Speaker 1: billion dollar monthly deficits that we're running now still with 144 00:07:59,280 --> 00:08:01,640 Speaker 1: us A Rick Reatar black Rock, and Barbara and Bernard 145 00:08:01,640 --> 00:08:03,560 Speaker 1: of Windcrest Capitals. So, Barbara and let me come to 146 00:08:03,600 --> 00:08:07,000 Speaker 1: you specifically on the consumer, because it's so much at 147 00:08:07,000 --> 00:08:09,960 Speaker 1: the heart of our economy. We talked this week with 148 00:08:10,080 --> 00:08:13,480 Speaker 1: the chair and CEO of Bank of America, Brian moynihan, 149 00:08:13,520 --> 00:08:15,440 Speaker 1: who said he's looking at the consumer from where he sits. 150 00:08:15,560 --> 00:08:17,520 Speaker 1: He has a lot of access in the consumer data. 151 00:08:17,680 --> 00:08:19,920 Speaker 1: He says it's really very strong and that will take 152 00:08:20,000 --> 00:08:22,760 Speaker 1: us through the tightening that we're looking forward from the FED. 153 00:08:22,840 --> 00:08:26,520 Speaker 1: You agree, So, I think what Brian was talking about 154 00:08:26,680 --> 00:08:29,560 Speaker 1: was what he was seeing currently. And this week the 155 00:08:29,600 --> 00:08:33,280 Speaker 1: market got excited about housing starts. Um. I think those 156 00:08:33,360 --> 00:08:37,240 Speaker 1: are are lagging indicators and you can't create alpha if 157 00:08:37,240 --> 00:08:39,679 Speaker 1: you're driving with the rear view mirror. If you look 158 00:08:39,920 --> 00:08:43,040 Speaker 1: at how sales to me that's far more indicative of 159 00:08:43,080 --> 00:08:46,080 Speaker 1: what is going on. And the SMP Homebuilder Index wouldn't 160 00:08:46,080 --> 00:08:49,040 Speaker 1: be down this year if we didn't have a problem. 161 00:08:49,320 --> 00:08:51,360 Speaker 1: National home sales have been down in three of the 162 00:08:51,440 --> 00:08:54,880 Speaker 1: four last months, so the consumer is not feeling as 163 00:08:54,880 --> 00:08:57,920 Speaker 1: good as they did this time last year. And if 164 00:08:57,960 --> 00:09:02,480 Speaker 1: we just want to look at sales, retail sales is 165 00:09:02,480 --> 00:09:06,640 Speaker 1: an uncomparable year. That was peak sales for peak sales, 166 00:09:06,800 --> 00:09:12,280 Speaker 1: peak retail sales. Um retail sales were up seventeen. So 167 00:09:12,440 --> 00:09:16,360 Speaker 1: every company is facing really tough comps, and I think 168 00:09:16,400 --> 00:09:21,000 Speaker 1: the street is extrapolighting the strength of the consumer and 169 00:09:21,040 --> 00:09:23,160 Speaker 1: it's not going to happen. So I look at companies 170 00:09:23,200 --> 00:09:25,440 Speaker 1: that look like they're on ten times turnings, but on 171 00:09:25,440 --> 00:09:28,560 Speaker 1: a normalized turnings number, they are more like thirty times. 172 00:09:28,559 --> 00:09:30,760 Speaker 1: And I can give you multiple examples of that. So 173 00:09:30,960 --> 00:09:34,760 Speaker 1: just tactically right now, given where estimates are, we are 174 00:09:35,559 --> 00:09:40,199 Speaker 1: very short discretionary consumer. So give us a couple of examples. 175 00:09:40,200 --> 00:09:42,120 Speaker 1: What do you run toward in that world, barber, and 176 00:09:42,120 --> 00:09:44,600 Speaker 1: what do you run away from? Okay, so let's look 177 00:09:44,640 --> 00:09:47,400 Speaker 1: at Tesla. They had a great, uh the great quarter 178 00:09:47,480 --> 00:09:50,000 Speaker 1: this week, and I would say that's a they went good. 179 00:09:50,000 --> 00:09:52,560 Speaker 1: They've got purchasing power, but that to me, is not 180 00:09:52,600 --> 00:09:55,040 Speaker 1: indicative of what's going on in the auto market. If 181 00:09:55,080 --> 00:09:57,640 Speaker 1: you look at a CarMax or Carbona or an Auto 182 00:09:57,720 --> 00:10:00,760 Speaker 1: lead this morning, they've had a terrible time. And so 183 00:10:00,920 --> 00:10:03,199 Speaker 1: you look at something like CarMax and fifty percent of 184 00:10:03,240 --> 00:10:06,280 Speaker 1: their profits are from auto sales, So that's a function 185 00:10:06,280 --> 00:10:09,360 Speaker 1: of commission and volume. Last year they sold eleven point 186 00:10:09,400 --> 00:10:12,440 Speaker 1: seven million cars. In the Great Financial Crisis, they sold 187 00:10:12,480 --> 00:10:15,200 Speaker 1: nine and a half. A normalized number is ten and 188 00:10:15,200 --> 00:10:17,640 Speaker 1: a half, So I don't think they're gonna do eleven 189 00:10:17,640 --> 00:10:20,680 Speaker 1: point seven million car sales this year. The other fifty 190 00:10:20,679 --> 00:10:23,599 Speaker 1: percent of their earnings are from financing, and that's a 191 00:10:23,679 --> 00:10:27,160 Speaker 1: function of spreads and loan lost provisions, both of which 192 00:10:27,200 --> 00:10:29,880 Speaker 1: are below a normalized number. So on my math, the 193 00:10:29,920 --> 00:10:33,360 Speaker 1: carbon CarMax was over earning by ten on the top line, 194 00:10:33,800 --> 00:10:37,520 Speaker 1: and it was over earning by finance, and so that's 195 00:10:39,440 --> 00:10:43,600 Speaker 1: over earning. So on EPs of five dollars and UM 196 00:10:43,720 --> 00:10:45,640 Speaker 1: in a fifteen times multiple, I get a seventy five 197 00:10:45,640 --> 00:10:48,560 Speaker 1: target and the stocks at ninety today. So this is 198 00:10:48,600 --> 00:10:54,520 Speaker 1: what I mean about uncomparable comps and unrealistic expectations. So, Rick, 199 00:10:54,559 --> 00:10:56,280 Speaker 1: where are you on the consumer right now? Because it's 200 00:10:56,280 --> 00:10:58,839 Speaker 1: so important. I mean we talked to people like Secretary Yelling, 201 00:10:59,000 --> 00:11:00,880 Speaker 1: she points to the strength the job market. Is that 202 00:11:00,920 --> 00:11:04,440 Speaker 1: going to get us through? So I think it's more complex. 203 00:11:04,480 --> 00:11:07,960 Speaker 1: I think I've said around the housing market. Housing markets 204 00:11:08,160 --> 00:11:11,640 Speaker 1: is going through a stagflationary dynamic. There's an affordability problem 205 00:11:11,679 --> 00:11:14,160 Speaker 1: that is that is profound. You're seeing the mortgage applications 206 00:11:14,200 --> 00:11:16,240 Speaker 1: drop as a result of that. Home builders as as 207 00:11:16,240 --> 00:11:20,080 Speaker 1: you're saying, is definitely down, completely agree with that. I 208 00:11:20,120 --> 00:11:23,679 Speaker 1: think you're going to see consumption slowing. You are seeing 209 00:11:23,720 --> 00:11:26,240 Speaker 1: that because of this dynamic around where fuel prices are, 210 00:11:26,240 --> 00:11:29,360 Speaker 1: where food prices are, so you are seeing some pull 211 00:11:29,440 --> 00:11:31,800 Speaker 1: back from the consumer. But I think it's much more 212 00:11:31,800 --> 00:11:34,959 Speaker 1: complex around I mean I quite frankly my career, I've 213 00:11:34,960 --> 00:11:38,199 Speaker 1: never seen a consumer more loaded loaded for bear than 214 00:11:38,240 --> 00:11:39,720 Speaker 1: they are than they are today. And give with some 215 00:11:39,720 --> 00:11:40,920 Speaker 1: of the stats, I mean there's two and a half 216 00:11:40,960 --> 00:11:44,800 Speaker 1: trillion of savings that the consumer still has. We tracked 217 00:11:44,800 --> 00:11:46,800 Speaker 1: this number really closely too, and half trillion is still 218 00:11:46,840 --> 00:11:49,880 Speaker 1: of savings from the fiscal stimulus. You also, as you say, 219 00:11:49,960 --> 00:11:52,880 Speaker 1: you have a job market that is desarkably white hot. 220 00:11:53,160 --> 00:11:55,440 Speaker 1: And you know, consumers tend to spend based on their 221 00:11:55,520 --> 00:11:57,240 Speaker 1: there and you're see by the way, the quits rate 222 00:11:57,559 --> 00:12:00,280 Speaker 1: is really high, and that's when the when the when 223 00:12:00,320 --> 00:12:03,520 Speaker 1: individuals are confident in their job prospects and and the 224 00:12:03,640 --> 00:12:06,400 Speaker 1: and the consumer has delevered and actually looked at something. 225 00:12:06,440 --> 00:12:09,560 Speaker 1: Today for the first time in thirty years, cash on 226 00:12:09,640 --> 00:12:12,760 Speaker 1: hand is higher than debt for consumers. That is a 227 00:12:12,760 --> 00:12:16,079 Speaker 1: pretty extorts generational change. So I think I think Barbara 228 00:12:16,160 --> 00:12:19,240 Speaker 1: is right around the consumer can wait and be patient, 229 00:12:19,240 --> 00:12:22,440 Speaker 1: and when it sees prices that are extremely high and 230 00:12:22,440 --> 00:12:24,760 Speaker 1: you compare them to where they were, what consumption was 231 00:12:24,840 --> 00:12:27,160 Speaker 1: last year before these prices were high, I do think 232 00:12:27,160 --> 00:12:29,840 Speaker 1: you'll see some pullback of that. But you know, I'm 233 00:12:29,840 --> 00:12:33,480 Speaker 1: pretty far from this is a recessionary. Recessionary construct when 234 00:12:33,520 --> 00:12:35,760 Speaker 1: you've got this sort of firepower by the way, sitting 235 00:12:35,800 --> 00:12:37,680 Speaker 1: on corporate balance sheets as well, you've got that sort 236 00:12:37,720 --> 00:12:41,120 Speaker 1: of firepower. So I'm a bit more enthusiastic about the 237 00:12:41,160 --> 00:12:44,040 Speaker 1: consumer can be in good shape and be supportive, but 238 00:12:44,040 --> 00:12:46,720 Speaker 1: but agree with the fact they can be patient and 239 00:12:46,760 --> 00:12:49,800 Speaker 1: pull back when when you see the prices of food escalate. 240 00:12:49,880 --> 00:12:53,040 Speaker 1: So quickly, which they will continue to do. Barbara, is 241 00:12:53,040 --> 00:12:55,079 Speaker 1: the household balance you're going to protect us from recession. 242 00:12:57,000 --> 00:12:59,080 Speaker 1: I hear what Rick's saying, But when you look at 243 00:12:59,120 --> 00:13:01,120 Speaker 1: that tun and a half allion, and you just look 244 00:13:01,160 --> 00:13:03,560 Speaker 1: at just what rates have done a thirty year mortgage 245 00:13:03,559 --> 00:13:08,080 Speaker 1: for the average new homeowner, Um, the average mortgage expenses 246 00:13:08,120 --> 00:13:12,400 Speaker 1: five dollars more per month. That's six thousand dollars a year. 247 00:13:12,760 --> 00:13:15,880 Speaker 1: You add that to higher gas prices, higher rent, higher food, 248 00:13:15,920 --> 00:13:18,320 Speaker 1: and you can see how you can blow through that 249 00:13:18,360 --> 00:13:20,720 Speaker 1: two and a half trillion and extra savings pretty quickly. 250 00:13:21,240 --> 00:13:25,080 Speaker 1: Um So UM, I just you know, Rick, I I 251 00:13:25,120 --> 00:13:29,200 Speaker 1: agree that the consumers in better shape than perhaps they 252 00:13:29,240 --> 00:13:32,400 Speaker 1: were um when they had more debt. But I also 253 00:13:32,480 --> 00:13:34,920 Speaker 1: think the cost of living is just so much higher 254 00:13:34,960 --> 00:13:40,080 Speaker 1: today that when real weekly average earnings are down and 255 00:13:40,160 --> 00:13:44,360 Speaker 1: retail sales are down, right, that combination of lower spending 256 00:13:44,400 --> 00:13:47,800 Speaker 1: and lower earnings over the last sixty years has always 257 00:13:48,080 --> 00:13:50,600 Speaker 1: meant your heading into a recession. And that's where we are. 258 00:13:50,880 --> 00:13:54,480 Speaker 1: Both of those figures are negative. For average weekly earnings, 259 00:13:54,480 --> 00:13:57,040 Speaker 1: the numbers down negative three point three percent year on year, 260 00:13:57,240 --> 00:13:59,720 Speaker 1: and retail sales are now negative one point six percent 261 00:14:00,160 --> 00:14:02,400 Speaker 1: year on year. So that tells you the consumer isn't 262 00:14:02,480 --> 00:14:05,240 Speaker 1: feeling healthy. And in addition to that, they no longer 263 00:14:05,360 --> 00:14:08,520 Speaker 1: have those stimulus checks. Um. So does the consumer have 264 00:14:08,600 --> 00:14:11,560 Speaker 1: more money? No, I don't think they do. Um, it's 265 00:14:11,600 --> 00:14:14,400 Speaker 1: not incoming anyway. Thanks so much to Barbara and Bernard 266 00:14:14,400 --> 00:14:17,760 Speaker 1: of Windcrest Capital and of course Rick Reader of black 267 00:14:17,880 --> 00:14:21,880 Speaker 1: Rock coming up. We thought we were on a track 268 00:14:21,920 --> 00:14:25,960 Speaker 1: towards zero emissions, but has the war in Ukraine derailed us? 269 00:14:26,200 --> 00:14:30,240 Speaker 1: If we talked with Anthonuka the Bank of America. This 270 00:14:30,480 --> 00:14:34,760 Speaker 1: is Wall Street Week on Bloomberg. This is Bloomberg Wall 271 00:14:34,800 --> 00:14:42,320 Speaker 1: Street Week with David Weston from Bloomberg Radio. What a 272 00:14:42,440 --> 00:14:46,520 Speaker 1: difference a war makes. President Biden started his tenure pledging 273 00:14:46,560 --> 00:14:49,320 Speaker 1: to cut back on the use of fossil fuels. If 274 00:14:49,360 --> 00:14:52,640 Speaker 1: we act to save the planet, we can create millions 275 00:14:52,680 --> 00:14:56,560 Speaker 1: of jobs, an economic growth, and opportunity to raise the 276 00:14:56,640 --> 00:14:59,480 Speaker 1: standard of living almost everyone around the world. But that 277 00:14:59,600 --> 00:15:02,640 Speaker 1: was before a resurgent global economy and the war in 278 00:15:02,800 --> 00:15:05,680 Speaker 1: Ukraine sent the price of oil and of gas at 279 00:15:05,680 --> 00:15:08,960 Speaker 1: the pump skyrocketing. I'm doing everything I can to bring 280 00:15:09,000 --> 00:15:12,280 Speaker 1: down the price, to address produced price. That's why I 281 00:15:12,440 --> 00:15:15,440 Speaker 1: authorized the release of one million barrels per day for 282 00:15:15,480 --> 00:15:19,040 Speaker 1: the next six months first from our strategic patrolling reserve. 283 00:15:19,480 --> 00:15:22,000 Speaker 1: So what about all those concerns about the effect of 284 00:15:22,040 --> 00:15:26,040 Speaker 1: fossil fuels on climate? Did one war in Ukraine undo 285 00:15:26,200 --> 00:15:29,800 Speaker 1: all those best laid plans? Well, at least one energy 286 00:15:29,880 --> 00:15:34,560 Speaker 1: industry participant, Anglo American CEO Market Kudafani says, it's only 287 00:15:34,680 --> 00:15:39,480 Speaker 1: a temporary setback. The transition to renewables and grain energy 288 00:15:39,920 --> 00:15:42,120 Speaker 1: is getting to stool for a short period of time 289 00:15:42,320 --> 00:15:46,040 Speaker 1: and then it's gonna rice like So, I think there's 290 00:15:46,040 --> 00:15:48,880 Speaker 1: a negative consequence on renewables in the very short term, 291 00:15:48,880 --> 00:15:51,560 Speaker 1: but long term everyone's gonna push out to get their 292 00:15:51,560 --> 00:15:59,960 Speaker 1: renewable strategies. Lice and it give us a broader perspective 293 00:16:00,280 --> 00:16:02,560 Speaker 1: on how the war Ukraine may or may not be 294 00:16:02,640 --> 00:16:05,160 Speaker 1: affecting the quest to get to zero emissions. Welcome now 295 00:16:05,200 --> 00:16:08,440 Speaker 1: and finuk And she is the chair of Bankoeumerta Europe 296 00:16:08,600 --> 00:16:10,880 Speaker 1: and for many years has been something of a pioneer. 297 00:16:10,920 --> 00:16:13,200 Speaker 1: I must say in yesg and great to have you 298 00:16:13,240 --> 00:16:14,960 Speaker 1: back with us on Wall Street week. Thank you for 299 00:16:15,000 --> 00:16:17,960 Speaker 1: being here. First of all, give us a sense of 300 00:16:18,040 --> 00:16:21,440 Speaker 1: the extent to which this war may have either suspended 301 00:16:21,520 --> 00:16:24,880 Speaker 1: or at least prolonged some of the fight on climate. Well, 302 00:16:24,920 --> 00:16:27,400 Speaker 1: thanks for having me, David, and I have to say 303 00:16:27,480 --> 00:16:30,600 Speaker 1: I do agree with Mr Kutafani in terms of the 304 00:16:30,760 --> 00:16:36,000 Speaker 1: short term problem. If UH Russia accounts for about of 305 00:16:36,040 --> 00:16:39,960 Speaker 1: Europe's natural gas imports, obviously, and they've now committed that 306 00:16:40,800 --> 00:16:42,960 Speaker 1: UH by the end of the year they'll have cut 307 00:16:42,960 --> 00:16:45,280 Speaker 1: those by two thirds, we're going to have a scramble. 308 00:16:45,320 --> 00:16:47,320 Speaker 1: You've seen what the US is willing to do in 309 00:16:47,400 --> 00:16:51,200 Speaker 1: terms of shipments, et cetera to the EU. So we're 310 00:16:51,240 --> 00:16:53,960 Speaker 1: gonna have a short term problem on fossil fuels and 311 00:16:54,000 --> 00:16:56,400 Speaker 1: the use of gas oil, and I think actually an 312 00:16:56,480 --> 00:17:00,280 Speaker 1: uptick in the use of coal. However, it's really aid 313 00:17:00,320 --> 00:17:06,560 Speaker 1: bear this issue of overdependence on fossil fuels the indisputable 314 00:17:06,680 --> 00:17:10,280 Speaker 1: science of the International Panel on Climate Change that says, 315 00:17:10,760 --> 00:17:13,000 Speaker 1: if you thought it was bad, it turns out it's worse. 316 00:17:13,160 --> 00:17:17,119 Speaker 1: In terms of climate change, we're not nearly on track 317 00:17:17,760 --> 00:17:22,440 Speaker 1: to keep to this one point five degrees celsius temperature 318 00:17:22,560 --> 00:17:24,879 Speaker 1: rise by the end of the century. So we've got 319 00:17:24,960 --> 00:17:27,840 Speaker 1: a problem in that the science says we're not getting there, 320 00:17:28,240 --> 00:17:31,960 Speaker 1: We're too heavily dependent on fossil fuels, and fossil fuels 321 00:17:32,000 --> 00:17:34,520 Speaker 1: are as it turns out kind of dicey at the 322 00:17:34,560 --> 00:17:38,120 Speaker 1: moment in terms of ability to even get them. So 323 00:17:38,960 --> 00:17:41,240 Speaker 1: I think that you're going to see, and we are 324 00:17:41,320 --> 00:17:44,680 Speaker 1: seeing just in our own business, is a focus on 325 00:17:45,080 --> 00:17:49,960 Speaker 1: renewables as a risk meticant and obviously arithmetic and against 326 00:17:50,359 --> 00:17:52,919 Speaker 1: the climate issues at the same time of arithmetic, and 327 00:17:52,960 --> 00:17:57,040 Speaker 1: against being so dependent on other nations that we may 328 00:17:57,080 --> 00:17:59,800 Speaker 1: be at war at with at any given point. When 329 00:17:59,840 --> 00:18:02,760 Speaker 1: you mentioned and the goals that we all have to 330 00:18:02,840 --> 00:18:05,480 Speaker 1: keep to one point five recigrade, and we've got a 331 00:18:05,560 --> 00:18:09,000 Speaker 1: lot of fairly ambitious targets being set by various countries 332 00:18:09,000 --> 00:18:11,400 Speaker 1: in because in the United States, including President Biden as 333 00:18:11,440 --> 00:18:15,119 Speaker 1: well as by corporations before the war in Ukraine happened. 334 00:18:15,119 --> 00:18:19,560 Speaker 1: Were we on track to meet those commitments? Maybe not, 335 00:18:19,920 --> 00:18:23,679 Speaker 1: but we were close. So the commitments were that you 336 00:18:23,840 --> 00:18:27,840 Speaker 1: had about nine of the global GDP that was committed 337 00:18:27,880 --> 00:18:30,880 Speaker 1: to net zero. Most of them felt that they would 338 00:18:30,960 --> 00:18:33,879 Speaker 1: make it. Now this is countries and companies. Shall we 339 00:18:33,920 --> 00:18:38,600 Speaker 1: say we're on route to make it by fifty maybe, 340 00:18:39,359 --> 00:18:42,199 Speaker 1: but that was a reach. Now, what we're dealing with 341 00:18:42,400 --> 00:18:45,600 Speaker 1: is Uh, We've got a little bit of a setback, 342 00:18:45,680 --> 00:18:48,040 Speaker 1: and I think there are bigger issues at play, which 343 00:18:48,080 --> 00:18:51,480 Speaker 1: is where's the money? And that just hasn't been accounted for. 344 00:18:51,520 --> 00:18:54,439 Speaker 1: And when I say where is the money, it has 345 00:18:54,480 --> 00:18:59,120 Speaker 1: been estimated out of copy the UN Climate Conference, out 346 00:18:59,119 --> 00:19:03,240 Speaker 1: of copy that we would need four to five trillion 347 00:19:03,440 --> 00:19:07,879 Speaker 1: dollars a year, so annually for the next decade, maybe 348 00:19:07,920 --> 00:19:12,560 Speaker 1: thirty years, so at least ten more likely thirty years 349 00:19:12,720 --> 00:19:15,679 Speaker 1: to ameliorate this problem. And where is the money? So 350 00:19:15,760 --> 00:19:18,080 Speaker 1: that's the really issue at the moment. To just be 351 00:19:18,240 --> 00:19:22,280 Speaker 1: very practical about it. You could roll up all the 352 00:19:22,359 --> 00:19:25,440 Speaker 1: governments and all the philanthropy in the world, and if 353 00:19:25,480 --> 00:19:28,720 Speaker 1: you don't put capital markets into this, it's not happening. 354 00:19:29,240 --> 00:19:32,479 Speaker 1: And we don't have that synergy between capital markets and 355 00:19:32,560 --> 00:19:37,000 Speaker 1: government the way we have when we have had enormous 356 00:19:37,080 --> 00:19:41,399 Speaker 1: problems in the past, so armaments during World War Two, 357 00:19:42,520 --> 00:19:47,120 Speaker 1: even COVID to to be able to make and distribute 358 00:19:47,119 --> 00:19:51,240 Speaker 1: the vaccines that were needed globally, you needed this composition 359 00:19:51,560 --> 00:19:55,440 Speaker 1: of companies and governments to come together. And I think 360 00:19:55,440 --> 00:19:57,920 Speaker 1: that's what's needed here. As I say, I think it's 361 00:19:57,920 --> 00:20:00,840 Speaker 1: a fascinating alternatives of those offense obsess they really use 362 00:20:00,880 --> 00:20:02,720 Speaker 1: the kaval markets. Thank you so much for bringing it 363 00:20:02,760 --> 00:20:06,359 Speaker 1: to us. That's and Fuken Bank of America coming up. 364 00:20:06,440 --> 00:20:10,040 Speaker 1: Secretary Janet Yelling thoughts on China inflation and the world 365 00:20:10,160 --> 00:20:14,359 Speaker 1: economic order, and Steve Ratner of Willow Advisors for his reactions. 366 00:20:14,880 --> 00:20:23,119 Speaker 1: That's next on Wall Street Week on Bloomberg. This is 367 00:20:23,160 --> 00:20:27,560 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 368 00:20:28,160 --> 00:20:31,520 Speaker 1: But they is concerned to that inflation. We've made clear 369 00:20:31,640 --> 00:20:35,560 Speaker 1: that they will be removing accommodation to try to get 370 00:20:35,600 --> 00:20:39,159 Speaker 1: it under control. But UM, I know they'll try to 371 00:20:39,240 --> 00:20:44,000 Speaker 1: achieve his soft landing and um, with some skill and 372 00:20:44,119 --> 00:20:47,360 Speaker 1: some luck, um, you'll will have a very good year 373 00:20:47,600 --> 00:20:50,639 Speaker 1: for the US economy in terms of the job market 374 00:20:50,760 --> 00:20:54,639 Speaker 1: this coming year. That, of course, was Treasure Secretary Janet 375 00:20:54,680 --> 00:20:56,240 Speaker 1: Yell and talking to us at the very end of 376 00:20:56,240 --> 00:20:58,080 Speaker 1: the week after those I m F and World Bank 377 00:20:58,119 --> 00:21:01,040 Speaker 1: meetings in Washington to go through what the Secretary had 378 00:21:01,119 --> 00:21:03,399 Speaker 1: to say to us. We welcome down Steve Rattner's chairman 379 00:21:03,400 --> 00:21:05,800 Speaker 1: CEO of will And Advisors, which invests the personal and 380 00:21:05,840 --> 00:21:09,040 Speaker 1: philanthropic funds of Michael Bloomberg. The founder and majority owner 381 00:21:09,080 --> 00:21:11,119 Speaker 1: of our parent companies. So thank you so much for 382 00:21:11,160 --> 00:21:13,159 Speaker 1: being back on Wall Street week. Let's start with what 383 00:21:13,200 --> 00:21:15,439 Speaker 1: we just heard from Janet Yellen. With some luck and 384 00:21:15,520 --> 00:21:17,840 Speaker 1: some skill, we can get to what they call soft landing. 385 00:21:17,880 --> 00:21:20,480 Speaker 1: It's the things replaced goldilocks, I guess, and what we 386 00:21:20,560 --> 00:21:23,560 Speaker 1: say every single day. Here you square something up for me. 387 00:21:23,840 --> 00:21:26,240 Speaker 1: How strong is the consumer? How strong is the household 388 00:21:26,240 --> 00:21:27,719 Speaker 1: balance sheet? Is that enough to get us through the 389 00:21:27,720 --> 00:21:31,600 Speaker 1: tightening we're looking at? Consumer in the household balance sheets 390 00:21:31,640 --> 00:21:35,280 Speaker 1: are still exceptionally strong. There's still over two trillion dollars. 391 00:21:35,320 --> 00:21:38,000 Speaker 1: I believe that last count of so called excess savings 392 00:21:38,000 --> 00:21:41,359 Speaker 1: above historic trends in the hands of households, roughly half 393 00:21:41,600 --> 00:21:44,320 Speaker 1: from simulus and other kinds of government assistance, and roughly 394 00:21:44,400 --> 00:21:47,840 Speaker 1: half from money they couldn't spend during the pandemic. And 395 00:21:47,880 --> 00:21:51,119 Speaker 1: that will that will certainly forestall a recession for good. 396 00:21:51,200 --> 00:21:53,359 Speaker 1: While I'm not at all in the camp of those 397 00:21:53,600 --> 00:21:56,520 Speaker 1: who think that a recession is likely this year or 398 00:21:56,560 --> 00:21:59,000 Speaker 1: probably even the second half of first steff rather up 399 00:21:59,040 --> 00:22:02,840 Speaker 1: next year, but at some point it becomes anybody's guests 400 00:22:02,840 --> 00:22:05,720 Speaker 1: whether we'll get through this without a recession. Well, anybody's guests, 401 00:22:05,720 --> 00:22:07,440 Speaker 1: but a square one thing for me, you could Steve. 402 00:22:07,800 --> 00:22:09,760 Speaker 1: We have a lot of economists. We survey its seventy 403 00:22:09,760 --> 00:22:13,359 Speaker 1: two economists here at Bloomberg. Let's say after two years 404 00:22:13,359 --> 00:22:15,080 Speaker 1: out or so, it looks like there really is a 405 00:22:15,160 --> 00:22:18,280 Speaker 1: significant not not certain, but it's to give me a chance. 406 00:22:18,440 --> 00:22:21,280 Speaker 1: We also had Bank of America survey fund managers who say, 407 00:22:21,320 --> 00:22:23,560 Speaker 1: that's really a big concern of theirs. Why are they 408 00:22:23,640 --> 00:22:27,639 Speaker 1: worried about it? Because there's really, as Larry Somers has 409 00:22:27,680 --> 00:22:31,159 Speaker 1: pointed out repeatedly on your show and elsewhere, history is 410 00:22:31,200 --> 00:22:33,359 Speaker 1: not on the side of a soft landing. There's really 411 00:22:33,359 --> 00:22:37,560 Speaker 1: no precedent for bringing in economy this overheated with inflation, 412 00:22:37,880 --> 00:22:41,120 Speaker 1: whether it's transitory, permanent, or whatever, running at this rate 413 00:22:41,560 --> 00:22:44,760 Speaker 1: down to anything that looks like two percent without there 414 00:22:44,800 --> 00:22:48,720 Speaker 1: being a recession. It would require the skill of the 415 00:22:48,760 --> 00:22:51,240 Speaker 1: most experienced pilot in the world to achieve that kind 416 00:22:51,240 --> 00:22:53,560 Speaker 1: of a soft that kind of a soft landing, you 417 00:22:53,640 --> 00:22:56,879 Speaker 1: have to really cool off demand. You have to unfortunately 418 00:22:57,240 --> 00:23:00,679 Speaker 1: raise the unemployment rate, get some slack into the flabor market. 419 00:23:01,160 --> 00:23:04,280 Speaker 1: And that's a level of precision that economics is sort 420 00:23:04,320 --> 00:23:06,240 Speaker 1: of a science, but it's not that kind of stunts. 421 00:23:07,119 --> 00:23:10,080 Speaker 1: So obviously the FED has in its mandate price stability, 422 00:23:10,080 --> 00:23:12,720 Speaker 1: and so it's sort of it's primary responsibility of addressing 423 00:23:12,960 --> 00:23:15,760 Speaker 1: the inflation that people are concerned about. At the same time, 424 00:23:15,840 --> 00:23:17,840 Speaker 1: it's not necessary all alone. There are other things that 425 00:23:17,880 --> 00:23:19,760 Speaker 1: we've done. One of the things other things I asked 426 00:23:19,960 --> 00:23:22,399 Speaker 1: Janet Young and the Treasure Secretary about was why there 427 00:23:22,440 --> 00:23:24,760 Speaker 1: weren't other things, such as were leaving some of the tariffs, 428 00:23:24,800 --> 00:23:26,840 Speaker 1: that so called Trump tariffs. This is what she said 429 00:23:26,840 --> 00:23:31,640 Speaker 1: about that. I think gas prices peaked in of now 430 00:23:31,720 --> 00:23:37,040 Speaker 1: come down some from their peak. We're working very diligently 431 00:23:37,400 --> 00:23:41,800 Speaker 1: on supply chain issues to get our ports working better. 432 00:23:42,040 --> 00:23:47,159 Speaker 1: We're re examining carefully our trade strategy with respect to China, 433 00:23:47,720 --> 00:23:52,879 Speaker 1: and um, you know, I think it's worth considering. We 434 00:23:52,960 --> 00:23:56,280 Speaker 1: certainly want to do what we can to address inflation, 435 00:23:57,720 --> 00:24:00,440 Speaker 1: so worth considering. It was what she said, Steve. I'm 436 00:24:00,440 --> 00:24:02,720 Speaker 1: sure you saw that Peterson Institute report that came out 437 00:24:02,720 --> 00:24:04,399 Speaker 1: this week that said if you took away those so 438 00:24:04,480 --> 00:24:07,040 Speaker 1: called Trump tariffs, it were just inflation as much as 439 00:24:07,080 --> 00:24:10,280 Speaker 1: one point, and that would not necessarily lead to our sessions. 440 00:24:10,320 --> 00:24:14,399 Speaker 1: So why aren't we doing it because their politics involved 441 00:24:14,400 --> 00:24:16,280 Speaker 1: in all these kinds of things that I actouldn't even 442 00:24:16,480 --> 00:24:19,840 Speaker 1: demeaned by saying politics. There are multiple considerations involved all 443 00:24:19,880 --> 00:24:22,280 Speaker 1: these things. We have a complicated but I don't I'm 444 00:24:22,280 --> 00:24:25,320 Speaker 1: gonna here to say they shouldn't eliminate the tariffs. I 445 00:24:25,359 --> 00:24:27,560 Speaker 1: think probably they should, but that we do have a 446 00:24:27,560 --> 00:24:30,639 Speaker 1: complicated relationship with China. There are many issues on the table. 447 00:24:31,040 --> 00:24:34,000 Speaker 1: Maybe they weren't put in place in the most thoughtful way, 448 00:24:34,080 --> 00:24:35,800 Speaker 1: but we do have a trade issue of China, so 449 00:24:35,840 --> 00:24:38,520 Speaker 1: you could make an argument. But look, the administration is 450 00:24:38,560 --> 00:24:41,359 Speaker 1: also doing things that actually increase the inflation problem. I 451 00:24:41,359 --> 00:24:43,199 Speaker 1: think Larry has also pointed out on the show, but 452 00:24:43,560 --> 00:24:46,600 Speaker 1: certainly other people have pointed out that extending the moratorium 453 00:24:46,800 --> 00:24:51,080 Speaker 1: on student debt repayments, however meritorious and humane that may 454 00:24:51,119 --> 00:24:54,639 Speaker 1: be another read for other reasons, does simply increase demand 455 00:24:54,640 --> 00:24:58,760 Speaker 1: and therefore increases inflation as well. So there are always multiple, 456 00:24:58,840 --> 00:25:03,160 Speaker 1: multiple considerations and all these decisions. But look, fundamentally, everything 457 00:25:03,160 --> 00:25:05,800 Speaker 1: that Secretary Yellen said is very much at the margin. 458 00:25:06,280 --> 00:25:08,000 Speaker 1: The core of the problem is that we have an 459 00:25:08,000 --> 00:25:11,760 Speaker 1: overheated economy. The Fed went way too far. The fiscal 460 00:25:11,840 --> 00:25:14,439 Speaker 1: policy went way too far. We're talking about trillions of 461 00:25:14,480 --> 00:25:18,160 Speaker 1: dollars of excess fiscal policy, trillions of dollars of excess 462 00:25:18,200 --> 00:25:22,600 Speaker 1: monitoring stimulus. Uh speaking a few tarts here. There is 463 00:25:22,640 --> 00:25:24,159 Speaker 1: not going to make up for the mistakes that have 464 00:25:24,240 --> 00:25:27,080 Speaker 1: been made so far. Steve. One of the other things 465 00:25:27,080 --> 00:25:29,720 Speaker 1: that Secretary Yellen has talked about is making some changes 466 00:25:29,760 --> 00:25:33,119 Speaker 1: in the entire international system by which we control the 467 00:25:33,119 --> 00:25:36,040 Speaker 1: global economy, so called Bretton Woods that both the agreements 468 00:25:36,119 --> 00:25:38,760 Speaker 1: and the institutions. I asked her whether she really wanted 469 00:25:38,760 --> 00:25:40,560 Speaker 1: to make some fundamental changes or whether it was more 470 00:25:40,560 --> 00:25:42,440 Speaker 1: tweaking around the edges. This is part of what she said. 471 00:25:43,560 --> 00:25:48,200 Speaker 1: The world has changed in very significant ways, and I 472 00:25:48,240 --> 00:25:53,240 Speaker 1: think that does require rethink of the organization and some 473 00:25:53,359 --> 00:25:57,040 Speaker 1: of the specific mandates that we give the I m F, 474 00:25:57,240 --> 00:26:01,640 Speaker 1: the World Bank, in the w t O. So, Steve, 475 00:26:01,680 --> 00:26:04,600 Speaker 1: how fundamentally should we be looking at these institutions. It 476 00:26:04,680 --> 00:26:06,720 Speaker 1: is a very different world, not least because we have 477 00:26:06,840 --> 00:26:11,280 Speaker 1: China now uh close second, inclusive and inclusing and perhaps 478 00:26:11,359 --> 00:26:13,120 Speaker 1: taking over the United States in terms of the down 479 00:26:13,200 --> 00:26:15,119 Speaker 1: position in the world, and it has a very different 480 00:26:15,119 --> 00:26:17,200 Speaker 1: way of regulat its economy. Do we need to take 481 00:26:17,200 --> 00:26:19,440 Speaker 1: a fresh look at things like the i m F. 482 00:26:20,840 --> 00:26:23,359 Speaker 1: Sure it would be great. We're talking about what almost 483 00:26:23,480 --> 00:26:26,960 Speaker 1: seventy years, almost exactly seventy five years, I guess, since 484 00:26:27,000 --> 00:26:29,119 Speaker 1: Brenton woulds and since all this was put in place, 485 00:26:29,480 --> 00:26:31,840 Speaker 1: and so, for example, the i m F was created 486 00:26:31,880 --> 00:26:35,200 Speaker 1: in part to help stabilize exchange rates and what everybody 487 00:26:35,200 --> 00:26:37,320 Speaker 1: thought was going to be a fixed exchanger at world 488 00:26:37,359 --> 00:26:40,480 Speaker 1: while in August of seventy one, all that changed and 489 00:26:40,480 --> 00:26:44,040 Speaker 1: we're obviously seeing a completely different exchange rate environment, and 490 00:26:44,080 --> 00:26:47,400 Speaker 1: so there's absolutely no question that we hanging another look, 491 00:26:47,440 --> 00:26:51,560 Speaker 1: whether it's a deep restructuring or some change more modest 492 00:26:51,600 --> 00:26:55,160 Speaker 1: changes in both those organizations, we would be a good thing. 493 00:26:55,520 --> 00:26:57,840 Speaker 1: I'm just not sure where you rank that in the 494 00:26:57,880 --> 00:26:59,879 Speaker 1: list of priorities of things we have to deal with 495 00:27:00,040 --> 00:27:03,320 Speaker 1: than the likelihood of getting international cooperation, especially from the 496 00:27:03,400 --> 00:27:07,920 Speaker 1: Chinese on some kind of dramatic rethinking of those two organizations. 497 00:27:07,920 --> 00:27:10,560 Speaker 1: But she's honestly, you can't argue with her logic and 498 00:27:10,640 --> 00:27:12,680 Speaker 1: her points on that. Yeah, I want to pick about 499 00:27:12,680 --> 00:27:15,000 Speaker 1: that the likelihood of getting it done that you just mentioned, 500 00:27:15,040 --> 00:27:17,040 Speaker 1: because it's also a different world than it was after 501 00:27:17,040 --> 00:27:18,960 Speaker 1: War two, at least what I read about it, the 502 00:27:19,160 --> 00:27:21,840 Speaker 1: Unit States was really in a very dominant position globally 503 00:27:22,200 --> 00:27:24,920 Speaker 1: and could really not not perhaps have its way, but 504 00:27:25,040 --> 00:27:27,040 Speaker 1: really had a large influence. It would be a very 505 00:27:27,040 --> 00:27:29,520 Speaker 1: different matter today, in part because of Chinese, you suggest, 506 00:27:29,720 --> 00:27:34,680 Speaker 1: but in general it's a more evenly distributed world. Oh, 507 00:27:34,680 --> 00:27:37,680 Speaker 1: you're completely right about that. I should have said that myself. 508 00:27:37,720 --> 00:27:40,879 Speaker 1: But if you go back to Britain, Woods, essentially Britain 509 00:27:40,960 --> 00:27:43,440 Speaker 1: was kind of well, not exactly China, but Britain was 510 00:27:43,480 --> 00:27:46,320 Speaker 1: trying to maintain its pre eminence in the world financial 511 00:27:46,400 --> 00:27:49,360 Speaker 1: order and have, if not the seat at the head 512 00:27:49,359 --> 00:27:50,960 Speaker 1: of the table, at least right next to the head 513 00:27:50,960 --> 00:27:54,000 Speaker 1: of the table. But it had no ability to actually 514 00:27:54,840 --> 00:27:59,359 Speaker 1: enforce that or implement that, and so amidst tortuous negotiations 515 00:27:59,720 --> 00:28:03,320 Speaker 1: uh uh, led by Harry Dexter White, we eventually basically 516 00:28:03,359 --> 00:28:05,080 Speaker 1: said it's going to be our way or the highway, 517 00:28:05,359 --> 00:28:08,280 Speaker 1: and we've got our way. Uh. You're absolutely right. We 518 00:28:08,320 --> 00:28:10,560 Speaker 1: can't do that with respect to China or a number 519 00:28:10,560 --> 00:28:12,520 Speaker 1: of other players in this world, and so it would 520 00:28:12,520 --> 00:28:15,840 Speaker 1: have to be a far more consensual and therefore more 521 00:28:15,840 --> 00:28:21,040 Speaker 1: difficult and therefore more improbable negotiation also Brent Woods was 522 00:28:21,119 --> 00:28:24,000 Speaker 1: essentially it was, you know, like the old phrase, don't 523 00:28:24,080 --> 00:28:25,879 Speaker 1: let a crisis go to waste. We had to do 524 00:28:25,960 --> 00:28:28,080 Speaker 1: something at the end of World War Two in terms 525 00:28:28,119 --> 00:28:31,920 Speaker 1: of how the international monetary uh an economic order weill worked. 526 00:28:32,080 --> 00:28:35,320 Speaker 1: There's not quite that same pressure today. So this I 527 00:28:35,320 --> 00:28:37,040 Speaker 1: think most people would look at as a nice to have, 528 00:28:37,119 --> 00:28:38,920 Speaker 1: not a must have, and that also makes it a 529 00:28:38,920 --> 00:28:40,840 Speaker 1: lot harder to get it done. Thank you so much, 530 00:28:40,840 --> 00:28:44,200 Speaker 1: Steve radera will of advisors for being with us today. Finally, 531 00:28:44,280 --> 00:28:48,120 Speaker 1: one more thought. Swipe right, swipe left meets the world 532 00:28:48,280 --> 00:28:51,680 Speaker 1: of global finance. The power and the mischief of social 533 00:28:51,680 --> 00:28:54,600 Speaker 1: media brings a host of possibilities to mind, from the 534 00:28:54,800 --> 00:28:58,120 Speaker 1: romance of Tinder to the envy our many so called 535 00:28:58,280 --> 00:29:02,400 Speaker 1: friends elicit with their carefully manicured Instagram posts of their 536 00:29:02,440 --> 00:29:06,520 Speaker 1: beautiful lives. But what happens when the power of instant 537 00:29:06,520 --> 00:29:11,280 Speaker 1: global posts meets financial markets. Well, one thing is the 538 00:29:11,360 --> 00:29:14,200 Speaker 1: Bald Guy, also known as the Chief Economists of the 539 00:29:14,240 --> 00:29:18,000 Speaker 1: Institute of International Finance, Dr Robin Brooks, has become a 540 00:29:18,080 --> 00:29:21,960 Speaker 1: social media heartthrob, well, at least in brazili has where 541 00:29:21,960 --> 00:29:25,280 Speaker 1: his analysis of the real and in particular, his conclusion 542 00:29:25,280 --> 00:29:28,840 Speaker 1: that it is greatly undervalued has garnered him a devoted 543 00:29:28,960 --> 00:29:31,880 Speaker 1: social media following for his every tweet. I think my 544 00:29:31,960 --> 00:29:34,160 Speaker 1: favorite quote in this story was from his kids when 545 00:29:34,200 --> 00:29:36,640 Speaker 1: he said, I mean, that's just my stupid dad. The 546 00:29:36,800 --> 00:29:40,000 Speaker 1: stupid dad is crushing it in economics. Now. The Brooks 547 00:29:40,040 --> 00:29:43,560 Speaker 1: followers are in questionably loyal, but they are only a 548 00:29:43,680 --> 00:29:46,960 Speaker 1: hundred and fifty strong, which doesn't begin to compete with 549 00:29:47,040 --> 00:29:51,160 Speaker 1: Mr Elon Musk's eighty two point four million followers, which 550 00:29:51,160 --> 00:29:53,400 Speaker 1: has gotten him in trouble with the sec in the 551 00:29:53,440 --> 00:29:55,680 Speaker 1: past when he talked about things he should not have 552 00:29:55,720 --> 00:29:58,600 Speaker 1: been talking about, things that moved the market for Tesla 553 00:29:58,640 --> 00:30:02,160 Speaker 1: stock and got him put in the securities law penalty box. 554 00:30:02,600 --> 00:30:04,800 Speaker 1: When you sign an agreement with the Securities and Exchange 555 00:30:04,800 --> 00:30:06,760 Speaker 1: Commission with the blessing of a federal judge, I just 556 00:30:06,800 --> 00:30:08,200 Speaker 1: think you've got to be health to the deal. You 557 00:30:08,280 --> 00:30:11,200 Speaker 1: struck men well not to be deterred. Elon Musk has 558 00:30:11,240 --> 00:30:14,080 Speaker 1: now decided he wants to buy the entire Twitter company, 559 00:30:14,440 --> 00:30:16,400 Speaker 1: or at least he says he does so. He does 560 00:30:16,440 --> 00:30:19,480 Speaker 1: admit it might not all work out. Do you think 561 00:30:19,480 --> 00:30:21,400 Speaker 1: this will be somewhat painful, and I'm not sure that 562 00:30:21,440 --> 00:30:24,800 Speaker 1: I will actually be able to acquire it. And how 563 00:30:24,920 --> 00:30:28,160 Speaker 1: is Mr Musk conducting his campaign for a hostile takeover? 564 00:30:28,560 --> 00:30:31,120 Speaker 1: You guessed it by way of Twitter. You know what 565 00:30:31,240 --> 00:30:34,680 Speaker 1: happens when the world's richest man tweets you at your 566 00:30:34,680 --> 00:30:39,160 Speaker 1: workplace at a relatively small science magazine. I mean, imagine 567 00:30:39,160 --> 00:30:42,440 Speaker 1: how that would fail. That was Bloomberg's Conrad Quilty Harper, 568 00:30:42,480 --> 00:30:44,480 Speaker 1: who in a prior life was on the management team 569 00:30:44,480 --> 00:30:48,400 Speaker 1: of a small digital publication when Elon Musk used Twitter 570 00:30:48,640 --> 00:30:51,720 Speaker 1: to explore buying the company. In the end, that one 571 00:30:51,720 --> 00:30:54,200 Speaker 1: didn't work out, but it did cause a fair amount 572 00:30:54,240 --> 00:30:58,040 Speaker 1: of excitement and yes, consternation along the way. And it's 573 00:30:58,080 --> 00:31:00,240 Speaker 1: one of the few who have actually experienced a Lusk 574 00:31:00,320 --> 00:31:03,760 Speaker 1: Twitter overture. Conrad has some advice for people like Twitter. 575 00:31:04,280 --> 00:31:07,719 Speaker 1: You have to take the medium of humor seriously, I 576 00:31:07,760 --> 00:31:11,040 Speaker 1: think in this kind of pool game, So Twitter, good 577 00:31:11,160 --> 00:31:15,240 Speaker 1: luck with that serious sense of humor. That does it. 578 00:31:15,360 --> 00:31:17,520 Speaker 1: For this episode of Wall Street Week, I'm David Weston. 579 00:31:17,640 --> 00:31:21,120 Speaker 1: This is Bloomberg. See you next week.